alsoWhere the Ivory Towers Meetthe Whitehall Village

The Operational Risk Game

Regulatory Fever

Controlling the Campus

On the Railroad to Nowhere?

Risk&RegulationMagazine of the ESRC Centre for Analysis of Risk and Regulation No.5 Spring 2003

Risk&Regulation: CARR ReviewNo 5 Spring 2003

Editor: Henry RothsteinAssistant Editor: Sabrina Antâo

Thanks to: Filippa Corneliussen,Yuval Millo & Joan O’Mahony

Enquiries should be addressed to:

Centre ManagerESRC Centre for Analysis of Risk and Regulation

The London School of Economics and Political ScienceHoughton Street, London WC2A 2AE

United Kingdom

Tel: +44 (0)20 7955 6577 Fax: +44 (0)20 7955 6578Website: www.lse.ac.uk/Depts/carr/

Email: risk@lse.ac.ukPublished by the

ESRC Centre for Analysis of Risk and RegulationThe London School of Economics and Political Science

Houghton Street, London WC2A 2AE

Copyright in editorial matter and this collection as a whole:London School of Economics © 2003

Copyright in individual articles:p4 © Ronald Amann

p10 © Brian HogwoodRonald Amann and Brian Hogwood have asserted

their moral rights.

All rights reserved. No part of this publication may bereproduced, stored in a retrieval system, or transmitted, inany form or by any means, without the prior permission in

writing of the publisher, nor be issued to the public orcirculated in any form of binding or cover other than that

in which it is published.

Design and Art Direction: LSE Design UnitPhotography (unless stated): LSE Photography

Page 12: Thanks to Modelzone for supplying modelsIllustration, page 9: Mark Elliot

Printed by: BSC

ISSN 1473-6004Online ISSN: 1473-6012

3 Editorial: Between Theory and PracticeCARR Co-Directors, Bridget Hutter and Michael Power, reflect on the interplay between theory and practice.

4 Where the Ivory Towers Meet the Whitehall VillageRon Amann considers the contribution that academics can make to the practice of government.

5 CARR NewsAll the latest news from CARR.

6 The Operational Risk GameProposals to regulate operational risk prompt Michael Powerto reflect on how ill-defined concepts can have a profound impact on practical affairs.

7 Regulatory FeverAs regulatory fever grips the NHS, Lindsay Stirton considers thecauses of the outbreak and asks whether it is good for our health.

8 Risk&Regulation Research DirectoryA powerful, free, online searchable database containing up-to-dateinformation on academic risk and regulation expertise.

9 Controlling the CampusColin Scott argues that excessive hierarchical control in HigherEducation is not the inevitable price of regulation.

10 Exam Howlers or Accidents Waiting to Happen?Exam result crises provide a perfect model of ‘How to Organise a Debacle’argues Brian Hogwood, but they also show we need to learn how tomanage change in the public sector.

11 When Government Neglects RiskHenry Rothstein finds that government is ignoring a significant risk that could be doubling workplace fatality rates and draws some worryingimplications for risk governance.

12 On the Railroad to Nowhere?Railway regulation is often considered a peculiarly British failure, butMartin Lodge argues that experience in other countries suggests therewill always be ‘trouble on the lines’.

13 The World According to the Next GenerationMichael Huber and George Gaskell reflect on what researchstudents’ interests can tell us about contemporary intellectual shifts.

14 CARR ConferencesRisk and regulation conferences hosted by CARR.

15 CARR NetworkCARR is building contacts across the UK and worldwide.

16 CARR SeminarsReports from CARR’s regular seminar series.

17 CARR BooksAn extensive range of risk and regulation books by CARR members.

18 CARR in PrintNew papers by CARR members.

19 CARR PeopleCARR staff and their expertise.

www.lse.ac.uk/Depts/carr/

Contents

CARREDITORIAL

Between Theoryand Practice

The complex relationship between theory andpractice lies at the heart of the social sciences, andmany great minds have been exercised in exploringdistinctions between the two pursuits. Nowhere isthis relationship more tangled than in the world of

risk regulation, where the work of academics and practitionersfails to neatly align with conventional distinctions. Many so-calledpractitioners operate on a daily basis with abstract ideas andtheories, often unconsciously, in pursuit of their business. Thevery idea of risk and its related theoretical baggage is a goodexample. Equally, the academic disciplines are often informedand influenced by more pragmatic issues than claims tointellectual purity suggest; for example, statistics has historicalroots in insurance and arithmetic for political purposes, whilstthe qualitative research genre of anthropology came into being,in part, as empire management. This complex interplay betweentheory and practice underlies much of CARR’s work, both inintellectually organising risk and regulation studies into acoherent theoretical field, and in extending dialogue withpractitioners. Over time, we hope that these activities willbecome fully-fledged and mutually enlightening partners.

As far as theoretical development is concerned, our fifteen-month review, in December 2002, reported visible progress on anumber of fronts. First, several projects are addressing genericissues relating to organisations and risk management, buildingpartly on neo-institutional theories of organisations and takingvariations in the organisation of risk management practice as thecentral problematic. Second, a number of other studies aredeveloping analytical frameworks for the comparative analysis ofthe regulation of government and the theory of risk regulationregimes. A third strand of theoretical work relates to thelegitimising and blame allocating dimensions of risk regulation.A final fourth generic theme focuses on Ayres’ and Braithwaite’sconcept of enforced self-regulation, in which the statemandates self-regulation and steps in where this is notadequately achieved.

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Coupled to these theoretical advances in intellectually framing riskand regulation studies, we have also been working hard to cultivateour relationship with practitioners and to build related forms ofcapacity within CARR. Perhaps the most significant step in recentmonths has been to establish a series of practice consultativeseminars within CARR, in which policy-makers are invited to discussaspects of a particular regulatory or risk management initiative. Sofar, we have hosted colleagues from the Department of Trade andIndustry to discuss the regulation of the accountancy profession,and from the Cabinet Office’s Strategy Unit to discuss their 2002publication, Risk: Improving Government’s Capability to Handle Riskand Uncertainty. In both cases, we hope to influence equally thequality of discussion around these initiatives and the final substantiveform of any proposals.

At the same time as we are reaching out to the varied worldsof practice, our UK academic outreach programme has becomean expanding portfolio of mutually supporting elements, includingUK visitors and regional- and London-based events. Of particularimportance in this regard has been the launch of the CARRRisk&Regulation Research Directory (see page 8) as a clearing-house for academic expertise in the area. In time, we hope to extend this data resource to include policy-makers and practitioners.

In addition to UK Outreach and our efforts to serve as anational centre for the evolving field of risk regulation studies, weare committed to investing in the next generation of scholars whowill take the field forward. We have recently made a number ofappointments at the postdoctoral and research officer level,funded by the ESRC, BP p.l.c. and the Leverhulme Trust.Deutsche Bank AG resources continue to support graduate andpostdoctoral teaching within CARR, including the annualgraduate conference, which was so successful last summer(see page 13).

We do not expect that these investments in theory- andpractice-orientated work will solve the issue that has perplexedmany minds over the centuries. We do believe, however, that theconjunction and proximity between abstract ideas and appliedconcerns can make them partners in a very productiverelationship. The delicate trick is to avoid the pitfallsof propagating mere consulting and faddish rationalisations ofpractice on the one hand, and of defending a deluded andimpossible purity on the other.

