Strengthening public sector governance: The case for embedding risk management in  state institutions

Ghana is working towards inclusive development and macroeconomic stability. However, many public institutions lack a structured approach to risk management. This gap is a missed opportunity for effective governance.

In the private sector, especially in finance, risk management is standard. In contrast, the public sector often manages risks reactively after issues arise. Institutions with structured frameworks can anticipate risks and prevent them.

What is Risk Management in Public Services?

Risk management involves identifying, evaluating, and addressing threats to service delivery. These threats include:

- Operational: Service disruptions from outdated infrastructure.
- Financial: Budget overruns or misuse of funds.
- Reputational: Public backlash from unfulfilled promises or perceived corruption.
- Compliance-related: Breaches of procurement laws or regulations.
- Strategic: Poor planning or failure of national programs.

Risk management is not just for corporations; governments face complex risks too. These include climate change, technological shifts, and public scrutiny.

Why Public Institutions Need Risk Management

1. Better Resource Stewardship: Efficient use of public funds minimizes fraud and waste.
2. Strengthened Institutional Reputation: Transparency builds public trust in state institutions.
3. Proactive Response to Threats: Anticipating risks helps avoid major disruptions.
4. Alignment with National Goals: A risk-based approach supports Ghana’s long-term objectives.

Lessons from the Private Sector

The banking sector provides a useful model for risk governance. Every Ghanaian bank has a documented framework driven by regulation and business needs. Chief Risk Officers (CROs) and enterprise risk management systems are crucial for financial stability.

Public institutions can adopt similar frameworks with necessary adjustments. Ministries could establish Risk Oversight Committees supported by internal risk units.

Global Best Practices

International examples show the benefits of embedding risk management:

- United Kingdom: Uses the 'Orange Book' as a guide for public services.
- Australia: Requires agencies to integrate risk management into planning.
- Rwanda: Mandates active risk logs in all ministries.

Ghana can learn from these models while creating its own context-specific approach.

Defining Responsibility in Risk Management

A common challenge is clarifying responsibilities in managing risks within public institutions:

- Employers (government agencies) must provide dedicated structures and support.
- Employees (public servants) should apply risk principles and report issues.

This shared responsibility fosters a culture where everyone sees risk management as part of their role.

Policy Recommendations: A Roadmap Forward

To institutionalize risk management in Ghana’s public service, consider these actions:

1. Mandate Risk Units in Public Agencies: Each major ministry should have a dedicated unit reporting to top management.
2. Develop a National Risk Management Framework: Led by the Ministry of Finance or Office of the President, this framework should provide templates and training models.
3. Capacity Building and Partnerships: Staff should receive tailored training on risk governance from local universities and professional entities like GARP or PRMIA.
4. Monitor and Report Risks Publicly: Foster transparency through annual performance reviews that include key institutional risks.
5. Promote Cross-Sector Collaboration: Encourage partnerships between public and private sectors to share best practices.

In conclusion, Ghana's sustainable development relies on resilient institutions equipped with effective policies. Embedding risk management will reduce inefficiencies, strengthen governance, and restore public trust.

It’s time to move beyond reactive crisis responses toward proactive governance that prepares our institutions for future challenges. Investing in these systems will protect our investments and secure our nation's future.

The writer is the Chief Risk Officer at UBA Ghana.