Risk and innovation : towards a framework for risk governance in social innovation Stephen P Osborne (University of Edinburgh Business School, Scotland)

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 differentiationRisk is socially constructed: what is a risk and

how much are we prepared to bear, for what outcomes?


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)


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


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)


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


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


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


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

Both these approaches see risk as negative and avoidable – but for innovation risk is necessary and must be negotiated


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 True ‘risk governance’ Resonance with ‘digital era governance’

Risk governance – three approaches II


The challenge…

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.


Risk and innovation – an integrated framework

TYPE OF INNOVATION

MODE OF RISK GOVERNANCE

Risk Minimisation

(technocratic)

RiskAnalysis

(decisionistic)

Risk Negotiation(transparent governance)

Incremental X

Expansionary X X

Evolutionary X X

Total X


Risk governance in social innovation in practiceStage 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)


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?


Documents

Risk and innovation : towards a framework for risk governance in social innovation Stephen P Osborne (University of Edinburgh Business School, Scotland)