A risk governance deficit is a deficiency or failure in the identification, framing or assessment of a risk issue, or in how it is being managed and communicated. As such, it can also be understood as a risk governance challenge. Governance deficits are common. They may be found throughout the risk handling process, and limit its effectiveness. They are actual and potential shortcomings and can be overcome or remedied.
Potential consequences of risk governance deficits can include:
- Missing opportunities, in particular in the case of benefit-risk trade-offs
- Costs of inefficient management measures, such as public regulations
- Loss of public trust in how policymakers or industry work to reduce risk
- Inequitable distribution of risks and benefits between stakeholders, in particular those that create or amplify risks and those that are adversely affected
- Excessive focus on high profile risks (such as those with high probability and potentially high severity), to the neglect of lower profile risks (especially fat tail risks)
- Failure to move away from ‘business as usual’, assign and enforce responsibility, and trigger action
Over the course of this project, in 2009/2010, IRGC has identified and described the causes of the most commonly occurring risk governance deficits. The goal was to help governments, regulators and private sector actors to better understand how these deficits occur and how they can be minimised. Developing such an understanding is important for dealing with new risks. In some cases, this can also lead to the revision of approaches to existing risks.
Risk governance deficits operate at various stages of the risk governance process, from the early warnings of possible risk to the formal stages of assessment, management and communication. For conceptual clarity, the deficits identified by IRGC have been divided into two categories, related to:
- Assessment and understanding of risks (Cluster A: 10 deficits)
- Management of risks (Cluster B: 13 deficits)