‘It’s time to pivot.’
A phrase possibly used more through 2020 than at any time previously and countless private sector and non-profit organisations responded and adapted to the extensive COVID-19 shutdown periods with a range of reforms to how their organisations engage with their customers or clients.
The public sector on the other hand, while of course facing challenges in transferring their substantial workforce to the work from home environment and managing the rapid pace of interim and other regulatory change, hasn’t had the same drivers to fundamentally change their ways of working. But through 2021, that is likely to change and the Victorian Public Sector as much as (or likely more than) any other government in Australia will face pressure to adapt - and those that don’t will face real challenges in their Authorising Environment.
The ‘Authorising Environment’ concept outlines the need for public sector agencies to have authority to carry out their functions and that this authority arises through both formal channels such as legislation and informal channels such as stakeholder support. These factors change and move over time, and as such the authorising environment and authority of the agency to undertake work changes. Public sector organisations must always be apolitical but they operate within a political environment and management of that external environment and responses including through stakeholder engagement is a key pillar of agencies’ authorising environment.
Further, the concept can be expanded to government as a whole, considering the government’s ability to retain their authority in the minds of their constituents. The Victorian COVID-19 second wave and the following COVID-19 Hotel Quarantine Inquiry affected the reputation of government and potentially lowered trust that will extend beyond the short term impacts of the pandemic. This makes any ‘political’ decisions more sensitive and creates greater risks to the governments ability to undertake major changes to long term programs, particularly in the health sector. This sensitivity is then reflected in the public sector’s inability to progress large scale previously planned reform and is compounded by disrupted government business such as the delayed 20/21 State Budget which created uncertainty within public sector and also created new condensed timelines between the 20/21 Budget delivery and the 21/22 Budget planning.
Outside of the large Departmental structures, smaller agencies who are appropriately focussed on their mission and service delivery objectives are both less connected to and have less capacity to remain attuned to the broader political and policy environment within which they operate. In addition, such agencies are often smaller or more peripheral to central government business and are likely to be more exposed to indirect or unanticipated environment changes, for example as key reforms are brought forward with less assessment on broader implications across government or if their line Minister’s priorities remain focused on central government business. This peripheral nature means such agencies are more exposed to government risks (where government decisions impact an organisation’s operations), which without appropriate assessment and management places a significant burden on such bodies, particularly when coupled with attempts to manage and deliver a clear strategic direction and purpose in the public interest.
There are a number of trends across the Victorian Government that are likely to impact on public sector organisations’ authorising environment not only challenging fundamental business as usual activities but also the ability of those organisations, or units within them, to proactively position themselves in a policy or project context. Most obvious are the impacts of COVID-19 recovery which will dominate Budget and policy settings, risk impacting business as usual or non-recovery related initiatives in a challenging funding environment, create a greater focus on the need to address social inequities exposed through the crisis and the ongoing delays to standard parliamentary business as a result of both an extensive response effort through 2020 and backlog of Bills on the table.
Less obvious are those trends that arise from a desire to take opportunities to execute reform in a dramatically changed environment, the fundamental challenges of the State Budget and the long-term ambitions of this government as it approaches the next election. Guidance on this last aspect can be taken from the re-organisation of the Victorian Public Sector in March 2020 (and updated in June) around ‘core missions’ of Public Health Resilience, Economic Management, Restoration and Reform of Essential Services, Economic Program Delivery, Supply, Logistics and Procurement, Economic Recovery and Growth and Restoration and Reform of Public Services. But progressing any activities towards these core missions must be considered in the context of not just the current crisis impact on State Debt, but also that as recently as February 2020 the Treasurer was seeking to cut $4bn of recurrent expenditure.
There is the risk that with a significant Budget deficit and reduced direct taxation revenues due to the poor economic conditions, the Treasurer may seek alternative revenue raising measures such as increasing dividend payments through SOEs. It is also clear that even for sound, shovel ready or transformative projects that can deliver significant boost to jobs, the choice to prioritise such projects will come down to an intersection of a range of key policy delivery objectives and a tight control on expenses including project phasing and/or focus on co-contribution or funding partnership.
Understanding and managing these trends – the formal and informal determinants of a public sector agency’s authorising environment - can only be effectively achieved by understanding exposure to the risks arising from government decision-making and are core to the ability of an organisation to adapt or pivot to deliver on its mission. What we know is that public sector must pivot, the question is when, how, and in what direction. As we move into 2021, public sector agencies without a sound understanding of their government risk environment will fall woefully short in addressing questions about how they should contribute to future policy agenda, their role and opportunities in supporting Victoria’s economic and social recovery and their need to engage within government and across stakeholders to support their future.
Built on years of political and policy experience developed working within government and for corporate, public sector, non-profit and membership association clients in managing their interactions and activity with government, FPL Advisory’s GovernmentRisk360® methodology systematically captures risks that arise from government activity to inform an organisation’s strategic decision-making. For more information visit https://governmentrisk360.com.au/