Bridget Hutter and Michael PowerCARR Co-Directors

I 4 I Risk&Regulation I Spring 2003 I

GUESTCOLUMN

The Civil Service has undoubt-edly improved in recent yearswith the introduction of keyreforms such as better strate-gic planning, greater diversity

and more sophisticated human resourcemanagement. Given the ‘revolutionary’ cul-tural changes that such ‘modernisation’entails, however, it is not at all surprising thatsome difficult tensions remain. On the onehand, there is a greater emphasis on inno-vation, risk taking, and individual responsi-bility for ‘delivering’ specific ‘projects’. Onthe other hand, traditional Civil Service val-ues of strict accountability, orderly adminis-tration and protecting Ministers are still verymuch in play. Consequently, single-mindeddynamism, more characteristic of the private sector’s pursuit of the bottom line,can come up against the conflictingdemands of multiple stakeholders.

Management consultants can offersome help, but they are generally morecomfortable providing limited and stan-dardised techniques rather than con-fronting the central issue as a whole. Afuller answer might come in two parts.First, there is the intellectual task ofextracting a coherent concept out of thiscultural mixture in order to pave the wayfor a sustainable vision of the Civil Service.Second, there is the practical task of con-structing a balanced framework of riskmanagement, which, in operational terms,could encourage innovative behaviourwhilst meeting high standards of public accountability. These systemicpuzzles are classic territory for academics, not least within CARR.

In getting to grips with suchcomplex tensions, academics arehampered by one fairly obviousdisadvantage. Very few of themhave seen central government fromthe inside at any great length ordepth. Moreover, the memoirs ofsenior Civil Servants upon whichthey might l ike to draw forauthentic insights, often do notget beyond what Clive Pontinghas called ‘respectful admiration’.The massive knowledge asymmetriesbetween those inside and outside theWhitehall vi l lage are revealed with

particular force in discussions of thedistribution of power, the role ofpersonalities, and attempts to reveal the‘true’ character of relatively closed policyprocesses. Here, the layering of one theoryupon another is often only tenuously linkedto any empirical foundation.

Despite all this, however, I believe thatthere are ways in which academics can,and do, make an important contribution toour understanding of the issues. First, CivilServants tend to have short memoriesbecause of the sheer pressure of work,the need to focus on the latest policyinitiatives and periodic job rotation. Yet, abroader historical perspective is invaluablefor anticipating problems that are likely toarise in implementing institutional reform.There is much to be learned today, forexample, from Peter Hennessy’s accountof how the 1968 Fulton Report wasdiluted in its implementation, or thefactors that lay behind the rise and fall ofthe Central Policy Review Staff between1970-83. Provided access can beobtained, high quality empirical researchcan provide systematic accounts ofaggregated behaviour that Civil Servantscannot easily formulate for themselves.Hugh Heclo and Aaron Wildavsky’saccount of the institutional ‘politics’ ofpublic expenditure rounds in The Private

Government of Public Money remainsan absolute classic of

this genre.

Second, academics are often in agood position to offer meta-views of thestyl ised solut ions offered by themanagement consultants periodicallyengaged by Government; for example, insensitive areas such as performance pay,where academics could highlight thevalues implicit in management strategiesand the extent to which prevai l ingmanagement ideologies close downpossible alternative approaches. This is a missed opportunity, however. Muchof the ‘critical’ management literature,such as that inspired by the FrankfurtSchool, is disappointingly poorempirically. Michael Power’s work onThe Audit Society, which is written from acrit ical stance yet r ichly l inked tospecific context, is an important butrare exception.

Finally, academics can contribute whatone might call ‘high theory’, often informedby a comparative perspective. When this isdone well, it is extraordinarily illuminating.For example, Patrick Dunleavy’s ‘bureau-shaping model’, sheds a great dealof light on the structure of institutionalincentives that lie behind departmental‘silo’ mentalities, and Christopher Hood’sThe Art of the State artfully uses ‘grid-group cultural theory’ to bring out atypology of public management styles.

Christopher Hood’s book brings meback to the central puzzle raised earlier,since he has successfully highlighted whydifferent public management paradigmsdo not easily converge or blend. One canappreciate the theoretical force of hiscentral argument that the indiscriminatecloning of fashionable models into areaswhere they are deeply inappropriate is acardinal recipe for the production ofreverse effects. Yet, reformers wil ldoubtless persist in trying to combinedifferent approaches in order to gain thebenefits of each. That raises the practicalquestion of whether cultural hybridscould, i f ski l ful ly introduced, beembedded in a sustainable way.Hopeful ly, we can search for someanswers with the help of CARR’sresearchers and others.

Where the Ivory Towersmeet the Whitehall Village

Professor Ron Amann

has recentlyretired as DirectorGeneral of theCabinet Office’sCentre forManagement andPolicy Studiesand prior to thatwas ChiefExecutive of theEconomic andSocial ResearchCouncil. ProfessorAmann is also amember of theCARR PolicyAdvisoryCommittee.

I Spring 2003 I Risk&Regulation I 5 II Spring 2003 I Risk&Regulation I 5 I

Online Research Directory LaunchedCARR launched a pioneering resource tool for risk and regulation research last December. Containing up-to-date information on academic research, the internationalRisk&Regulation Online Research Directory promises to become a gateway foracademics, students and practitioners. Our aim is for the resource to aid the developmentof intellectual synergies, pulling together research and building successful partnershipsacross the world. To use this innovative tool go to: www.lse.ac.uk/Depts/carr

Shaping the local agendaFollowing the success of the first series of lectures on theeconomics of population change, the Westminster EconomicsForum has begun a second series of seminars on the subject of ‘risk’ for local policy-makers and businesses. Bridget Hutterand Mike Power have provided intellectual guidance, andChristopher Hood hosted a seminar in March on BlameAvoidance, Risk and Negativity Bias.

Government Handling of Risks to the PublicThe Cabinet Office’s recent report, Risk: Improving Government’s Capability to HandleRisk and Uncertainty, presents a platform for government handling of risk. As part of CARR’s high-level seminar initiative, a special meeting was held with representativesfrom the Cabinet Office’s Strategy Unit to provide CARR input on organisationaldimensions of risk management.

Click on CARRThe CARR website has been improved and re-launched with a new look. The site has new content, new functions and is even more user-friendly. Amongst many things, thewebsite keeps you informed of the latest research, riskregulation expertise in CARR, and provides access to an array of online publications. As always, all issues of Risk&Regulation are accessible online:www.lse.ac.uk/Depts/carr/

CARR in the NewsA number of CARR members have been invited to offer their opinions on topicaldebates. Robert Kaye was interviewed by Channel 4 News to discuss the regulationof party political funding, whilst Martin Lodge appeared on BBC1 to discuss theregulation of German energy markets.

Research Student ConferenceCARR is organising the second Risk and Regulation Research Student Conference,following the success of last year’s inaugural event (see page 13). The conference will be held on 18 – 19 September. For details see the CARR website.

Staff NewsCARR says goodbye to David Black who leaves us as Administrative Secretary for a position in the Civil Service. Congratulations to Louise Newton-Clare, our CentreManager, on the birth of her new baby. We welcome Anna Pili as her temporaryreplacement. Also our congratulations to Bridget Hutter, who has recently becomethe Editor of the British Journal of Sociology.

CARR members have been much in demand in recentmonths and have presented their work to academicand practitioner audiences across the globe.

Tim Besley was invited to deliver threelectures as part of the Lindahl LecturesSeries in Uppsala, Sweden.

Bridget Hutter was invited by the Policy Research Initiative to present research on risk-based regulation at McGillUniversity, Montreal.

Christopher Hood addressed the Annual Meeting of theAmerican Political Science Association in Boston.

Terry Gourvish addressed the International Business HistoryColloquium at Bocconi University, Milan.

