Cedric Stephens | Risk management crucial for government departments | Business

Last weekend’s magnitude 7.6 earthquake, which the US Geological Survey said occurred at sea in an area to the south of the Cayman Islands, surprisingly, caused only a small ripple of concern among people I know.

Meanwhile, some authorities abroad issued tsunami alerts and urged people near coastlines to move inland. One positive from that potentially catastrophic event, for me, was learning that our Office of our Disaster and Emergency Management, ODPEM, gets alerts from the Pacific Tsunami Warning Center, PTWC, which is operated by the US National Oceanic and Atmospheric Administration.

The PTWC’s mission is to monitor seismic activity and issue warnings for potential tsunamis. Monitoring seismic activities that can pose threats to the island is one strategy the ODPEM uses to manage earthquake risk.

My article last Sunday suggested that we explore whether New Zealand’s National Seismic Hazard Model, outputs from which inform building standards, infrastructure planning, and emergency response in those Pacific islands, by estimating of the likelihood and strength of earthquakes, can be modified for local use. The post-event data to which we are accustomed is insufficient in the 21st century and given advances in artificial intelligence and machine learning.

I accidentally watched part of a live meeting of Parliament’s Public Accounts Committee, PAC, last Tuesday. PAC plays a vital role in overseeing public finances and ensuring accountability in government spending, is chaired by an opposition member. Parliamentarians selected by the government and opposition are its members.

PAC’s work is essential for maintaining transparency and good governance in Jamaica’s public sector.

After about 30 minutes I formed the following opinions about the PAC and its work:

• The chair and Auditor General invested time preparing for the meeting. They were familiar with the issues, apprised of key facts, did not allow reams of paper or stacks of files to control them, spoke fluently, authoritatively, and with clarity. The same could not be said for the ministry technocrats; and

• Participants appear not to have recognised PAC’s functions can be interpreted, among other things, as risk management responsibilities. Risk management is the process of identifying, assessing, and controlling threats. In the case of the state, government’s capital stock, that is, physical, and intangible assets used to provide public services and support economic activity.

Was it because of PAC members’ failure to understand the scope of the committee’s mission that issues like the Planning Institute’s November 2024 report showing how Hurricane Beryl damage estimate of $32 billion pushed the local economy into a 2.8 per cent decline in the third quarter and a further 1.5 per cent in the fourth quarter, climate change impacts, and the planning for the June 1, 2025 Atlantic Hurricane Season were not part of the agenda?

Lack of fiscal space is a phrase that bureaucrats often use to say their agency does not have money to pursue certain courses of action. Risk management is important in this context. It helps to identify, assess, and mitigate potential risks that can affect operations, disrupt income, reputation, and the ability to deliver service.

Here are five reasons why the risk management process is crucial for government departments:

• The identification and implementation of plans to manage risks ensure that operations run smoothly and with minimum disruption;

• Effective risk management helps to maintain and enhance public trust by preventing scandals, corruption, or other issues that can damage the reputation of government entities;

• It helps agencies to comply with laws, regulations, and standards and prevent legal troubles;

• Risk management ensures that resources are used efficiently and effectively, wastage is minimized, and financial losses avoided; and

• The practice of enables departments to prepare for and respond to emergencies, natural disasters, or other crises efficiently. This is particularly important given the scarcity of resources and the island’s centuries-long history of disasters and the threats posed by climate change.

Risk management is about seizing the initiative in relation to future threats rather than reacting to them. It an essential practice for organizations in the private or public sector. Different countries have integrated risk management into their government operations to address various risks and ensure effective service delivery. These countries include the United States, Canada, Australia, The United Kingdom, New Zealand, and Singapore.

Here are three excerpts from the International Monetary Fund’s February 12, 2025, Mission Concluding Statement for the Eastern Caribbean Currency Union. In it, the Fund offered governments of some of our regional neighbours advice about how to facilitate the integration risk management into their operations:

a) It began with the recognition that members of the union were in a ‘shock-prone region,’ Hurricane Beryl had a devastating impact on the economies of Grenada and Saint Vincent and the Grenadines (like it did in Jamaica). Exposure to natural disasters (NDs) was one of the several risks that were identified ‘going forward.’ Recurring NDs impair productive infrastructure and hinder human capital formation, placing additional limits on Total Factor Productivity growth. (TFP is a measure of the efficiency with which all inputs in an economy are used to generate output).

b) The fallout from Hurricane Beryl highlights a potential role for common building standards across the region and the importance of prioritizing resilient infrastructure investment.

c) The ECCU’s high dependence on global property reinsurance makes it vulnerable to the evolving reassessment of climate liability risks. The risk of more sustained hardening of the reinsurance market could worsen existing underinsurance by driving up costs and reducing capacity. ‘Strengthening monitoring of reinsurance coverage, including through more targeted data collection, would support policy preparedness to manage these risks and narrow protection gaps.

It is my hope that this essay will be read by at least one member of the PAC or members of parties that are competing for votes in the general elections and that, he, or she, will offer written arguments to counter this narrative.