Risk and Regulatory Policy

OECD governments have come to recognise the critical importance of and the need for an effective risk policy. Public servants deal regularly with risks in many public policy domains – economic, financial, health, safety, environmental and national security. With increasing frequency, officials face decisions about policies, programmes and services where future uncertainties are economically significant and unavoidable. Thus, they need to assess, appraise and manage risk in an overall effort to develop suitable policy responses. Moreover, in a context of growing complexity and interdependence, they need to inform the public about the nature of risks and the inherent tradeoffs between specific policy choices.

The concept of risk policy in the public sector comprises a broad picture. Not only does it include what has been termed risk management or risk analysis; it also looks at how risk-related decision-making unfolds when a range of actors is involved. Risk policy requires co-ordinating and possibly reconciling between differing policy objectives, perspectives, goals and activities. Indeed, the problem-solving capacities of government administrations have often been limited in the face of the major challenges facing society today. Risks such as those related to natural disasters, terrorism or critical infrastructures call for co-ordinated effort amongst a variety of government agencies. Finally, risk policy also needs to take into account such factors as the historical and legal background, guiding principles, value systems and perceptions.

Many OECD countries have developed both implicit and explicit frameworks for developing regulation (and more generally public policy) solutions in the face of uncertainty and risk. A generalised and stylised version of the risk policy frameworks across the OECD can be divided into three sequential phases: assessment, analysis and management. These three phases are all linked with the additional element of communication. While most OECD governments generally follow a policy process regarding risk, the specific methods vary across countries, across agencies, over time, and depending on the particular risk being addressed.

In principle, risk regulation begins with some forecast of potential future risk. In practice, regulation may be a reaction to a recent crisis. In either case, risk-based regulation attempts to forecast the future likelihood of adverse consequences, through an initial component usually called “risk assessment.” One widely applied form of risk assessment is Environmental Impact Assessment. In the EU, the move towards quantitative risk assessment has been driven in part by WTO decisions under the Agreement on Sanitary and Phytosanitary Standards (SPS), which requires a scientific risk assessment to support international trade restrictions.

For further reading:

Risk and Regulatory Policy
Strategic Issues in Risk Regulation and Risk Management
Risk and Regulatory Governance