Landscape of Risk Management in the South African Public Sector
By: Jonas Shai CA(SA)
Director: Risk Management Support and Training Officer
The analysis pertaining to the landscape of risk management in the public sector is performed on the back of a weakening Rand, sluggish growth outlook and the downgrading of South Africa’s sovereign credit rating. The negative impact of these events is further exaggerated by the continuous uncertainties with regards to electricity supply. These challenges paint a picture that purports to the system of risk management in the public sector not functioning. This picture is far from the truth.
Risk management was introduced in the public sector as a tool to assist the accounting officer to ensure that there is effective, efficient, economical and transparent use of resources. The majority of public institutions have made great strides in implementing systems of risk management and internal control. This improvement is attributable to various legislations, regulations and a general willingness to have good corporate governance by public sector institutions. Risk management governance structures have largely been established and policies are in place. A Public Sector Risk Management Framework (PSRMF) has also been published by the National Treasury as a guideline to enhance the standard of risk management documentation and implementation. Thus the foundation for a program of risk management within the public sector is in place.
The public sector by design is fragmented. The executive authority of one department has no authority over another. For example, the Department of Basic Education cannot advance its mandate if the Department of Public Works has not built the school. This also means that the Department of Public Works cannot build a school if the Department of Water and Sanitation has not provided for water reticulation and absolution infrastructure. It thus becomes critical for an effective system of inter-governmental relations to exist. It also became critical for government to streamline efforts in order to improve the provision of services to the people. To that end, a National Development Plan (NDP) was published in 2011. The NDP provides an objective diagnosis of the challenges of the country, highlighting key strategic areas that require immediate attention and the action plans required to eliminate inequality and poverty in South Africa. The NDP thus serves as a risk register, expresses risk appetite statements on a macro level and also elucidates on mitigation strategies. These mitigation strategies have costs attached to them which are adjusted through the national budget process at least twice a year. This means that the system of risk management at a macro level in government is, by design, robust.
The truth is that the robust system of risk management that is prevalent at a macro level of the country has not been successfully embedded at a micro level thus manifesting in a proliferation of service delivery protests. In particular the following key areas have been identified as requiring focus by the Office of the Auditor General:
· Supply Chain Management
· ICT Controls
· Quality of submitted financial statements
· Quality of service delivery reporting and
· Human Resource Management
In conclusion, risk management in the public sector is maturing. This maturity is in line with an improving young democratic country that aims to be a capable state.