Key risk areas
The LGR initiative introduces several critical risks that require effective management to achieve successful transformation. These include:
- Cultural resistance can hinder integration and delay progress
- The rise of unforeseen challenges related to legacy systems and liabilities
- Misaligned stakeholder priorities that create friction and delay decision-making
- Financial constraints that can compromise scope and timelines
- Reduced employee engagement and morale amid repeated transformations
Overview of government guidelines
The following frameworks provide valuable guidance for managing risks during the LGR:
- Orange book: Provides a framework for incorporating risk management into decision-making3
- Teal book: Embeds robust, evidence‑based approaches to programme delivery, including outcome evaluation for transformational initiatives4
Nine key considerations for leaders ahead of the LGR
During a transformation or merger, having a strategic approach can address risks, challenges and opportunities. The leadership can design their strategy by focusing on the following areas:
- Identifying and understanding risks: Look for all potential risks across operations, finance, culture and reputation. Consider the possibility of unforeseen risks ('unknown unknowns') and ensure these are understood across the organisation.
- Establishing a strong risk management framework: Identifying, assessing and mitigating risks becomes easier if you have a clear, structured risk management framework. Regularly updating this framework to align with the evolving nature of the transformation while maintaining communication with stakeholders helps avoid surprises.
- Ensuring organisational resilience: Preparing for events requires resilience. Maintaining operational stability and ensuring service delivery during disruptions is key. Focus on protecting mission-critical activities throughout the change process.
- Addressing cultural and workforce challenges: Assess cultural compatibility and the impact of transformation on employees. Engage employees, address their concerns and foster morale to reduce resistance and support a smooth transition.
- Retaining key personnel and knowledge: Keeping critical talent and institutional knowledge is vital during transformation. Develop succession plans for key roles to support continuity and mitigate risks associated with personnel changes.
- Optimising risk transfer through insurance: Bringing together organisations insurance and risk programmes can be complex as there are differing levels of cover, risk appetite, data and procurement consideration that underpin these arrangements. Planning well ahead is the key.
- Managing stakeholder expectations and communication: Engaging with all key stakeholders, including employees, customers, regulators and partners, is essential for achieving alignment and support. Implement a clear communication plan to keep stakeholders informed and address their concerns effectively.
- Implementing assurance processes: Establishing an assurance process, such as a gateway-style approach, can help with monitoring progress and ensure the transformation stays on track.
- Learning from past experiences: Reviewing lessons from previous transformations or mergers, both within the organisation and in similar contexts, can help identify potential pitfalls and best practices.
Robust risk management is essential to work through the complexities of transformation across systems, culture and people. It offers greater clarity and confidence, helping organisations avoid any disruptions, frictions, delays and cost overruns.
Tilden Watson, regional strategic risk advisor, Public Sector and Education, Gallagher
Risk mitigation strategies
To navigate the complexities of the LGR, organisations can benefit from adopting proactive risk mitigation strategies, including:
- Establishing a programme management office (PMO) to oversee the transition and ensure accountability
- Risk registers and solid escalation mechanisms to address issues early
- Leveraging tailored insurance programmes to manage liabilities and unforeseen risks
- Proactive scenario planning through identification of potential failure points and development of contingency plans to address them. This includes safeguarding critical data, systems and personnel to ensure operational continuity
- Maintaining data accuracy by validating and consolidating data for accurate risk profiling, better decisions, effective insurance and operational continuity
Case study: Risk management in action
A recent LGR project by Gallagher involved merging multiple councils into a single unitary authority. The transformation required a comprehensive risk management and insurance strategy to address diverse exposures, align risk appetites and ensure a smooth transition. Key stages of the process included:
- Setting the strategy: Stakeholder expectations were aligned, and success metrics were defined. The concept of total cost of risk (TCoR) was introduced to optimise value for money.
- Data gathering and validation: Included resolving gaps, such as incomplete property risk information and errors in claims history, which helped to create an accurate risk profile.
- Benchmarking and coverage design: Existing insurance programmes were benchmarked against other unitary authorities, and a tailored insurance strategy was developed to address strategic and operational risks.
- Actuarial modelling and risk transfer: Probabilistic modelling was used to balance risk retention and transfer. Tools like loss portfolio transfers (LPTs) were explored to manage legacy liabilities effectively.
- Finalising the insurance programme: Claims and exposure data were consolidated for the market presentation, ensuring a comprehensive insurance programme was in place by vesting day.
The project achieved annual cost savings, enhanced governance structures and created a bespoke insurance programme that reflects the new authority's risk profile.
Contact one of our risk advisors or reach out to Tilden Watson directly, to understand more about how Gallagher can support your organisation during the LGR.
