Contact: Peter Andrews, ext. 01962 847309, [email protected]

1. Summary

1.1. The aim of this report is to update Members on the County Council's programme for management of risk.

1.2. This report:

· Provides further details on the specific risks requested by the Governance Committee

· Outlines the details for the production of a register of cross cutting risks

· Provides the outline of training and guidance for Members

Recommendation

That Members note the contents of this report

2. Specific Risks

2.1. At the meeting of 5 April, members of the Governance Committee requested further details on three areas of risks:

2.1.1. The implementation of the pay and benefits programme

2.1.2. Highways maintenance risk

2.1.3. Financial risk

2.2. As reported on 5 April the risk register presented to the Committee had not been subject to quality assurance. This has occurred in respect of the risks associated with the pay and benefits programme and highways maintenance.

2.3. There are two risks associated with the pay and benefits programme, the risk of equal value claims and failure to implement the new pay structure.

2.4. The risk of equal value claims has increased due to the delays to the implementation of the project. Using the corporate process it has been scored as a high risk without controls and remains a high risk with current controls. This risk constitutes the highest risk in the Chief Executive's Department's risk register.

2.5. A number of measures are being taken to manage this risk. A report was submitted to Employment in Hampshire County Council Committee (EHCC) in March detailing the approach that was being proposed to deal with any claims brought against the County Council. The other main way in which the risk will be managed is by implementing the new pay framework which has been designed to ensure fairness and equality for the future.

2.6. The risk of failure to implement the pay and benefits project is a lower risk but could still have serious consequences for the County Council. The result of the ballot with the Unions is currently awaited and a report on the options in the event of a `no-vote' is being considered by a meeting of EHCC in June.

2.7. A question was raised by the Committee in relation to the highways maintenance risk and specifically the reference to `lack of funds' quoted in the summary of the risk. Clarification has been sought from the department and it has been confirmed that this was a general reference to the impact that a failure of future external funding streams would have on the County Council's Highways responsibilities. This is effectively looking at the localised impact of the general financial risk to the authority outlined below. The principal controls used to manage this risk are via the Highways Maintenance Management Plan and by comparing processes and service performance with other authorities nationally providing a mechanism to identify best practice and promote continuous improvement.

2.8. The Committee also asked for clarification of the financial risk to the County Council relating to the risk should the County Council lose up to £38m per annum in Government grant from 2008-09.

2.9. The background to this is that a new formula was introduced for distributing formula grant to local authorities in 2006-07, which had it been applied without transitional protection would have resulted in the County Council receiving about £38m less in Government grant in both 2006-07 and 2007-08. A new three year grant settlement for 2008-09 to 2010-11 is due to be announced later this year and theoretically the current transitional protection ( which would result in the grant being lost incrementally over say up to a 10 to 15 year period if the formula remained unchanged) could be discontinued. Hampshire is not a unique case and generally the 'Home Counties' are all big losers from the formula change. Government ministers have indicated that the transitional protection arrangements will continue though the degree of protection is uncertain.

2.9 This risk has been assessed with a financial impact of 5 (the highest possible). Controls can do little to reduce this risk as the County Council cannot prevent the changes to the grant distribution formula. The action it is taking is through its communication strategy to ensure the Government are aware of the impact it will have on the County Council's ability to provide services and to alert the public to this threat to financial stability of local authorities in the South East. In addition the County Council has a robust budget strategy designed to moderate the impact by providing some phasing of the requirement to make savings by retaining a grant equalisation reserve and by basing its budget strategy on the assumption that grant increases will be below average.

2 Cross Cutting Risks

3.1 The risk register that was presented to the Governance Committee on 5 April showed those highest risks identified by Departments to individual services. It did not show those risks which affect a number of departments or the County Council as a whole. The Risk Management Steering Group will be identifying these cross cutting risks as a matter of urgency and this will form part of a future report to this committee.

3.2 This will cover three main aspects:

· Risks that are common to one or more departments

· Risks that require the joint working of one or more department to manage them

· The identification of common control measures used by departments to manage risk which if not operating at an appropriate level would in themselves constitute significant risks.

3 Risk Management Guidance for Members

4.1 A key element of the County Council's risk strategy is to ensure that Members are involved. Members need to:

· be aware of the risks facing the County Council both externally and internally.

· have good risk information to support the decision making process

· understand the principles of risk management to determine what appetite the County Council has for taking risks and to set tolerance levels.

The extent to which Members are involved will depend on their individual role.

4.2 It is proposed to present the risk register to Cabinet in July and then hold a joint briefing session with Audit for all members covering risk management and general corporate governance issues. A guidance document for Members on risk management is also in the process of being drawn up and this will form part of a briefing programme.