It’s a worrying statistic: more than nine in 10 risk professionals at public sector organizations say their organization is engaging in commercial activities to make money, but less than half feel they and their colleagues have the sufficient risk awareness to manage such projects.
Those are the findings from the latest research from Zurich Municipal, which found that the most common involvement in commercial initiatives at public sector organizations are investments in commercial property – undertaken by 76% of those surveyed – and in professional services, such as accountancy, financial planning and legal services, in which 63% confirmed they were involved.
The research, which was carried out among members of ALARM, a professional organization for risk professionals, found that less than a quarter believed that their organizations made decisions in these areas with a full understanding of the risk implications.
“The uplift we are seeing in public sector engagement with commercial initiatives marks a momentous shift in what is now required from organizations serving the public,” commented Rod Penman, head of public services at Zurich Municipal.
“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.”
The findings suggest that moving towards commercial initiatives is a necessity for many: four in five said that the primary reason for engaging in commercial initiatives was to close the funding gap and pressures to maintain services on reduced budgets.
But despite concerns, many risk professionals in public sector organizations see clear benefits in engaging in commercial activities.
59% said that commercial activity to generate income has led to greater innovation, while 68% agreed that it better enabled their organization to fund the services they provide to their communities.