As Australia emerges tentatively back into the light after our period of coronavirus induced lockdown and massive economic upheaval, some of us may still be looking back with a sense of bewilderment and shock at what happened – and the fact that government has the absolute authority to make that happen.
Pre COVID-19, most of us in a Western liberal democracy such as Australia would be living our lives with little regard to the impact of government on our everyday existence. We only notice local government when the bins aren’t picked up, when the state government hits us with the car rego once a year and when Canberra takes money out of our pay cheque all the while yelling at each other in Parliament.
We know instinctively that much more ‘government’ is going on but we are fortunate that well-functioning institutions and a strong rule of law means most of what government does fades in to the background. How government has responded (appropriately) to the COVID-19 emergency has brought it to the forefront of all our minds – and highlighted the ability of government to intervene so directly in everything we do.
From a business or organisational perspective, this authority is mostly helpful – known regulations, dependable systems and a rules-based society. However, what it has also done is make it crystal clear how organisations are exposed to ‘government risk’ every day. Whilst the response to the pandemic is at the absolute extreme end of this risk spectrum (maybe one step short of the overnight nationalisation of an entire industry or even an attempt at nationalisation such as the 1947 Labor Government proposal to nationalise the banking system), it creates pause for thought for how organisations should assess how government could directly impact their operations in similar ways.
It is also important to note that outside of the pandemic response, there are many more examples of more ‘normal’ aspects of government risk that impact on an organisation. For example, changing personnel at senior levels of government (such as the sudden resignation of the Queensland Deputy Premier and Treasurer recently) has a profound impact on policy settings and the direction of a particular government that can flow through to quite specific operational aspects for an organisation that was working under the existing known settings.
It may also appear as a sudden new draft regulation that (through accident or by design) surprises the relevant sector and triggers chaos as everyone scrambles to interpret what that means, how to deal with it and whether to try and change it. A recent example in the COVID-19 response was the almost daily edicts on what constituted ‘essential businesses’ and what evidence or compliance was required to demonstrate that workers or freight services were essential to allow for operations and the movement across state borders.
It might also appear as a result of poor industry reputation and negative media coverage leading to a knee jerk policy response such as the immediate ban on live animal exports in 2011.
Understanding this potential impact of government risk leads to the obvious question of what can be done about it? Whilst it would be a brave soul to say the pandemic could have been predicted and mitigated, there are aspects that could have been considered and appropriate risk mitigation put in place.
This hinges on an ability to understand how government can potentially intervene in what we do – whether a manufacturing operation that can be shut down due to an industry wide environmental order or a non-profit that loses program funding due to a change of Ministerial priorities as a result of a Cabinet reshuffle.
Understanding this government risk exposure is the first step to managing this risk – making sure our compliance is squeaky clean and our regulators know about it or broadening our profile in government to make sure we are less exposed to the vagaries of the political cycle.
If there is one lesson we can take from how government has responded to the pandemic it is this – they have the authority and the willingness to intervene in a major way into our economy and social settings. Now that we have witnessed the extreme version of government risk, understanding that government can impact on our organisation in an everyday context should be much clearer for all of us.
Steve Cusworth is the Managing Director at FPL Advisory.
FPL Advisory is a team of specialists resolving risks and creating opportunities with respect to government. We work with public sector and corporate clients to execute strategies for owning and managing change.
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