While in the Reaction phase of their pandemic response, municipalities' focus was on stopping the spread of coronavirus and supporting public health. This required leaders to prioritize which services were critical to short-term safety and their ability to meet citizens' basic needs, and to identify how key services could be delivered safely and effectively given physical distancing requirements. The Resilience phase is about dealing with the ensuing operational and financial pressures, as well as exploring considerations for managing these issues while avoiding long-term harm.
After speaking with cities across Canada, it's clear that those that have embraced Enterprise Risk Management (ERM) and put thought into risk-based planning and mitigation have fared better than their counterparts. I expect to see many municipalities further their ERM efforts as they move through the pandemic, and even more so once it is over. Having robust risk management is key to building resiliency and having the agility needed to respond to future challenges and threats.
As I noted in my last post, Reaction measures have had a huge impact on municipal spending and revenues. Faced with growing costs and shrinking revenues, many municipalities are facing significant shortfalls. And because legislation prohibits municipalities from running deficits, focus has shifted from accommodation to cash flow, with adjustments tailored to surviving this period. This has many municipalities scrambling to shed or defer costs while mitigating short-term impacts to service and capability, so that once the current crisis has passed, they may be restored.
In many ways, the strategy here is not all that different than the one being used to manage the coronavirus: we need to 'flatten' the spending curve. This will require us to deprioritize non-essential spending to help flatten the peaks in spending, planning realistically to adapt to this new normal. Having a clear understanding of service criticality and the assets and operations contributing to service delivery will play an important role.
By determining priorities through well-defined relationships between goals, services, resources, and investments, a clear framework for evaluating the impacts of reductions in capital and available operational spending, as well as overall impacts to front-line services, will be attainable. These outlines will help in identifying the risks associated with deferring investments, and the unintended consequences of these adaptions moving forward.
Though external supports by way of federal and provincial programs may be provided, many questions around the nature, extent, and timing of these programs remain. Given this uncertainty, it is wise for municipalities to turn inward, assessing possible ways to internally alleviate the financial strains of this current situation through various levers. Here are some key questions to ask, in identifying each lever:
- Services: Which services are and are not critical over the short- to medium terms? Can restart be suspended or delayed? Can a reduced level of service be offered?
- Operations: Where are the large 'buckets' of resource expenditure for each service? What if spending in these buckets was reduced or eliminated? Could this risk be reasonably managed?
- Capital: What are the consequences of deferring planned capital investments? Where can these associated risks be accepted or mitigated, either in the short- or long terms, through operational adjustments? Which courses of action provide the best short-term gain, without exposing us to long-term risks?
These questions will not yield simple answers. But they are crucial to developing an effective, structured framework that can both see municipalities through this current crisis and set them up for future success.
In my next post, I'll explore how targeting, delivery and assurance will all play critical roles in driving—and sustaining—economic recovery in Canada's municipalities.