Risk and innovation : towards a framework for risk governance in social innovation

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

2. Learning from innovation in public sector environments (LIPSE)

3. 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

4. Risk • Risk - ‘the probability that something might happen’ • Risk (known unknowns) and uncertainty (unknown unknowns) a key differentiation • Risk is socially constructed: what is a risk and how much are we prepared to bear, for what outcomes? University of Edinburgh Business School

5. 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) University of Edinburgh Business School

6. 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 University of Edinburgh Business School

7. 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) University of Edinburgh Business School

8. 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 University of Edinburgh Business School

9. 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 University of Edinburgh Business School

10. 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 University of Edinburgh Business School

11. 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 University of Edinburgh Business School

12. Risk governance – three approaches II • 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’ University of Edinburgh Business School

13. 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. University of Edinburgh Business School

14. Risk and innovation – an integrated framework University of Edinburgh Business School

15. Risk governance in social innovation in practice Stage 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) University of Edinburgh Business School

16. 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? University of Edinburgh Business School