Martin Lodge was invited to present his work on administrative and regulatoryreform to the Croatian Ministry forEuropean Integration, and he presentedwork on regulatory accountability at TrinityCollege, Dublin.

Mike Power was invited by the Regulatory InstitutionsNetwork to speak about the wider contexts of auditing to the Australian National University and presented his work on operational risk to the University of New South Wales.

Henry Rothstein presented his workon institutional attenuation to the USNational Institute of Occupational Safetyand Health, and discussed UK reform of food safety regulation at conferencesin New York and Paris.

Colin Scott presented his research on Regulating ResearchEthics to Australia’s National Health and Medical ResearchCouncil, and discussed Regulatory Accountability at aconference at Columbia University, New York.

CARRNEWS

GlobalRound-Up

Christopher Hood

I 6 I Risk&Regulation I Spring 2003 I

Regulatory projects are alwaysin some sense visionary.Possibilities and aspirationsfor control and order getprojected via discussion

documents, codes, guidance manualsand the law, often in an ideal formabstracted from the messy realities ofimplementation. Concepts and categoriesare important vehicles for this creativeprocess, providing both powerful rhetoricsfor change agents and tentative maps forreshaping practice.

Nowhere is this visionary process moreevident than in the Basel 2 reforms ofbanking regulation and, in particular, thespecific proposals for the management andregulation of operational risk. The process ofdeveloping, implementing and supervisingoperational risk management in banks is stillincomplete, but in many respects the mostdifficult and decisive step has already beentaken: the rise and institutionalisation of‘operational risk’ as a category of regulatoryand managerial attention.

To suggest that operational risk hasbeen invented is not merely figurative orfanciful. Of course, businesses in generaland banks in particular have been awarefor many years of risks arising from ITinfrastructure, fraud, business disruptionand many similar issues. However, therenewed visibility of these risks under thelabel of ‘operational risk’ re-constructstheir location and status for managementdecision-making purposes. Furthermore,the connections made by the BaselCommittee and others between themanagement of operational risk and good

governance, positions these ‘old’ risks ina new space of expectation – regulatory,political and social.

The true author and inventor ofoperational risk is Nicholas Leeson, the‘rogue’ trader attributed with thedestruction of Barings Bank; Leeson did foroperational risk what Maxwell did forcorporate governance. So operational riskin the banking industry started life as aresidual category, something left over frommarket and credit risk managementpractices, a fear category with a prob-lematic reality and status. For this reason, ithas proved problematic to define, althoughsuch difficulties in fixing meaning haveenhanced, rather than detracted from, itsimportance. Arguments about whether itproperly includes or excludes such thingsas ‘strategic’ or ‘reputational’ risk only serveto emphasise the potentially broad appealof the concept as a meeting point for many different, often competing, intra-organisational interests and practices.Operational risk, therefore, often becomes asite of conflict and cooperation betweenaccountants, IT specialists, credit riskmanagers, insurance specialists, health andsafety experts and many others.

One of the most challenging andpotentially paradoxical features ofoperational risk is its implication for datacollection. Operational risk marks a spaceof concern for so-called low probability, highimpact events, which are typically thosewhere data is not only hard to collectbecause of its low frequency, but alsosubject to wider forms of ambiguity (eg,what is a relevant loss event? Do nearmisses count?). Understandably enough, insuch situations the tail of feasible datacollection often wags the dog of operationalrisk management.

Closely related to the data collectionissue is an apparent tension between twobroad management camps. On the onehand, there are those who would fit

operational risk to the quantitative metricsand economic capital calculation regimesthat already work for market risk. On theother, there are those more sensitive to thequalitative and governance dimensions ofoperational risk, where systems integrity,communication and directionality of riskassessment play a more significant rolethan measurement and technological fix.Inevitably, these tensions create a micro-politics of control in banking organisationsas experts compete for precedence.

Charles Goodhart, among others, hasargued that the operational risk game existslargely as a discretionary top-up forregulators concerned about decliningeconomic capital in the banking system. Assuch, the elaborate fantasies of micro-control evident in Basel 2, and its seeminglyendless iterations around operational risk,are an unnecessary smokescreen forsomething simple. Certainly, bankingindustry practitioners are vexed by aregulatory proposal that projects an ideal ofdetailed and complex systems ofcalculation, but which leaves criticaljudgements in the hands of supervisors.

As these messy regulatory andmanagerial realities unfold, the category of‘operational risk’ provides an instructivecase study of how ill-defined concepts andideas can nevertheless have a profoundand transformative impact on practicalaffairs. And at a time when a great deal ofintellectual investment in detailedinfrastructure and metrics is evident, thereis, I hope, some utility in a sociologicallyinformed reminder of the visionary originsand dreams of control which inform themanagement of operational risk.

Michael Power is CARR Co-Director and P.D. Leake Professor of Accounting.The Invention of Operational Risk will bepublished as a CARR Discussion Paperin summer 2003.

The OperationalRisk Game

CARRRESEARCH

Proposals to regulate operational riskprompt Michael Power to reflect on how ill-defined concepts can have a profound impact on practical affairs.

I Spring 2003 I Risk&Regulation I 7 I

CARRRESEARCH

The ‘health regulatory state’has flourished under the BlairGovernment. Since 1997, theNational Health Service (NHS)has established a raft of new

regulatory institutions and procedures:from the National Institute for ClinicalExcellence (NICE), which appraises newhealth technologies and disseminatesclinical ‘best practice’ guidelines, to theCommission for Health Improvement (CHI) which monitors compliance withstandards. Such is the pace of change,that some of these institutions have barelyopened for business before they havebecome outdated. Plans are already afoot,for example, to replace CHI with a new,more powerful Commission for HealthAudit and Inspection.

These reforms, however, represent theculmination of a process that extendsback over twenty years. Perhapsthe most notable illustration is theNational Service Framework Initiative, aprogramme of national service standardsand models, which was essentiallythe re-branding and extension of theapproach taken by the previousConservative administration to paediatricintensive care and cancer treatment.

Since the creation of the NHS, theimplicit quid pro quo for the NHSaccepting overall spending limits, has beenthat the state would not interfere in howmoney was spent. The creation of the NHSombudsman in 1974 started to underminethat understanding by providing somedegree of quasi-regulatory oversight. Thedirect and explicit erosion of the statusquo, however, can be traced to theestablishment of the Advisory Committeeon NHS Drugs (ACD) that same year. Inparticular, the ACD’s ‘Limited List’ of drugswas an attempt to control the spirallingcosts of marginally effective treatments byrestricting the pharmaceuticals that GPscould prescribe within certain therapeuticcategories. Since then, the list of healthregulatory institutions has grown apace.

There are a number of explanations forthis outbreak of regulatory fever. The first ismoney. Straightforward money saving canexplain some reforms such as the ACD’sLimited List, but simple ‘rationing’ wouldbe too crude a charge to lay at the foot ofthe NHS’s door. Concern to reduce theliability costs of clinical negligence,however, may have played a significantrole. The introduction of ex-ante controls,ostensibly to improve clinical practice, hashad important cost implications, especiallywhere controls have been cynically usedas ‘litigation shields’.

More recent regulations, however, arenot so obviously directed at money saving.Indeed, NICE was correctly anticipated tohave a positive net effect on expenditureby hastening the uptake of new therapies.Recent efforts towards completeimplementation and compliance withexisting clinical guidance, such as oncholesterol-lowering statins, have provedeven more costly.

Other commentators have suggestedthat the move towards a more market-orientated NHS is a better explanation ofthe extension of the regulatory mode ofgovernance. Undoubtedly, the InternalMarket, together with an increasing use ofthe private sector to deliver health care,has diminished traditional managerialapproaches to governance. Yet, many ofthe major health policy decisions in the lastten years have been traditional managerialplanning decisions, such as therationalisation of hospital services inLondon. In other words, traditionalhierarchical control has diminished only atthe margins.

