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Risk and Regulatory Policy

Improving the Governance of Risk

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We expect governments to protect citizens from the adverse consequences of hazardous events. At the same time it is not possible or necessarily in the best interest of citizens for all risks to be removed. A risk-based approach to the design and implementation of regulation can help to ensure that regulatory approaches are efficient, effective and account for risk/risk tradeoffs across policy objectives. Risk-based approaches to the design of regulation and compliance strategies can improve the welfare of citizens by providing better protection, more efficient government services and reduced costs for business. Across the OECD there is great potential to improve the operation of risk policy as few governments have taken steps to develop a coherent risk governance policy for managing regulation.  

This publication presents recent OECD research and analysis on risk and regulatory policy.  The chapters discuss core challenges today. They offer measures for developing, or improving, coherent risk governance policies. Topics include: challenges in designing regulatory policy frameworks to manage risks; different cultural and legal dimensions of risk regulatory concepts across OECD; analytical models and principles for decision making in uncertain situations; key elements of risk regulation and governance institutions; the use of management-based regulation to help firms make risk-related behavioural changes; an analysis of the risk-based frameworks of regulators in five OECD countries (Australia, Ireland, Netherlands, Portugal, United Kingdom) and across four sectors: environment, food safety, financial markets and health and safety; and the elements for designing formal guidelines for risk prioritisation, assessment, management and communication.

 

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Annex 1.A1

Framing Risk in the Public Sector

Because the reduction of risks is a pervasive part of government activity, the management of risks is a primary function embedded in the operations of capable governments. In practical terms, government action provides protection for citizens against myriad risks every day. However, this is clearly being done better for some risks (and in some countries) than for others. Meeting the challenges from new emerging risks is a constant source of pressure on government administrations that can result in reactive regulatory responses. The political consequences of failing to manage risks are significant. Elections can be won or lost on the public estimation of a government’s capacity to manage particular risks, and the choices made at the administrative level about the treatment of risks are also under increasing scrutiny and pressure from interest groups, particularly when viewed retrospectively following a critical event. Governments can only benefit from a better understanding of how to assess, manage and communicate with the public about risks at both the political and the administrative level.

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