Thursday, 19 July 2012
Risk and vulnerability up in UK public sector finds survey
Public services in the UK are under threat with a predicted increase in major incidents likely to be exacerbated by increased vulnerability as budgets are cut in the face of financial austerity, according to a survey by Zurich.
UK Chancellor of the Exchequer, George Osborne, is overseeing a public spending austerity drive
According to the Risk and Response report by Zurich Municipal, the public sector arm of the insurer, 54% of public sector leaders believe there is an increased risk that their organisation will have to deal with a major incident in the next three years.
Threats such as flooding, financial crises, data security lapses and supplier insolvencies top the list of worries.
But, according to Zurich, with local public sector organisations increasingly cash-strapped in the current financial climate, ‘their chance of surviving and recovering from the immediate and longer-term effects of major incidents is significantly compromised’.
At worst, some organisations may be forced to cut frontline services, or even fold altogether, added the insurer.
According to the Chief Financial Officers (CFOs) queried for the survey, 58% said financial reality is challenging their ability to manage major risks.
More than two-thirds (68%) cited further central funding cuts as the biggest threat to their ability to respond to events.
Nearly half (49%) are concerned their reserves will be drained over the next three years.
Around three quarters (71%) said depleted reserves will prevent them from being able to recover from major emergencies.
Over half (52%) agree that new market dynamics represent an increased risk of insolvency.
Anne Torry, Managing Director at Zurich Municipal, said: “Against a climate of tough decision-making and cuts for public sector organisations, our research shows that many are being forced to dip into their reserves just to continue delivering core frontline services. This means there will be little spare cash to draw on if disaster strikes. At the same time, the types and impact of major incidents is changing and issues like data loss, cybercrime and supply chain failure can have a serious impact on the community. For example, with so many critical community and social care services now relying on highly sensitive personal data, a data integrity failure can quickly present real security concerns.
“While many public sector leaders we spoke to feel confident in their immediate response to an incident, they are much less optimistic about getting communities, services and systems back to normal in the weeks and months after a major event,” she continued.
Zurich warned that many public sector organisations are not fully prepared for a ‘new generation of major risks’, but are instead focusing on the more ‘known’ threats, such as flooding.
“Many organisations have had to cut into their core strategic functions, making them more vulnerable to the wide range of major incidents on the horizon,” continued Ms Torry. “It is therefore essential the public sector, local communities and wider stakeholders adopt a more collaborative long-term approach to contingency and emergency planning. Failing to do so could have damaging repercussions for public services.”
According to Zurich, the key major incidents threatening the public sector are:
1. Severe weather event
2. Financial crisis
3. Supply chain failure
4. Global systemic event
5. Data loss
6. Major accident
7. Reputational PR disaster
8. Governance failure
9. Malicious attack
10. Industrial action
The report’s finding were based on surveys carried out by The Chartered Institute of Public Finance and Accountancy (CIPFA ) and Ipsos MORI.
Ipsos MORI conducted 127 telephone interviews with chief executives or board-level directors in the public sector.
CIPFA, in association with Zurich Municipal, designed and implemented an electronic (email) survey of CFOs working in the public sector.