Still others suggest that changes inprofessional power relations have beenthe root cause of regulatory develop-ments. Regulatory changes haveundeniably occurred at a time when themedical profession has been increasinglyunder challenge from a better-informedand more demanding public, and hasbeen put on the defensive by a series of

high-profile health service disasters. Yet,whilst the dynamics of the medicalprofessions can provide insights into themotives and opportunities for increasedregulation, an account of the means ofregulation is still missing.

Here, the changing nature of medicineitself has an explanatory role to play.‘Evidence-based medicine’, has provideda model for care provision, based onsupposedly ‘objective’ evaluations oftherapeutic approaches, the relatedestablishment of ‘clinical guidelines’, andmonitoring implementation by ‘clinicalaudit’. The rise of evidence-basedmedicine has been a crucial ‘missing link’in understanding why the governance ofthe NHS increasingly imitates the‘regulatory state’ familiar in other publicservices, such as utilities. In other words,there is at least a sense in which thegovernment has chosen to regulate theNHS ‘because it could’.

Will increased regulation of healthservices improve health service provision?Experience so far suggests, at most,cautious optimism. Counter-productiveregulatory outcomes suggest that we maybe solving pressing problems at the cost ofcreating others. Phenomena such as‘NICE-blight’, whereby clinicians avoiduseful treatments under review, or adoptmarginally effective – but sanctioned –treatments at the expense of moreeffective – but non-standardised –treatments, are becoming all too common.How the health regulatory state willmanage these new challenges remains tobe seen.

Lindsay Stirton is a CARR ResearchAssociate and Lecturer in Law at theUniversity of East Anglia.

Regulatory FeverAs regulatory fever grips the NHS, Lindsay Stirton considers the causesof the outbreak and asks whether it is good for our health.

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CARRRESOURCES

Risk&RegulationResearch Directory

The Research Directory provides a focused and dedicated resource for researchand policy thinking in risk and regulation studies. Inclusion is at the discretion of theDirectors of CARR. As a broad guide to relevance, potential registrants shouldconsult the CARR website and the aim and objectives of CARR. All or part of theresearch interests of potential registrants may be included; the relevance test isapplied at the level of projects rather than persons. Registrants may be de-registered where their interests cease to be relevant.

A powerful, free, online searchable databasecontaining up-to-date information on academicrisk and regulation expertise across the world.

Find your result

Enter yoursearch term

I Spring 2003 I Risk&Regulation I 9 I

CARRRESEARCH

Higher Education (HE) in theUK and Australia is widelyperceived to suffer from over-regulation, with the coreactivities of teaching and

research subject to ever tighteningcontrols. Many claim that over-regulationhas eroded the autonomy and creativitynecessary to maintain a flourishing HEsector. Yet a return to a romantic goldenage of unfettered control is neither realisticnor even desirable. The question,therefore, is how to reap the rewards ofregulation, whilst avoiding the harms?

One way out of this difficult dilemma isto understand that excessive hierarchicalcontrol is not the inevitable price ofregulation. Alternative regulatory modelscan instead be deployed that minimisethe problems witnessed in the HE sector.The promising seeds of one suchalternative approach can be found withinorganisations that deploy meta-regulatorystrategies – a concept developed byChristine Parker in The Open Corporation.

Meta-regulation refers to the use bythe state of indirect, rather than direct,controls to achieve regulatory goals.Indirect controls can be more effectivethan traditional hierarchical methods ifthey can capitalise on the internalmanagement capacities and incentivestructures of regulatory targets. We arealready witnessing some tentative meta-regulatory approaches within the HEsector, and comparative examination oftheir use within the UK and Australiasuggests they have considerablepotential.

The traditional autonomy of universitieshas been under pressure in many OECDcountries since the 1960s, as aconsequence of increased governmentfunding, greater salience of HE policyand recurring fiscal crises. A recentconsultants’ report for the UK funding

agency, for example, revealed anextraordinary web of monitoring andcontrol. The picture in Australia is muchthe same. A more disaggregated andnuanced analysis of the UK and AustralianHE sectors, however, reveals considerabledivergence in their choice of regulatorytools. The UK has adopted an excessivelyprescriptive model of regulation forteaching quality, but a more meta-regulatory style of control has been linkedto competitive pressures for research.Conversely, the Australian teaching qualityregime has been predominantly indirectlycontrolled and linked to communityvalues, whilst the research regime hasbeen more prescriptive. Analysis of thediffering outcomes highlights some ofthe advantages that meta-regulatorystrategies can offer.

The Australian and UK approaches tofunding research are similar in so far asthey have both introduced morecompetition for block grant and researchcouncil funds. In the UK, however,decisions on block grant researchfunding are informed by a periodic peerreview of a limited number of researchoutputs for every department within theResearch Assessment Exercise. The useof such highly generalised researchquality indicators has given institutionsconsiderable discretion to set researchpriorities. In contrast, the Australianregime entails an annual audit of allresearch outputs with funds linked toquantity and certain forms of researchoutput. In comparison with the UKregime, therefore, the Australian regimeappears to favour quantity over qualityand control over independence.

When it comes to controlling teachingquality, the UK and Australian regimesagain appear superficially similar, in so faras they both entail dedicated agenciesand auditors drawn from senior

academic staff. There are fundamentaldifferences however. The UK’s QualityAssurance Agency for Higher Education(QAA) sets external standards for manymatters such as assessment of students,degree content, external examining andprogramme approval, monitoring andreview. The Australian Universities QualityAgency (AUQA), in contrast, avoidssetting external standards and insteadaudits compliance with institutions’ ownobjectives. The UK regime, therefore, ismuch more prescriptive than theAustralian regime and, consequently, fails to capitalise on the benefits ofuniversities developing their ownstandards and processes.

The UK and Australian higher educationexperiences suggest that whereinstitutions show a strong capacity for self-regulating, meta-regulatory processes canprovide a way of keying into those internalcapacities to steer regulatees towardsexternally set objectives. The deploymentof meta-regulatory approaches inappropriate conditions is less costly thantraditional direct control methods, and canbe more effective in aligning behaviourwith wider public objectives. Such indirectsteering is an inexact science but is oneabout which we need to learn more. Meta-regulation has wide application beyondcontrols over the public sector and canprovide a bridge between traditionalbusiness regulation and interests inorganisational control.

Colin Scott is a CARR member andReader in Law at LSE. He is currently onsecondment to the Law Program andRegulatory Institutions Network of theResearch School of Social Sciences,Australian National University.

Controllingthe CampusIs excessive hierarchical control in Higher Educationthe inevitable price of regulation, or can meta-regulatory strategies offer a more effective regulatorymodel? Colin Scott considers experiences in the UK and Australia.

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CARRRESEARCH

In giving evidence to the Commons SelectCommittee on Education and Skills on 15 May2002, Sir William Stubbs, then Chairman of theQualifications and Curriculum Authority (QCA) inEngland, alluded to the exam results problems

that had occurred in Scotland in 2000. Hesuggested that, in part, problems had arisenbecause there was only a single exam awardingbody in Scotland, in contrast to England wherethere were three, overseen by the QCA. Commentin Scotland in 2000 following the debacle hadsuggested that one of the concerns was the lack ofan independent regulator; in Scotland the ScottishQualifications Authority (SQA) was also the singleexamining body.

