In The fundamental objective of each type of body

In present day, the borders which separate the public and
private sectors are have become increasingly blurred. The delivery of what were
traditionally seen as public services today requires agencies from both
sectors. An example being social services, which relies heavily upon
governmental funding and strategic direction as well as the private sector for
service delivery. When looking at such a system as a whole it is sometimes
difficult to say where one ‘sector’ ends and another begins. Therefore, it
could be said that the principles of risk management are largely universal
because different organisations from different sectors tend to exist together
within the same policy system (Mikes, 2011). Agencies from different sectors
have largely similar organisational forms, similar tasks being performed and,
at a fundamental level, similar risks to people, property and processes.
However, some profound differences need to be stressed in terms of risk
management in relation to the public-private distinction (Woods, 2011). The key
differences rest in:

–         
The fundamental objective of each type of body
(one is profit seeking and the other is service providing);

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–         
The networks of stakeholders that each
organisation needs to engage with and is accountable to;

–         
The importance of the social and political
environment to each

Quite simply, the private company has a fiduciary obligation
to provide profits and dividends to a relatively small number of shareholders.
The public agency, however, exists to provide a service to a target group or
the community in general. This is hardly surprizing news to anyone, but the
importance of this distinction plays out in different risks. Many public sector
agencies never have to worry about bankruptcy and liquidation. Private companies
generally do not need to worry too much about the reform agendas of a new
government. Changes in government, however, reflect public attitudes about
public service funding and these can pose real threats to many public agencies.
Many private companies will never need to open their finances or operational
processes to public or political scrutiny, but the public sector agency is
always subjected to accountability for its operations and funding. Many people
are also unaware of the existence and roles performed by private companies
unless they directly need to purchase a service. As a consequence, they are not
subject to the same kind of public debate that surrounds public service
provision. Everyone has an opinion on education, health and refuse collection,
for example, because these public services directly affect the lives of the
public who are all shareholders by virtue of the taxes that they pay. Hence,
while the private company might look towards technological or competitive
environments to define its key risks, public agencies need to look more towards
social and political environments (Woods, 2011).

Another key difference relates to the risk management
process. In the public sector there is less of risk taking activity due to a
lack of profit incentive. When we also factor in decreasing levels of public
tolerance of risk, allied to an increasing ‘claims culture’, we find
explanations for why many public sector organisations adopt a risk-averse
approach to managing risk. Many examples can be found in local government,
where children’s play areas have been dismantled, because of the risk of
injury, trees have been cut down in case they fall onto roads and schools have
been turned into fortresses with controlled entrances and CCTV systems in place
to deter vandals, thieves and others who might seek to do harm. The challenge,
particularly for public sector risk management, is to understand the
interdependencies of risk at play and to be clear that a particular risk
management strategy not only deals with the risk at hand in the way that it is
intended to but also enhances the overall objectives and strategic goals of the
organisations (Crawford, 2010).

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