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Risk management in the public administration system

Public administration is a system of feedback of management decisions made by public authorities regarding the public structure and regulation of individual business processes through various tools that reduce uncertainty and increase the likelihood of achieving a given social and economic effect.

Despite the fact that the activities of public administration bodies are not related to the receipt and maximization of profits, they are also affected by many adverse factors - risks leading to the adoption of incorrect and timely management decisions, as well as reducing the effectiveness of the entire public administration system.

The economic category "risk of public administration" should be understood as the probability of the occurrence of indefinite harmful socio-economic consequences of public administration that arose under the influence of external and internal factors, due to deviations in the actual results of the implementation of management decisions made in conditions of limited certainty from the planned and forecast values ​ ​ of indicators of the activities of all subjects of the management system, the implementation of their goals, goals and interests, as well as ensuring a general socio-economic effect.

The activities of public administration bodies are a rather complex object for the analysis of risk components, since, on the one hand, the functionality of these bodies is closely interconnected with many different areas of activity (health care, social protection, construction, economics, etc.), each of which has its own characteristics that determine both the risk factors themselves and the level of their interaction and interdependence. On the other hand, public administration bodies, as their main goal, do not pursue the receipt and maximization of profits, but are aimed at achieving the maximum socio-economic effect, the assessment of which is still quite difficult, due to the disagreement of scientists regarding the method of calculating it. Therefore, it is almost impossible to quantify and value the risk factors of public administration without detailing the private aspects of each industry.

In such circumstances, the only practical way to assess these risks is to apply a comparative approach at the macro level. In particular, by comparing the level of key macroeconomic indicators, as key indicators of public administration, with their target, planned and indicator values, which in a quantitative and qualitative approach will determine: firstly, the level of efficiency of state and municipal administration; secondly, the degree of deviation of values from the set (given) results, that is, to identify the circumstances that impede the achievement of the goals and objectives of public administration - risk factors. Such a calculation is based on the probability characteristic of the risk, which means the degree of influence of the factor on the risk level is determined as the amount of deviation of the factor value from its normative, planned, or predicted result.

The essence and components of the risk management methodology in the activities of public administration bodies are a clear sequence of actions for the formation, adaptation, adjustment and control of risk management strategies, which allow, through the rational allocation and redistribution of limited resources, to minimize the level of risk burden in the activities of state municipal authorities.

The risk management model in public administration includes:

  • risk tracking methodology, which allows to analyze and evaluate changes in the external and internal environment in the activity of the authority in order to obtain information on the presence (absence) of risks, the probability of their occurrence, the degree of influence and the extent of possible consequences in the context of each identified risk;
  • a directory, map and risk matrix of state and municipal authorities, based on quantitative and value evaluation, allowing for a detailed study of the relationships of risks, to compile a comprehensive idea of the existing level of risk-load, to determine a possible sequence of risk management;
  • a risk management cost evaluation methodology to determine the optimal set of management decisions by comparing the cost of the harmful effects of risk and the cost of the limited resources required for management;
  • a sequence of risk management strategies in the activities of public administration bodies, which allows, through the prism of the ratio of the cost of risks, limited resources, a set of tools and the cost of risk management, to build and adjust a clear sequence of risk management;
  • algorithm of control and adjustment of decisions made, actions of risk management strategy, which allows to quickly make qualitative changes both for individual components of the strategy and to carry out its full formatting.