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As Interserve's financial restructuring attempts come to fruition, it is again striking how poor the industry has been in managing risk and managing risk responsibly. It badumes on behalf of its public sector clients.
In our report, After Carillion: Outsourcing and Procurement in the Public Sector, we found that public organizations that leave contracts are too ready to believe that risks can be transferred at unrealistic prices and that contractors are too willing to badume risks that are not fully understood. the two parts. In the case of Carillion, this was motivated by directors and shareholders with a risk appetite well above those responsible for the use of public money or the provision of vital public services, and the government did not fully understand how such risks could affect the public record. . We are revisiting this issue in our current survey of the government's management of major projects.
Interserve's willingness to undergo pre-packaging administration, to the detriment of shareholders and directors' interests, shows a marked improvement in the system's ability to manage the legacy of excessive risk.
Lenders should be commended for baduming much greater responsibility. The government is probably ready to facilitate these discussions. It is hoped that shareholders will also choose not to hold the company for ransom, but that they will recognize instead that vital public services can not depend on a high risk business model. In the long term, the shareholders of these companies should be aware that this market should be a lower risk sector, with lower profits thereafter. The provision of public services can not depend on leveraged and leveraged companies that engage in risky acquisitions. Such decisions can enrich directors and speculative investors, but make public services too vulnerable.
Sir Bernard Jenkin, MP
Conservative, Harwich and North Esbad,
House of Commons, United Kingdom
President, PACAC (Committee on Public Administration and Constitutional Affairs)
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