Risk and innovation : towards a framework for risk governance in social innovation Stephen P Osborne (University of Edinburgh Business School, Scotland)
Learning from innovation in public sector environments (LIPSE)
Outline of presentation Risk Risk and public services Risk and social innovation Locus of risk Risk in public policy A new starting point Risk: three approaches Risk and social innovation: the challenges University of Edinburgh Business School
Risk Risk - ‘the probability that something might happen’ Risk (known unknowns) and uncertainty (unknown unknowns) a key differentiation Risk is socially constructed: what is a risk and how much are we prepared to bear, for what outcomes? University of Edinburgh Business School
Risk and public services Risk core element of public services (e.g. open heart surgery, community care, new business support) Research on risk in public services limited Risk management as reducing public service accountability (Harman 1994) Risk as higher for public than private services and concerned with risk minimisation (Vincent 1996) Risk management as a ‘blame game’ (Hood 2002) Risk as multi-faceted and complex phenomenon in public services (Lodge 2009) University of Edinburgh Business School
Risk and social innovation Social innovation is a key policy trajectory in the UK, across Europe – and elsewhere ‘Social innovation’ is poorly understood and over-used Innovation as a process of discontinuity not gradual change and therefore… Risk is a key element of the social innovation process but is also poorly understood in policy and practice in public services University of Edinburgh Business School
Four types of innovation Incremental (developing existing services and skills) Expansionary (meeting new needs using the same skill base) Evolutionary (meeting existing needs using new skills) Total (meeting new needs using new skills) University of Edinburgh Business School
Locus of risk in social innovation Consequential – direct risk to service user Organisational – risk to professional/organisational reputation or legitimacy Behavioural – risk to stakeholders surrounding the service and/or the wider community University of Edinburgh Business School
Risk and social innovation public policy: the example of the UK Public policy acknowledges complexity of risk in innovation but rarely moves beyond bland guidance in practice (Audit Commission 2007, Cabinet Office 2008) NESTA/Young Foundations – need to ‘manage risk not eliminate it’ (2008) Dominance of actuarial approaches to risk (NAO 2000, ALARM 2009) AND CONSEQUENTLY scant guidance on the specific challenges of risk governance in innovation, such as Risk as a positive element of innovation process Co-production Negotiating across multiple/contested stakeholders University of Edinburgh Business School
Risk and social innovation and risk: a new starting point Understanding risk in social innovation Requires acceptance of its inevitability, the need to govern it and make decisions about acceptable levels of risk for social benefit Requires an ‘open systems’ approach, both because of the fragmented nature of public services delivery and because effective innovation requires a collaborative and open orientation University of Edinburgh Business School
Risk governance – three approaches I I - Risk minimisation (actuarial) acknowledges risk and seeks to minimise its presence and costs (closed systems approach) {Stultz 1996} II - Risk analysis (health & safety) acknowledges risk and seeks to manage its consequences (natural systems approach) {Rasmussen 1997} Risk analysis Risk assessment Risk management Risk management Both these approaches see risk as negative and avoidable – but for innovation risk is necessary and must be negotiated University of Edinburgh Business School
III – Negotiated risk governance (Renn 2008) Technocratic (decision taking on technical grounds by professionals) {risk minimisation} Limited by scientific knowledge Ignores social context and construction of risk Decisionistic (combines above with political decision making) {risk analysis} Process of negotiation of risk for given outcomes Transparent (combines above with stakeholder engagement) Involvement of end users of innovation/others risk governance True ‘risk governance’ Resonance with ‘digital era governance’ Risk governance – three approaches II University of Edinburgh Business School
How to govern risk in innovation in public services in a way that Acknowledges it as an inevitable part of the innovation process, That is flexible to range of different levels of risk and uncertainty in different public service innovations, That engages the full, appropriate, range of stakeholders for any innovation, and Is sophisticated enough to enable the negotiation of acceptable levels of risk for given outcomes. University of Edinburgh Business School
Risk and innovation – an integrated framework TYPE OF INNOVATION MODE OF RISK GOVERNANCE Risk Minimisation (technocratic) Risk Analysis (decisionistic) Risk Negotiation (transparent governance) Incremental X Expansionary XX Evolutionary XX Total X University of Edinburgh Business School
Risk governance in social innovation in practice Stage 1: Adopt an appropriate mode of risk governance – not normative! (all) Stage 2: Analyse the type of risk and where it falls (all) Stage 3: Identify potential and perceived risk and benefits/outcomes (all) Stage 4: Collaborate with stakeholders to reach shared understanding of acceptable risk (RG) Stage 5: Build in accountability (RG) University of Edinburgh Business School
An implementation checklist How is risk constructed in social innovation in your service and understood by the different stakeholders? What are the requisite governance structures? How to positively engage professionals, politicians, citizens, and/or users to an effective resolution Regulatory, political and cross-organisational forms Can governance models keep up with an information rich society? What skills will these individuals require for effective resolution? University of Edinburgh Business School