John Hood

Managing the Risks of Public-Private Partnerships in Scottish Local Government

The involvement of the private sector in the financing and provision of public services has been placed at the core of the Labour governments second-term public sector reform agenda. PFI/PPP is a key policy instrument that is being used to transform public services. This article reviews the debates surrounding PFI/PPP before examining the implementation of the policy in Scottish local government. A key element of PFI/PPP is risk transfer. The research presented here suggests that scope exists for poor risk management decisions in Scottish local authorities. The degree of risk management involvement in the process to date is variable, and where it does exist its extent is frequently limited in scope. Local councils in Scotland appear ill-prepared to manage the risk transfer process inherent in PFI/PPP. Faced with commercial operators with substantial advantage over them in the arena of risk transfer negotiation, this increases the likelihood of PFI/PPP initiatives which offer poor value for money for Scottish local government.

Transparency of Risk and Reward in U.K. Public-Private Partnerships

PublicPrivate Partnerships (PPPs) are an increasingly common mechanism for the renewal of public sector infrastructure, although in the United Kingdom, these have been criticized as representing poor value for money. An inherent assumption of much of this criticism is that a corollary of detriment for the public sector is benefit for the private sector. This paper highlights the difficulty of objectively verifying the many criticisms and assumptions regarding risk and reward associated with PPPs. Public and private sector disclosure policies and systems are analyzed and we conclude that neither sector practices openness and transparency. This results in a democratic accountability deficit in the public sector and a lack of meaningful data being made available to stakeholders in private companies.

Risk financing in UK local authorities: is there a case for risk pooling?

Purpose – Since the early 1990s there has been a growth in local authorities of risk management. However, despite a range of different strategies, initiatives and practices the issue of financing the risks to which authorities are exposed has remained problematic. The traditional dependence on the commercial insurance market has proved to be a flawed strategy. This paper aims to analyse an alternative risk financing strategy which has been successful in local authorities in other countries, that of risk pooling.Design/methodology/approach – The paper analyses the rationale behind risk pools, investigates the legislative environment that appears to make these acceptable to central government and evaluates the likely benefits to local authorities of their adoption.Findings – The paper finds that the perceived main legislative barrier to risk pools may no longer exist. Given that, there is a strategic, financial and operational case to be made for at least exploring the possibility of risk pooling. The exper...

Operational risk: Emerging markets, sectors and measurement

The role of decision support systems in mitigating operational risks in firms is well established. However, there is a lack of investment in decision support systems in emerging markets, even though inadequate operational risk management is a key cause of discouraging external investment. This has also been exacerbated by insufficient understanding of operational risk in emerging markets, which can be attributed to past operational risk measurement techniques, limited studies on emerging markets and inadequate data.

Stakeholder Engagement and Compliance Culture

Abstract This research examines the experience of stakeholders of the Private Finance Initiative (PFI). The local authorities’ accounts of engaging stakeholders are compared against the stakeholders’ experience of being engaged. The findings suggest that the increasing procedures and tools used by local authorities to engage stakeholders do not necessarily lead to more positive experiences of the latter. Some stakeholders perceive engagement as merely an exercise by the local authorities to comply with central government policy guidelines and the stakeholders’ views have not had substantial impact on the overall decision-making process. The findings highlight the inadequacy of a compliance culture in public services.

Risk and the Outsourcing of Risk Management Services: The Case of Claims Management

Outsourcing of risk management activities is a well-established practice, involving a range of services from actuarial audits to loss control training to risk financing management to claims administration services. Surprisingly, little work has been done to examine the risks associated with outsourcing risk management activities. This article examines the outsourcing of claims management services by reviewing the research on outsourcing risks and by interviewing leading practitioners. In doing so, the authors draw some provisional observations about risks and risk costs associated with outsourcing claims management services—observations that seem generalizable to all risk management outsourcing.

Making widespread use of municipal bonds in Scotland

This article considers the possibilities for widespread use of municipal bonds to finance public sector infrastructure, with particular reference to Scotland. Provided the various control measures recommended in this article are in place, there can be few objections either in principle or practice and they would be a highly desirable secure form of debt, so helping ease the current credit crunch.

Closed circuit television systems: a failure in risk communication?

This article discusses the growth in the UK of the use of public space closed circuit television (CCTV) systems as a means of controlling risk. The evidence as to the efficacy of CCTV is equivocal, but despite this successive UK governments have extolled the virtues of the technology, and have made money available to fund a large number of systems. There has been little debate outside the academic literature on the use of CCTV, therefore there is an apparent paradox between CCTVs use as a medium for communication and the paucity of risk communication from government to the public. Due to apparent public acquiescence to the use of CCTV, government appears to have felt that informed debate is not required. Using a multimethod case study of the largest residential-area CCTV system in Scotland, it is concluded that there is a strong desire amongst the public for CCTV, suggesting that at present they have been unconcerned at the lack of policy debate and hard empirical evidence.

The UK's Prudential borrowing framework:a retrograde step in managing risk?

The contemporary understanding of public sector risk management entails a broadening of the traditional bureaucratic approach to risk beyond the boundaries of purely financial risks. However, evidence suggests that in reality public sector risk management does not always match the rhetoric. This paper focuses on the apparent inadequacy of any risk framework in the current Prudential Borrowing Framework (PBF) guidance in relation to that which was developed under Public Private Partnerships and Private Finance Initiative (PFI). Our analysis shows that the PBF and its associated indicators for local authorities adopt a narrow financial approach and fail to account for the full range of potential risks associated with capital projects. The PBF does not provide a framework for local authorities to consider long‐term risk and fails to encourage understanding of the generic nature of risk. The introduction of the PBF appears to represent a retrograde step from PPP/PFI as regards risk and risk management.

The emergence of public sector risk management: The case of local authorities in Scotland

Abstract The 1980s saw an increase in the extent of academic interest and research into local authority management. A specific aspect of local authority management practice which has, however, been grossly under‐researched is that of risk management. This is something of a paradox, given the fact that significant changes in the local authority insurance market have brought about a culture within authorities whereby a more pro‐active approach to risk management is necessary. This paper discusses the findings of both survey and case study research* into the current risk management situation within Scottish local authorities. In particular, the methods of budget calculation, the levels of budgeting and the means by which these budgets are expended are analysed. Finally, suggestions are offered as to how local authority risk management strategies could be improved.