Yet by September 2002, the English QCA andthe government were facing their own political crisisover exam results in England. On 27 September, SirWilliam Stubbs was forced to resign, and a monthlater the Secretary of State for Education, EstelleMorris, resigned, claiming she could not cope withthe pressures of the job. Clearly then, whilst thenumber of awarding bodies and independentsupervision of the exam system are important andinteresting issues, they are insufficient to explainwhy exam result crises blew up in both countries.

An ‘exam howlers’ approach to interpreting thecrises would concentrate on individual mistakes,perhaps so elementary as to be laughable, like apoorly prepared pupil who mixes up wronglyremembered pieces of information. An ‘accidentswaiting to happen’ approach, to adapt a phraseused by Mike Tomlinson in introducing his FirstReport on the problems in England, would implythat the process was so structured that problems ofsome kind had a high probability of occurring.

Certainly, it is possible to identify ‘howlers’. An example is the failure to inform the SQA’s ownhelpdesk of a change in making results availableto schools, so that anxious pupils were givenwrong information about who could help them.Overall, though, a preliminary comparison ofthese crises suggests that there were broaderstructural factors at work.

Both academic explanation and practical lesson-drawing are likely to be assisted if we can identifycommon structural features of the problems andpotential commonalities with other public policies:

• Both crises involved planned or ‘purposive’change rather than simply a response to aproblem, such as foot-and-mouth disease.Crises in both countries related to major changesin the nature of examinations.

• In both cases a large number of bodies wereinvolved, although activities were dividedamongst them differently. The involvement oflarge numbers of organisations in public policydelivery is so common, however, that it mayhardly be regarded as distinctive.

• All the organisations involved had undergonemajor reorganisations, including the qualificationsauthorities, the examining boards and thegovernment departments (with devolutionmarking a major change in Scotland). Thoseorganisational changes coincided with the management of major change in theexamination systems.

• There were significant changes in documentationto be processed, both in scale and in the way theinformation had to be collated for a final result.

• Very large (and growing) numbers of ‘customers’were involved.

• The process was highly time-constrained, both interms of the year of introduction and the verynarrow band of dates within which full andcorrect processing had to take place.

• The consequences of error or delay would behighly distressing to those affected (for example,loss of desired place at university).

The last three points help explain why problemsinevitably became highly politicised and involvedconsiderable blame-shifting, even though the actualerror rate was lower than, say, is routinely the casewith social security benefits. Concern wasincreased because of the uncertainty that lasted forweeks about the scale of the problem and whichindividuals had been affected.

Although there are some obvious commonfeatures between the two crises, there are somekey differences. The Scottish problems largelycentred on failure to collect, input and collate marks.The problem in England was more about theambiguous meaning of maintaining a standardwhen there had been a major qualitative change inthe structure of the qualification. The first is arguablyeasier to rectify than the second.

It is easy enough to list some of the events andfactors that led to the crises and use them toconstruct a list of instructions on ‘How to Organisea Debacle’. It is more difficult, but still insufficient, toidentify how those particular events and factorscould have been avoided. The broader need is toidentify the risks involved in managing particulartypes of change in the highly politicised atmosphereof the public sector.

Brian Hogwood is a CARR Visiting Fellowand Professor of Politics at the Universityof Strathclyde.

Exam Howlers orAccidents Waitingto Happen?

Recent exam result crises provide a perfect model of‘How to Organise a Debacle’ argues Brian Hogwood,but they also show we need to learn how to managechange in the public sector.

I Spring 2003 I Risk&Regulation I 11 I

CARRRESEARCH

Workplace fatalities occupyconsiderable government att-ention and resources and, atjust under 300 deaths eachyear in UK workplaces, it would

seem rightly so. Yet, recent research suggests thatseveral hundred additional workplace deaths arecaused annually by exposure to a risk of whichgovernment is aware, but largely neglects. Indeed,government has a statutory duty to reduce thisspecific risk, remedial measures come cheap at justover a thousand pounds per workplace, andemployers, when alerted to the risk, are generallyresponsive. So what is this risk, why is it beingneglected and why does it have worryingimplications for risk governance?

The risk is from radon – the natural radioactivegas that afflicts many regions of the country – notjust the well-known south-west. Estimates of radonrisks are controversial – some believe the nuclearindustry have hyped the risks and others believethat small doses may even be good for you. But theNational Radiological Protection Board (NRPB) –the government’s nuclear advisory body – suggeststhat exposure to radon in homes and workplacescould be annually responsible for over 2,000 lungcancers in the UK.

Public disinterest in radon is well-documentedand appears to explain remarkably low rates forprotecting homes against this hazard, eventhough this is where most exposure occurs. Somesay that government should do more to protectthe public, but the state has adopted ‘anEnglishman’s home is his castle’ approach,confining itself to a countrywide survey andsupporting limited radon awareness campaigns.

When it comes to workplaces, however,government has had a specific statutory duty toprotect workers against radon since 1985. Radonwas originally thought to just afflict the marginalnon-coal mining industries, but it was then foundin many workplaces and public buildings acrossthe UK. The NRPB now estimates that exposureto radon in workplaces alone may cause as manyas 250 lung cancers annually. The regime ismonitored and enforced by a highly risk-based

agency, the UK’s Health and Safety Executive(HSE) (working in tandem with local authorityinspectors), which has made control ofradiological hazards a high priority. Yet, figures forimplementing radon controls are disappointing.Only about 12,000 out of 150,000 potentiallyafflicted workplaces in England and Wales have sofar been tested and at that rate it will be at least 20years before workplaces are better protected.

Why has there been such regulatory neglect?There appear to be four main institutional reasons.First, there are expertise deficits amongst healthand safety inspectors who are mostly generalists.Radon is not readily associated with particularbusiness activities and is only detectable withspecial apparatus. One HSE official explained theproblem, ‘Some inspectors don’t feel comfortablewith the subject and some inspectors just don’tknow about radon. …When you explain the risksto field inspectors and say that radon causes 250deaths a year, their eyes light up.’

Second, the radon regime is institutionallyfragmented, spanning EU and national policy-making, a national nuclear watchdog, and regionalmonitoring and enforcement. Those splitinstitutional responsibilities work against remedyingexpertise deficits by hindering communication ofradon risks throughout the regime.

Third, radon control suffers from misalignedinstitutional incentives by failing to figure as animportant national objective within the HSE.Instead, radon often loses out to the localcontingencies of competing demands onresources, political priorities and issues thatattract greater professional rewards. As the HSEofficial explained, ‘There is not a lot of kudos inpushing radon. You get kudos as a regionaldirector for your contribution to the regional andnational workplan.’

Finally, radon falls prey to the traditional healthand safety culture, which holds employers moreculpable for safety risks directly resulting fromworkplace activities than unfamiliar health risks of‘natural’ origin. ‘Other issues such as gascylinders are more likely to be on their [inspectors]minds,’ is how another HSE official put it.

The management of occupational health and safety in theUK is said to be highly risk-based, yet government appearsto be ignoring a significant risk that could be doublingworkplace fatality rates. Henry Rothstein investigates anddraws some worrying implications for risk governance.

When GovernmentNeglects Risk

State institutional failure to manage risk is not limitedto occupational radon. Another example is the BSEstory during the early 1990s, when local authorityinspectors failed to enforce regulations to preventcontamination of human and animal food chainswith spinal cord and other cattle offal. Analysis ofthe institutional failures that contributed to the BSEcrisis reveals remarkable structural similarities to theradon story and is suggestive of a more general riskgovernance problem.

