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In 2012, the words "dysfunctional" and
"government" go hand in hand. As a result, the stakes for
businesses that are regulated by, receive funding from or otherwise
intersect with government at its various levels never have been
higher.
While the Fall elections are on everyone's mind, regardless
of the outcome, the country again will experience serious political
brinksmanship shortly thereafter. Congress will grapple in its lame
duck session with the expiring Bush tax cuts, the need to again
raise the debt ceiling, looming cuts to the federal budget,
expiration of the payroll tax cut, and appropriations for the
upcoming government fiscal year – and those are just a
few of the issues. Congress will try to address these issues
against a backdrop of a still struggling economy, financial
regulatory reform, health care reform, and a lingering political
hangover from the 2008 financial crisis.
"Governmental risk is intertwined with a variety of
other risks facing the enterprise, including, among others,
reputational risk and compliance risk."
Uncertainty reigns, and the government is playing a historically
disproportionate role in the private sector. So, how does an
organization effectively manage its governmental risk, i.e., the
potential for government action or inaction to frustrate its
business objectives, and turn that risk into a business
opportunity?
First, analyze governmental risk as its own distinct risk
category. Second, develop a basic understanding of the ways in
which government can impact the organization. And third, develop
and execute a macro and micro strategy for addressing governmental
risk.
Governmental risk is intertwined with a variety of other risks
facing the enterprise, including, among others, reputational risk
and compliance risk. To effectively address governmental risk,
however, an organization should conduct an annual governmental risk
assessment and inventory governmental risks across the enterprise.
Senior management should prioritize addressing those risks that
pose the greatest threat to the organization.
To evaluate the risks that an organization faces at its
intersections with government, management needs to have a framework
for understanding government. The "three Ps" –
policy, politics, and process – guide government decision
making and provide a useful reference for a management team
thinking about how to mitigate governmental risk.
Government policy is the public goal that the government is
attempting to achieve, and it is, at times, hard to comprehend or
rationalize, from a private sector perspective. Government policy
usually reflects an effort to balance various interests, as opposed
to profit and loss that guide private sector activity.
Politics influences government decision making at a number of
levels. The public is most accustomed to thinking about this in the
context of the two party system, Republicans and Democrats. And
while those politics surely matter, more often politics revolves
around things such as home state interests, job creation, and the
need to show progress on signature initiatives.
Process – the manner in which the government arrives
at and executes decisions – is the most misunderstood
component of government. For example, if one is attempting to
influence legislation, knowledge of the legislative process is as
important as enlisting policy support for a bill. Likewise, in the
executive branch, it's critical to understand that there are
stark differences between the way career civil servants and
political appointees look at and address issues.
Depending upon your organizational needs – for
example, getting business from the government or keeping the
government out of your business – an organization may
employ offensive or defensive strategies or both. Simply knowing a
member of Congress or other Washington "big wigs" is not
a strategy. A strategy needs to account for every moving part in
government that impacts your risks. Identify your political assets
and liabilities. Who are your friends? Who are your enemies? How
does the geography of your organization impact your influence in
Washington? Map out the government decision makers impacting your
organization and think through those officials' perspectives on
key issues and develop a plan to advance your interests.
In executing a strategy there are a few keys. Build
relationships early enough in the process of the particular
initiative you are trying to advance to be able to have a
meaningful dialogue with decision makers. Follow the "no
surprises rule" – stay out in front with key
officials on all issues, good and bad. Perhaps, most importantly,
the most difficult time to mitigate any risk, but particularly
governmental risk, given the potential legal and public relations
consequences, is when crisis already has struck. So don't
wait.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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