By Rob Whiteman, CIPFA CEO
Most of us feel the irrepressible urge to turn to the hive mind of Google when we’re not well. It starts off innocently. But soon enough, you’ve fallen down the rabbit hole, and mild abdominal pain has become a rare and terminal illness.
We do this to ourselves because, naturally, we want reassurance. And we want it now. But in our desire for a quick and easy answer, we often worry ourselves over nothing, diagnosing disaster and panicking over a simple case of indigestion.
The same can be said for organisational financial resilience. There are a lot of possible symptoms that could point to financial stress. But the addition of local context is vital in getting to a true diagnosis of the situation.
It is with this mentality in mind that organisations should be approaching CIPFA’s newly released Resilience Index. The Index demonstrates the performance of every local authority in England against a series of indicators, including levels of reserves, external debt and auditors’ judgements, to provide a picture of financial resilience.
But what does it mean to be resilient? It’s one of those corporate buzzwords that gets thrown around a lot these days. When you get right down to the nub of it, it’s about how you respond when things can go wrong.
Simple to understand as a basic concept, but less simple in practice, ultimately because resilience for one person will look drastically different to another. The same is true of organisations.
We’re all aware that councils have been at the sharp end of austerity for over a decade. Continuous reductions to government grants alongside higher cost pressures and increasing demand for services have piled on the pressure like never before.
It’s demonstrable that councils have been able to achieve efficiencies. The 2019 CIPFA/IfG Performance Tracker indicated that public satisfaction with local services is largely holding steady. The Resilience Index shows that even in the most challenging of fiscal circumstances, the majority of councils are maintaining a position in which they could weather shock.
However, there is a tail of perhaps 10% of councils, where there are some signs of potential risk to their financial stability. But these are symptoms requiring further scrutiny, not a terminal diagnosis.
The Index is neither predictive nor judgemental. It is designed solely, in the public interest, to support robust discussions around financial decision making by creating a common set of indicators to underpin CFOs’ statements on the robustness of budgets.
I would encourage anyone using the Resilience Index not to presume the worst if you don’t like the data that confronts you. Take it in your stride, and use it to enhance scrutiny. Robust scrutiny is a core step towards financial decisions that best serve our organisations and our communities. In CIPFA’s view, robust benchmark information will improve the quality of local considerations.
Click to find out more information about the Financial Resilience Index
This article first appeared in Room151.