Much has been written about the supposeddichotomy between official and lay perceptionsof risk. But such arguments often miss thesignificant ways in which bureaucraticperceptions of risk are shaped by social andinstitutional processes even within the mostarchetypal ‘risk bureaucracies’. In particular,research on radon, BSE and other risks, issuggestive of a phenomenon of institutionalattenuation, whereby the institutional dynamicsof risk bureaucracies can serve to attenuatebureaucrats’ perceptions of risk and diminishtheir attention to associated regulatoryrequirements. As a consequence, some riskscan be simply neglected.

The institutional attenuation phenomenonappears to be driven by a number of institutionalfactors, which collectively appear to be fatal foreffective risk management. Those factors includeexpertise deficits, institutional fragmentation,misaligned institutional incentives and dysfunctionalregulatory cultures. If government is to bettermanage public health risks, then even the mostrisk-based bureaucracies need to pay greaterattention to the institutional factors that canundermine effective risk governance.

Henry Rothstein is a CARR ESRC ResearchFellow. This article draws on CARR DiscussionPaper No.7 and Health, Risk and Society 5 (1)2003: pp85-103.

Radon affected areas in England and Wales

% of homesabove action level

0-11-33-55-1010-30>30

SOURCE: NRPB

CARRRESEARCH

On the Railroadto Nowhere?

That organisations are born in hope andenthusiasm and end in disillusion anddisappointment is a well-known adagein public administration. Britishrailways at the beginning of the 21st

century seem a particularly good example of thisdepressing cycle towards policy ‘hell’. Whether it is‘leaves on the line’ or further delays to projects thatare key to the once widely-hailed ten-yeartransport plan, British railway policy reform seemsto confirm the worst predictions of privatisation’sopponents. But plagued as British railways are,can we look elsewhere to find a better solution?On Different Tracks charts regulatory reform of therailways in Britain and Germany across thetwentieth century and finds a pattern of recurringreform themes.

‘Difficulties’ on the railways are not just familiarto British railway travellers. The last few years haveseen the recently ‘privatised’ German railwaysystem facing a similar identity crisis to thatafflicting its British counterpart. The problems inthe UK have been well advertised: Railtrack’sfinancial collapse, widespread financial difficultiesof the various franchises, accusations of worseningsafety records, and turf fights between differentregulatory and supposedly ‘strategic’ andfranchising bodies. But Germany has suffered fromsimilar problems, including market dominanceabuses in preventing network access, substantiallymisspent public money, weak regulatory oversight,and concerns over safety and service quality.

Legislation to privatise the German and Britishrailway systems was passed in 1993, but eachadopted different methods of vertically separatingservices and infrastructure. Britain adopted asystem of franchising numerous passengerservices and created a separate privateinfrastructure operator, three roll ing-stockcompanies, a private freight operator and a myriadof maintenance companies. Germany also

franchised local, subsidised passenger servicesand privatised the operator. Unlike the British case,however, the federal-state retained ownership ofthe operator and kept it vertically integrated for anindefinite period.

The fragmentation of the industry created by the1993 Railways Act was widely regarded as the rootcause of recent British difficulties. But in theGerman case, the key problem was seen to be thestrong position of the vertically integrated DeutscheBahn, which could rely on the anxieties of itsshareholder, the federal government, to protect itsinterests. Thus, in Britain, more integration wasadvocated; in Germany, enhanced fragmentation.

It was not the first time that the UK andGermany had adopted similar policy themes fortheir respective regulatory reforms. Just as bothcountries had simultaneously privatised theirrailways in the 1990s, both countries hadsimultaneously sought to ‘nationalise’ their railwaysduring the much earlier inter-war and the post-1945 war periods. During the inter-war period,Britain’s railways were changed from a private,oligopolistic industry to four regional monopoliesunder the eye of a new national transport ministry.Similarly, in Germany there was a shift from avariety of regional-state and privately-ownedenterprises to a national enterprise under federal-state ownership.

The British case represented the outcome of aprocess that had initially put the railways at theforefront of a ‘reforming’ post-war economic policy.Sir Eric Geddes, the first British Minister ofTransport, advocated a ‘regulatory arrangement’that would combat what he saw as the dangers ofpublic ownership, where ‘politics corrupts therailway management and the railway management

Railway regulation is often considered a peculiarly British failure,but Martin Lodge argues in a new book on British and Germanrailway reforms that there will always be ‘trouble on the lines’.

corrupts politics’. In the German case, the initial‘nationalisation’ of the German railways was soonovershadowed by the demands of the Allies forreparation payments. Influenced by twointernational railway experts (one being former LSEProfessor William Acworth), a ‘national’ railwayoperator was created that enjoyed considerablecommercial autonomy in its rate-setting policy.

After 1945, the new German governmentcreated a new single operator with less formalautonomy than the inter-war company. Britain’srailways were also transformed into a single publiccorporation as a response to the financial declineof the four regional monopolies and Labour’s post-election programme. Foreshadowing debates ofthe late 1980s/early 1990s, the four British railwaycompanies had proposed a vertical separationbetween their railway services and the provision ofinfrastructure. Although that proposal wasrejected, even Herbert Morrison, the initiator of thepost-1945 nationalisation policies of the thenLabour government, envisaged state-industryrelations where ministerial functions wouldbecome mainly ‘regulatory’ and ‘supervisory’.

On Different Tracks charts railways reformthrough three major periods of the twentiethcentury and shows how railway regulation canprovide an historical lens for understandingcontemporary regulatory reform programmes. Thebook provides numerous examples of recurringthemes and proposals – often with policy ideasswitching back and forth between key players.The book also points to the inherent tensions andtrade-offs between the competing demands ofefficiency, equity, reliability and safety whenregulating such a complex industry as the railways.Indeed, a comparative and historical perspectivecautions against any reform rhetoric that promisesto deliver the definitive solution to all problems onthe railways, whether in Britain or anywhere else.Indeed, there is no doubt that the problems ofregulating the railways are certain to accompanyour travels for a good deal longer.

Martin Lodge is a CARR member andLecturer in Political Science and Public Policy.On Different Tracks. By Martin Lodge, Westport,Conn.: Greenwood, 2002; £42.To order a copy: www.greenwood.com

I 12 I Risk&Regulation I Spring 2003 I

I Spring 2003 I Risk&Regulation I 13 I

CARRSTUDENTS

The World According to the Next Generation

CARR research shows that there is much to begained by bringing together the two fields of riskand regulation. A glance through the pages ofRisk&Regulation shows how contemporary risk andregulation problems have demanded thatresearchers step outside of their intellectual silos todevelop new approaches and conceptual framingsthat cross the academic disciplines. Long gone arethe days when risk was something for techniciansand regulation was an esoteric branch of policy-making. These two concepts are now central to theorganisation and management of both the privateand public sector and occupy the minds of the laypublic as well as the professional.

Nowhere are contemporary intellectual shiftsmore apparent than in the interests of researchstudents, and the emerging field of risk andregulation is no exception. Indeed, the CARRResearch Student Conference held last September,and funded by Deutsche Bank, shows just howpopular work in this new intellectual domain hasbecome. Doctoral students from around the worldcame to CARR to present research on abewildering array of subjects that ranged frompublic and private sector organisational riskmanagement to public attitudes to new technology.All the presentations, however, were linked bycommon themes that have become central tounderstanding the contemporary world.

According to Bridget Hutter, much can be learnedabout these new ideas and approaches by studyingthe intellectual history of risk and regulation studies.In her opening conference address, Professor Hutterhighlighted the breakdown of the historicalhegemonic dominance of disciplinary approaches torisk (eg, statistics, engineering, psychology andanthropology) and regulation (eg, political scienceand socio-legal studies). Instead, recent years havewitnessed greater interdisciplinarity as the focus ofattention has moved towards organisational risk-taking, governmental responses to riskmanagement, and financial and accountancy risk.As studies of risk and regulation have gainedground, so the social sciences have started to makesubstantial contributions to understanding decision-making under uncertainty.

