Public sector organisations undertake increasingly commercial activity, despite broad lack of risk awareness

Less than half (49%) of risk professionals at public sector organisations feel that they and their colleagues have sufficient risk awareness when managing commercial projects, despite more than nine out of ten (93%) stating that their organisations engage in commercial activities in order to generate income, according to research conducted by Zurich Municipal.

The most common involvement in commercial initiatives at public sector organisations included investments in commercial property, undertaken by more than three quarters (76%), and in professional services, such as accountancy, financial planning and legal services, in which almost two thirds (63%) confirmed they were involved.

However, the research, which was carried out among members of ALARM, found that less than a quarter (24%) believed that their organisations made decisions in these areas with a full understanding of the risk implications.

There are suggestions that the widespread move to commercial initiatives is a necessity, with four in five (80%) explaining that the primary reason for engaging in commercial initiatives was to close the funding gap and pressures to maintain services on reduced budgets.

Despite some concerns, many risk professionals in public sector organisations see clear benefits in engaging in commercial activities. More than half (59%) believe that commercial activity to generate income has led to greater innovation, while more than two thirds (68%) agreed that it better enabled their organisation to fund the services they provide their communities.

Rod Penman, Head of Public Services at Zurich Municipal said: “The uplift we are seeing public sector engagement with commercial initiatives marks a momentous shift in what is now required from organisations serving the public. Innovation and greater financial independence are two extremely encouraging by-products of this trend that should be celebrated, but leaders in the sector must not forget that where there is opportunity, there is also great responsibility and risk. To safeguard the future of public finance and services, there is a real need to ensure the appropriate risk management measures are in place to avoid walking blindly into trouble.”