What is Risk Based Thinking?
We are all aware about uncertainties in our day to day life. Whether it is related to our health, career, or finances, we have often times faced situations which were unforeseeable or at the very least, different from we have been used to. Thus, the intellectual process of identifying, evaluating and mitigating the possible risks we might face during the course of carrying out an action is termed as Risk-based thinking.
Emergence of Risk based thinking in Policy-making in the world
Risk has become an important issue in parlance to Governance and Policy-making. The word ‘risk’ itself has numerous connotations; Risk-based decision making in International trade issues has become equivalent to having a scientific approach to trade deals; while in Investment Banks, Risk has as much to do with reward (such as risk-based pricing) as it is to do with precautionary measures. At its simplest, risk-based policy-making is the practice of targeting policy in proportion to potential threats to society, considering both their likelihood and consequences. In managing risks to society (Societal Risks), Govt. must also tackle an associated set of threats to itself and to the legitimacy of its policy interventions that emerge from the inevitable complexities, conflicts and constraints of governing, these are known as Institutional risks. Together, these societal and Institutional Risks make up ‘Policy Risks’ and it’s a critical objective of risk-based Policy-making.
Benefits of Risk based thinking in public sector
Apart from the obvious benefits of carrying out risk assessment for any scheme, there are certain specific benefits that can be accrued when risk assessment is carried out for a government policy or scheme. These benefits are what not only make risk assessment a good practice but also critical when it comes to Policy-making in Public Administration:
- Withstand Public and Political Scrutiny
- Easier to spot schemes in trouble
- Better quality data for planningand decision making
- Escalations are clearer and easier
- Budgets rely less on guesswork
The growing recognition of the need to manage risks may become a government priority across the globe in near future for effective, efficient and sustainable implementation of public policies.
This Article is written by Mr. C.S Sharma, Joint Director, Quality Council of India.