These shifts have been accompanied by asignificant change in the language of risk andregulation. As recently as the 1980s, the word ‘risk’was considered a technical term of interest to fewbeyond the technocrats. But risk has emerged assomething fundamental to the understanding ofmodern and post-modern society and hascolonised many areas where decisions are madeunder conditions of uncertainty. As uncertainty isbecoming recognised as almost constitutive formodern societies, it is little wonder that riskdiscourses have both expanded and become lesstechnical in both the scientific and public domains.

Regulation has undergone a similar trajectory. Injust twenty years, the concept of regulation hasmetamorphosed from a technical corner of policy-making, to become the conceptual underpinningof complex and fragmented areas of policyanalysis. When recently allied to control systemstheory, such as the work on risk regulationregimes undertaken here at CARR, regulation hasproved a powerful tool for more generalorganisational analysis.

These developments in risk and regulation haveopened up a host of opportunities, challenges anddebates for academics, practitioners and policy-makers. For example, rational choice models asseen in ‘evidence-based policy-making’ appear, inprinciple, to bring the different interest groupstogether with a common communication mediumand a normative imperative. The costs of ignoringvalues and culture in the risk and regulationequation, however, have become increasinglyclear and have a particular contemporary saliencefor the coming generation of researchers.

It is, therefore, not surprising that the CARRResearch Student Conference revealed just howfar the emerging interdisciplinary fields of risk andregulation are provoking contemporary academicscholarship. Yet, despite the sweeping breadth oftopics addressed by this international group ofstudents, which included financial markets, ITregulation and genetically modified food, threecommon themes could be seen to emerge.

The first theme concerned organisationaldynamics, which locate the ‘actor’ in a central

position as source of both risk and self-regulation.Second, knowledge management emerged as akey issue underpinning risk and its control. Andthird, comparative perspectives were seen to playa key role in understanding organisationalmechanics and dynamics. All three themes havefeatured in past research on risk and regulation,but their combination in successive presentationsand debates was powerful. Particularly notablewas the impressive ease by which the themestranscended traditional disciplinary boundaries.

By combining a twin focus on real world‘problems’ and emerging theory, it is clear that theintellectual horizons of contemporary studentshave assumed a broad perspective. Thepresentations from this new generation of risk andregulation researchers show that the area offersmany exciting opportunities for work at theintersection between social sciences and issues ofcontemporary relevance in the public domain.CARR will hold a Research Student Conferenceannually and the quality of the work presented atthe conference suggests that the field will not onlyexpand, but will do so in safe hands.

The CARR Research Student Conference last September proved a resoundingsuccess. Michael Huber and George Gaskell now reflect on what the interestsof research students can tell us about intellectual shifts in our understanding of thecontemporary world.

Risk&Regulation 2003Research StudentConference

A conference for doctoralstudents in the social sciencesto present and discuss workin progress.

18 – 19 September 2003, CARRThursday 18 September17.00: Keynote address and receptionFriday 19 September9.30 – 17.00: Conference

Deadline for abstracts June 15 2003For details see the CARR website: www.lse.ac.uk/Depts/carr

I 14 I Risk&Regulation I Spring 2003 I

CONFERENCE NEWS Public Management Policy ChangeCARR, LSENovember 2002

In November 2002, CARR held a major workshop on thetheme of Public Management Policy Change. The purpose was to examine the process by which decisions are made tochange government-wide institutional rules and routines thatcomprise public management policies. Such policies reflectpolitical authorities’ and central agencies’ approaches andinstruments to regulate the core public sector as a whole. The focus of the seminar was on the change process. Publicmanagement policy change is poorly understood as a process,most prominently outside the English-speaking countries. Forthat reason, participants were brought together to presentpapers on Germany, Spain, Brazil, Mexico, Peru, and Thailand.The revised papers are scheduled for publication in asymposium issue of the International Public ManagementJournal at the end of 2003.

New Governance of Markets: regulationby non-majoritarian institutionsCARR, LSEDecember 2002

The 1980s and 1990s saw the spread of non-majoritarianregulatory organisations at the national, European andinternational levels. Powers were delegated to independentnational regulatory agencies, courts, self-regulatory bodies andsupra-national organisations such as the EC Commission andWTO. The workshop examined how these non-majoritarianorganisations have behaved and affected regulatory politics.The workshop looked at how they have altered the distributionof power and relationships within and between the state and private actors, and between government, independentregulatory agencies and courts. It raised issues of how non-majoritarian regulators gain accountability and legitimacythrough new decision-making processes and transparency.

Watchful Eyes, Oversight Explosions andFire Alarms? Cross-national perspectiveson control over governmentCARR, LSEDecember 2002

Is there a general ‘audit explosion’ over public services takingplace worldwide? Fifteen scholars from eight countries (Australia,France, Germany, Japan, the Netherlands, Norway, UK, USA)met to explore how controls over government had developedover a generation in three policy sectors – prisons, universitiesand the higher civil service. Prisons and universities showmarkedly different patterns, with the higher civil servicesomewhere in the middle. The workshop is the third in a series(see Risk&Regulation, No.1, Spring 2001: p.5) and it will result in a book edited by Christopher Hood, Oliver James, Guy Petersand Colin Scott, to be published by Edward Elgar next year.

Organisational Management of Complex RiskLondon February 2003

A grant from the BP Complex Risk programme allowed CARRresearchers to spend part of the last two years working withorganisations facing challenging risk management problems(see Risk&Regulation, No.1, Spring 2001: p.6). The distinctivefeature of this work has been the combined deployment of ethnographic and problem structuring methods. With theproject now complete, the workshop provided an opportunityto discuss a number of developing themes with riskmanagement practitioners and academics from social andmanagement science backgrounds. As the first stage of thepost-project dissemination programme, the focus of theworkshop was on the identification of risk handling practiceswithin organisational settings, and the design and deploymentof group-based soft modelling support for associated planningand decision-making processes. The team’s provisionalfindings provoked lively discussion amongst the participants.

CARR sponsors regular risk and regulation conferences

More information on CARR events can be found on CARR’swebsite, www.lse.ac.uk/Depts/carr/

CARRCONFERENCES

I Spring 2003 I Risk&Regulation I 15 I

CARRNETWORK

VisitorsCARR has a dynamic Visitors Programme that isactively contributing to CARR’s intellectual life. CARRhas recently been privileged to welcome five leadingscholars and practitioners.

Brian Hogwood is Professor of Politics at the University of Strathclyde and has a research interest in analysingtrends in public policy using a wide variety of indicators,including the use of different types of body for policydelivery and regulation. At CARR, he is examining theimplications of using appointed public bodies in regulation,using a comparison of the regulatory implications of theexam debacles in Scotland in 2000 and England in 2002(see page 11).

Rolf Lidskog is Professor in Sociology at Örebro University(Sweden) and is involved in the socio-political aspects ofenvironmental management and policy-making. He is alsoresearching multiculturalism and social order with aparticular focus on institutional responses to urban violenceand public fear of urban crime.

Alexandru Preda is Assistant Professor of Sociology at theUniversity of Konstanz, Germany. His research focus is on thehistorical development of financial markets technologies andassociated risks. He has published several articles on thecognitive instruments at work in financial markets, their tiesto technology, and the development of financial expertise.

William Shenkir is William Stamps Farish Professor at theMcIntire School of Commerce, University of Virginia.Professor Shenkir specialises in financial reporting policies,management control systems, and business risk. As theformer dean of the McIntire School, he maintains an activeinterest in business and accounting education policy issues.His current research focuses on open-book managementand enterprise-wide business risk management.

