What is the surest way to plague a country, blessed with abundant natural resources and over 100 million globalized young people, with never-ending cyclical crises? Poor management!
Pakistan isn't a poor nation; it's a poorly managed one. This mismanagement stems from various factors, but none more critical than the absence of formal, written, and updated objectives, coupled with a lack of formal risk management within the public sector.
Logically, nothing is accomplished without clear objectives. For public organizations, these objectives must be formally documented. Terms like "aim," "mission," "vision," and "functions" cannot, technically, provide anything without objectives. Furthermore, these objectives should ideally incorporate elements of the SMART framework, ensuring they are Specific, Measurable, Achievable, Relevant, and Time-bound. From organizational structure to risk management, everything is designed, implemented, and maintained in alignment with these objectives.
However, most public sector organizations in Pakistan lack objectives entirely. The Urban Areas Development Authorities (UADAs), established under the 2020 Khyber Pakhtunkhwa UADA Act, are a prime example. This absence of clear goals has led to numerous problems. Some UADAs have declared bankruptcy due to resource misallocation and a lack of professional accounting. Displaced priorities have resulted in a significant imbalance, with operational and payroll expenses exceeding those allocated for development projects by nearly five times.
Pakistan isn't a poor nation; it's a poorly managed one. This mismanagement stems from various factors, but none more critical than the absence of formal, written, and updated objectives, coupled with a lack of formal risk management within the public sector.
These issues will naturally follow: development work will come to a complete halt, Provident Fund disbursements will cease, followed by pensions and then salaries. Ultimately, the organization will either be forced to sell off its assets or rely on a government bailout, only to be able to start it all over again.
In this environment, accountability remains elusive, as the absence of clear objectives makes it impossible to establish and measure meaningful Key Performance Indicators (KPIs). Furthermore, the risk of fraud persists unchecked.
In contrast, other organizations suffer from poorly defined objectives. Both the Auditor General of Pakistan (AGP) and the Federal Board of Revenue (FBR) operate without formal, SMART objectives, leading to potential confusion and inefficiency. While the FBR has defined KPIs, the lack of clear overarching objectives makes it challenging to contextualize these metrics, justify them, and assess their effectiveness. The AGP has no formal objectives whatsoever, just a confusing mix of aim, mission, and vision, hindering any meaningful evaluation of its performance or strategic direction. Before the FBR can achieve its targets and the AGP can provide quality accounting and auditing, both organizations must first undergo in-house restructuring. This is impossible without having formally written objectives.
In Pakistan, a formal national risk management policy is absent, having far-reaching consequences. Policymakers often mistakenly equate risk management solely with credit risk management.
The other pillar of effective modern management is risk management. Risk represents the potential impact of uncertainty on objectives. Simply put, it's the potential hazards one might encounter while pursuing goals. Modern management, whether private or public, is essentially conscious and proactive risk management.
In Pakistan, a formal national risk management policy is absent, having far-reaching consequences. Policymakers often mistakenly equate risk management solely with credit risk management. This limited understanding is evident in the recent establishment of the Central Monitoring Unit at the Finance Division. When international organizations like the IMF or World Bank advise Pakistan to focus on risk management, they're referring to a comprehensive approach that encompasses far more than just credit risk – which itself is only a small part of the broader risk management landscape.
Let's examine how a proactive approach to risk management could have averted one of Pakistan's major crises: The ongoing issues with Independent Power Producers (IPPs) in Pakistan serve as a stark example of the consequences of neglecting proactive risk management. A thorough demand forecasting and scenario planning process could have identified the potential for excess capacity, leading to more measured investment in power generation. Additionally, properly assessing technology risks and opportunities would have encouraged the exploration of renewable energy sources, diversified the energy mix and reduced reliance on fossil fuels. Anticipating and mitigating infrastructure-related risks would have led to the development of a robust transmission network capable of handling the increased power generation. Finally, conducting due diligence and negotiating from a position of risk awareness could have resulted in more balanced and sustainable contracts with IPPs.
The solution lies in identifying those public sector organizations operating without formal, updated, and comprehensive objectives. Without clear objectives, effective risk management is impossible. Subsequently, these objectives, along with the corresponding organizational structures, need to be revised and aligned.
The systemic neglect of risk management in this case has led to innumerable problems: excess capacity, financial losses, power delivery issues, and overpayments to IPPs. These issues continue to burden the national economy and its citizens, highlighting the critical importance of proactive risk management in policy-making and project implementation.
The solution lies in identifying those public sector organizations operating without formal, updated, and comprehensive objectives. Without clear objectives, effective risk management is impossible. Subsequently, these objectives, along with the corresponding organizational structures, need to be revised and aligned. The Organization for Economic Cooperation and Development's (OECD) principles of public administration can serve as valuable guidelines in this process. When that is done, it would be possible to formulate and establish a national risk management policy, drawing inspiration from frameworks like the United Kingdom's Orange Book or Singapore's Risk Assessment and Horizon Scanning. Each public sector organization would then be required to tailor its own risk management framework in accordance with this national policy. Importantly, this can be achieved without the need for new recruitments.
All in all, Pakistan's public sector will continue to breed and nurture one crisis after another unless it embraces professional management practices. The absence of clear objectives and proactive risk management lies at the heart of this issue. The system is moving towards complete collapse, and band-aid solutions like massive layoffs and privatization simply won't suffice. It is time to move beyond impractical rhetoric, confusing quick-fixes and take concrete professional action. If we fail to act now, we will face even graver issues than the IPP crisis – crises where, due to thorough mismanagement, we will expend resources only to accrue further liabilities.