18706_Authority_Oct

municipalauthorities.org | 31 EndorsedMember Program Paper-based bidding is wasteful of your time and money. Learn how your resources are better spent using PennBid for e-procurement – all at no cost. info@pennbid.net | 610-693-4769 | www.pennbid.net Why eProcurement? p rocureMent r iSk M anageMent : e xceeding B aSic c oMpliance for r eal r eSultS By Freddy Lutz, Principal, The PennBid Program Risk is defined as “the possibility that something unpleasant or unwelcome will happen” or as “a situation involving exposure to danger.” At times, when authorities think of the risk associated with their purchasing process, they may believe that simply complying with the law is adequate. And while that may be true, compliance is only the beginning. This article isn’t a review of the purchasing requirements outlined in the Municipality Authorities Act. Rather, it summarizes additional risk management strategies and considerations that authorities looking to truly minimize the organization’s exposure can implement to safeguard themselves and their employees. Under the microscope In the private sector, “the bigger the risk, the bigger the reward” is generally true – especially when financial gains are a driving force behind decisions. In the public sector, on the other hand, authorities provide services aimed at ensuring the health, welfare, and safety of constituents and ratepayers, a responsibility that makes the risk-management balancing act a bit more complex. Add in that the entire decision-making process is centered around public engagement and scrutiny, and the need for a robust risk management program becomes quite clear. Analyze, assess and mitigate Some incorrectly believe risk management is automatically embedded in day-to-day decisions. At times, this belief is accompanied by an absence of clear reporting to senior management and/or an audit committee. Additionally, when authority officials have a general misunderstanding of the purpose and relevance of risk management, employees may view it simply as a compliance exercise. A weak or absent risk management process often spawns a lack of interest in or awareness of risk. One approach to developing a risk management plan is to employ the following three-step methodology: Continued on page 54.