The NAO has released a risk analyser tool designed to help public sector organisations explore the role risk plays in public service planning and delivery and to embed risk into innovation planning and decision-making.
Our new strategy ‘Trust, Value, Impact’ sets out two ambitions – more productive and resilient public services, and better financial management and reporting. At their heart lies a powerful message: innovation and well managed risk-taking are not just complementary but inseparable. To transform public services, we must reframe risk as a catalyst for innovation.
So, what does effective innovation look like in the public sector? Where does the role of risk management fit? And how can we help?
In a speech to parliament, NAO head Gareth Davies shared some of the fundamentals of successful innovation drawn from our body of work. They were:
- Clearly articulate your risk appetite and diversify your investment portfolio;
- Embrace and use technology smartly;
- Develop a culture of fast learning and evaluation;
- Ensure an accountability framework that enables responsible risk-taking.
For decision-makers across the public sector, these fundamentals demonstrate that it is vital to clearly understand the risks and trade-offs associated with spending decisions, business cases, policy and strategy.
Risk management is often cited as a barrier to innovation, but the truth is that they are not opposites. Innovation thrives when risk is understood, embraced and managed well. Innovation and risk management form a dynamic partnership in which one enables the other.
Insights and improvement
Our guide on overcoming the challenges to managing risks draws on extensive work across government and includes examples of good practice and practical tips to help risk leaders and practitioners to improve risk effectiveness, and to help place risk at the heart of decision-making.
The guide sets out 10 approaches, and those below align particularly well with the innovation challenge:
- Establish strong leadership and risk culture: a culture that values learning from failure, encourages experimentation and supports responsible risk-taking;
- Define and embed risk appetite and tolerance: clearly articulating risk appetite provides the freedom to innovate within safe boundaries;
- Take a forward-looking view: innovation thrives on anticipation, and by scanning the horizon for emerging risks and trends, organisations can proactively identify opportunities for innovation and turn potential disruptions into positive change;
- Make risk-informed decisions: embedding risk into strategic decision-making ensures that innovation is both bold and responsible and allows leaders to weigh potential benefits against uncertainties, enabling smarter, faster decisions that deliver value for money;
- Adopt a whole-systems approach: innovation often fails when risks are siloed, whereas a systems approach helps organisations understand how innovations can affect departments, partners and suppliers.
Taking action
We launched our analyser tool earlier this year. This self-assessment tool can be used by leaders, practitioners and audit committees to inform and shape risk improvement plans. It facilitates strategic discussions on risk management, provides a foundation for benchmarking and continuous improvement and can help organisations to make smarter, faster, risk-informed decisions.
As public services face increasing complexity and demand, the ability to innovate safely and swiftly is essential.
By embracing risk as a strategic asset, and using tools and insights to guide the way, the public sector can unlock new levels of trust, value and impact.
Find the NAO’s analyser tool at: nao.org.uk/insights
