Saving dollars by managing risk
Aggressive risk-taking may be appropriate for Generation X snowboarders, but not for city and county managers, as Orange County, Calif., demonstrated in 1994. Unbeknownst to other county officials, the treasurer poured large sums of county money into risky investments that went bad, leaving the county in a severe fiscal bind.
While public sector risk management historically has focused on insurable risk, managers now are recognizing that the scope of risk extends beyond catastrophes and workers’ compensation. In fact, risk is the threat that an event or action will hinder an organization’s ability to achieve its objectives.
In government, investment risk, tax shortfalls, fraud and embezzlement, employee incompetence and bureaucratic red tape all constitute risks, many of which are not insurable. Moreover, privatizing, re-engineering and other cost-cutting practices can increase risk exposure.
Activities organizations perform to reduce risk or increase their ability to meet objectives represent controls. The equation “risk – control = exposure” defines the relationship between risk and exposure. In the Orange County fiasco, a systematic risknd GIS implementation.
As if all of that were not enough, members of the committee usually have full-time jobs. If they cannot dedicate the appropriate amount of time to the GIS project, momentum slows or comes to a halt altogether. In addition, threeother areas — a long time frame, heavy client involvement and high cost — present problems under conventional GIS implementation (see related feature, page 24).
Shortening the GIS time frame allows cities and counties to reap their financial benefits sooner. For example, Wyandotte County, Kan., collected $500,000 in delinquent taxes a year after implementing its GIS. Using those figures, when a GIS is implemented in three years under a turnkey solution as compared to seven under the conventional timeline, the county stands to gain $2 million in tax revenue.
A cost/benefit study was the critical first step that the city of Evansville and Vanderburgh County, Ind., have included in their joint city/county GIS planning project. The study produced an analysis that may aid the city and county in GIS planning and development.
The resulting report examines system hardware, software and data needs, and spells out anticipated costs and benefits. It also identifies potential sources for external funding, matching them with current city/county programs that could logically incorporate a GIS application.
In evaluating potential turnkey solution contractors, it is helpful to narrow the selection to those that have proven expertise in identifying and securing external funding support. Turnkey contractors are adept at finding GIS funding opportunities in programs involving wetlands, water and air quality, accident investigation, traffic control and economic development.
Maximizing the value of client involvement is one of the main objectives of the turnkey approach. In Evansville/Vanderburgh County, because of the need for shared data, the city and county representatives who studied the feasibility of GIS implementation also saw an opportunity to share costs. To that end, the group sought input from a range of potential GIS users and supporters from the very beginning.