Adoption of comprehensive risk management in local government

ABSTRACT

In the aftermath of large company failures in the early 2000s, there emerged a new wave of efforts to enhance risk management (RM) and control in enterprises. The normative RM model has been promoted widely to all organisations, including public sector organisations. Using survey data, this article describes and explains the diffusion and adoption of RM innovation in local government in Finland. Our survey results support the argument that if comprehensive RM is not obligatory, it is not widely used in local government. Our analysis reveals that financial constraints explain to some extent the existence of comprehensive RM in municipalities, while structural factors such as the size of municipalities do not, even though RM is slightly more advanced in larger rather than smaller local governments. Slow adoption indicates that comprehensive RM as a managerial innovation lacks immediate benefit when assessed against the efforts and costs of its introduction and maintenance.

KEYWORDS:

• Local government
• risk management
• comprehensive risk management
• enterprise risk management

Disclosure statement

No potential conflict of interest was reported by the authors.

Notes

1. The grant formula gives more grants to municipalities with a disadvantageous age structure, dispersed population, higher than average illness and lower than average tax base per inhabitant. Population change as such is not decisive in grant allocation; rather, it has an indirect impact through the abovementioned factors (The Law of State Grant to Basic Services of Local Government, 29.12.2009/1704).

2. We also tried with population change between 2015 and 2012; the change to this variable instead of that used did not change our regression analysis results regarding the explanatory power and significant variables. The correlation between the two population change variables was 0.747.

Additional information

Notes on contributors

Lasse Oulasvirta

Lasse Oulasvirta is a professor at the Faculty of Management, University of Tampere, Finland. He holds a PhD in administrative sciences and an MA in business economics. His research focuses on public sector financing, accounting and auditing; and his recent articles, in journals including Journal of European Integration and CPA, deal with accounting models and accounting standardization in the public sector.

Ari-Veikko Anttiroiko

Ari-Veikko Anttiroiko is an adjunct professor at the Faculty of Management, University of Tampere, Finland. He holds a PhD in administrative sciences. His research focuses on local economic development and public sector innovations. His publications include New Urban Management (Palgrave Macmillan 2015) and, co-edited with S.J. Bailey and P. Valkama, Innovations in Public Governance (IOS Press 2011).