Industry Views

Public Sector Partnership

Key Issues for the Industry Currently Reflected in the Risk Selection

Rapid digitalization of services arising from the COVID-19 pandemic has led to inconsistency in protective controls and lack of cyber maturity, which in turn have led to cyber attacks and data breaches. This issue is prevalent across the public sector.

The COVID-19 crisis has forced the public sector to innovate by adopting technologies to drive significant improvements in governance, public administration and citizen services. These efforts bring not just progress but also an increase in cyber risk.

Surprises in the Top 10 Risks Selected

Surprisingly, pandemic risk and regulatory changes are not among the top three risks. The public sector saw no significant change in the top five risks compared with 2019, although the pandemic substantially disrupted public sector enterprise operations.

As pandemic-related containment measures are lifted, public policies should shift swiftly to supporting demand for services, incentivizing hiring and repairing balance sheets to mitigate risk associated with the economic slowdown and slow recovery.

Failure to attract or retain top talent is another challenge facing the public sector. Most public sector organizations are still locked into decades-old workforce policies, such as rigid job classifications, lockstep pay and reliance on seniority instead of capability. Government agencies are increasingly called upon to address society’s most complex challenges using workforce approaches rooted in the distant past. This not only makes it hard to recruit talented people but also makes it difficult for public sector managers to provide their employees with great work experiences.

Most Underrated Risks

Regulatory and legislative is the most underrated risk, as evidenced by the economic slowdown and public sector performance in recent years.

Failure to retain or attract top talent also appears underrated. Public sector enterprises operating in countries with worker shortages, especially in data, digital and IT fields, will face stiff competition for talent. With increasing digitalization across the sector, organizations will be left with unfilled roles that are critical to meeting their strategic goals.

Political risk dropped to rank 12 in 2021 from five in 2019. This risk is underrated considering the recent political events in the U.S. and in some parts of the globe. These events bring uncertainty to the sector and result in a volatile regulatory environment.

Challenges the Industry Will Face in the Next 3 Years and What Organizations Can Do to Address Them

Apart from regulatory and legislative challenges, Transparency International’s annual publication of the Corruption Perceptions Index puts public enterprises globally at risk of damage to reputation.

The rapid digitalization of organizations triggered by the COVID-19 pandemic will continue to present myriad challenges related to talent, cyber security, customer experience and innovation. Organizations must approach this challenge holistically and implement revised programs that integrate risk management and mitigation strategies to ensure successful implementation.

How New Challenges Will Require Companies to Change Their Approaches to Risk Management and Mitigation

As the pace of change accelerates, organizations must embed risk management in their change management processes to ensure that risk is properly understood and managed — not just a “check the box” exercise. Risk management must support change and be a tool to ensure successful implementation.

Organizations need to pay much more attention to resilience by focusing on everything from physical protections to disaster planning and disaster recovery.

Current Top 10 Risks

Predicted Future Risks

By 2024

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