Paul Walker is Associate Professor of Commerce atMcIntire School of Commerce, University of Virginia.Dr Walker has developed expertise in accountinginformation systems, auditing, business risk consulting,and financial accounting. He has published in numerousjournals on topics related to information systems, businessrisk, auditing, auditing expertise, audit failures, audit fees,competition in public accounting, and regulation of theaccounting profession.

Outreach EventsBusiness History and RiskNottingham, March 2003

CARR, in association with the University of NottinghamBusiness History Institute, held a successful workshop on‘Corporate Governance’ in March. The second of a series of interdisciplinary discussions, it brought together businesshistorians, economists, accountants, management theorists and risk analysts to develop a broader and deeperunderstanding of a concept which has engaged the attention of policy-makers, regulators and academics since theCadbury report in the early 1990s. Michael Mayer (Universityof Glasgow) addressed the issue of corporate ownership,highlighting new developments in the pattern of ownership inEuropean businesses. Mike Wright (University of Nottingham)examined new research on MBOs, focussing on therelationship between regulatory and entrepreneurialresponses. Nick Tiratsoo (LSE) turned to Britishmanufacturing since the Second World War, revealing asignificant gap between the theoretical and the real in themanagement of such companies. Finally, Stefan Szymanski(Imperial College) spoke on the corporate governance issuein the professional football industry. Plumbing the murkierdepths of the Premiership à la Tom Bower, he concluded thatgovernance needs to be enhanced if it is to be effective in anindustry where normal business rules are often suspended.The workshop concluded that meanings of ‘corporategovernance’ can vary widely according to context. ‘Corporategovernance’, therefore, requires precise definition if it is to beeffective as an analytical tool.

Environmental Risk: corporate responsibility,corporate responsivenessAberdeen, March 2003

CARR, in collaboration with the Centre for Social andEnvironmental Accounting Research (CSEAR) at theUniversities of Glasgow and Aberdeen, organised a two-dayworkshop on the new public dimensions of environmentalgovernance in March. The workshop focused in particularon the perception, assessment, management andaccounting aspects of the environmental risks associatedwith industrial activity. Focusing on the structures forcorporate environmental governance, the workshopaddressed issues of environmental risk from the outsidein – by examining the evolving nature of social, market andgovernment regulations relating to environmental risk.The workshop also addressed these issues from the insideout – by examining the ways in which different businesseshave accounted for environmental risk and engaged withthe range of external stakeholders who have an interest intheir performance. The workshop brought together a rangeof senior academic experts from around the UK to discusscontemporary trends and issues in environmental riskmanagement and finished with a practitioner roundtable.Further details of CARR’s Visiting

Fellowship Scheme and OutreachProgramme can be found on the CARRwebsite: www.lse.ac.uk/Depts/carr

CARR is building contacts across the UK and worldwide

I 16 I Risk&Regulation I Spring 2003 I

The 2001 Foot-and-Mouth CrisisDavid Campbell and Bob Lee Cardiff UniversityOctober 2002

It is widely accepted that the 2001 Foot-and-Mouth Disease epidemic was badly managed by the Ministry of Agriculture, Fisheries and Food(MAFF). The picture emerging is one of wastedpublic expenditure, cruel mass slaughter anduncompensated harm to third parties. Butaccording to Professors Campbell and Lee, even the most swingeing criticisms of MAFF’sperformance fail to appreciate the extent of the regulatory failure. In particular, ProfessorsCampbell and Lee argued that MAFF’s owndisease control policy was a central cause of the epidemic and needs to be rectified if a futureoutbreak is to be avoided.

Technologies With(out)ProgrammesFabrizio Panozzo Universita’ ca’ Foscari di VeneziaOctober 2002

According to Professor Panozzo, the distinctionbetween programmes and technologies is centralto the interpretation of the status of accounting.The international spread of public managementreforms has been widely regarded as a primaryexample of the powerful association between therise of accounting expertise and the transformationof technologies of government. Comparativestudies of the public sector have pointed to thewidespread penetration of ‘new’ accountingtechniques. Yet despite much hype, traditionalforms of compliance accountability continue todominate and civil law countries have tendedto escape much of the so-called audit explosion.

Herding Towards a New ConventionDavid Levi-Faur Universities of Manchester and OxfordNovember 2002

Despite growing recognition of the role of emulationin policy process and policy transfer, there are onlylimited efforts to model it systematically. Dr Levi-Faur provided a temporal analysis of the role ofcontagion in the diffusion of liberalisation acrosscountries and sectors and argued that policychoice is determined not only by individualpreferences and information, but largely by signalsof others. He argued that many public officialsfound themselves in this situation when consideringliberalising their country’s infrastructure. He thenoffered a formal model where an individual’spreferences, strategies and payoffs are dependenton others, and where political and policy outcomesare the result of imitation and contagious behaviour.

Too Much Ice Cream or Tigersin the Bushes? David NelkenUniversities of Macerata and CardiffDecember 2002

Professor Nelken offered a critical discussion ofRobert Kagan’s latest book Adversarial Legalism – the American Way of Law published by HarvardUniversity Press in 2001. The book claims that theUSA suffers from an excess of adversarial legalismand needs to learn from Europe (including the UK)about how to employ sounder methods ofgovernance and regulation. Professor Nelkenconsidered whether Kagan’s contrast between the USA and the rest is convincing, and linked thiskind of endeavour to the question of how best toresearch ‘legal culture’ in a comparative context.

Communities of Practice andthe Politics of Conflict in EUProblem-SolvingDamian ChalmersLSEJanuary 2003

According to Damian Chalmers, regulation and theEuropean Community enjoy a mutually constitutiverelationship. On the one hand, regulation is whatthe European Community spends most of its timedoing. On the other, the scale of the Community’sregulatory activities have made it the central arenafor gauging the nature of regulation within the UKtoday. Yet, the Commission’s White Paper onGovernance suggests a crisis in EC regulation,indicating it is often mediocre and lacking broadersupport. The solution suggested is for broadeningparticipation to enhance the quality of debate,disseminating knowledge of the issues andincorporating dissenting voices. Damian Chalmersprovided a theoretical critique of such solutions and considered their practical application.

Exam Howlers or AccidentsWaiting to Happen? The examresults debacles in Scotland2000 and England 2002Brian Hogwood University of StrathclydeFebruary 2003(see page 10)

The Stock Exchange Men andTheir Marvellous InstrumentsAlex Preda, University of KonstanzFebruary 2003

A key aspect of modern financial markets is thestandardised, availability and real-time informationof securities prices. According to Dr Preda, thatinformational character entirely depends on price-recording technologies. Dr Preda examined the

emergence of price-recording technologies in the late 19th century, the cognitive and culturalassumptions embodied by these technologies, theimpact on financial markets, and the consequentrisk and regulatory issues that emerged. Using anapproach developed in the sociology of knowledgeand science, he argued that price-recordingtechnologies have consequences that go wellbeyond mere increases in speed and efficiency.

Enterprise Risk ManagementPaul Walker and William Shenkir University of Virginia March 2003

Even before the Enron and WorldCom debacles,businesses were aware of the importance ofenterprise risk management. In 1999, the NationalAssociation of Corporate Directors stated thataudit committees should “define and use timely,focused information that is responsive to importantperformance measures and to the key risks theyoversee.” Professor Walker and Dr Shenkiridentified strategic risk as the major cause of valuecollapse, with financial risk and operation risk aslesser causes. Since senior level executivesgenerally lose their jobs when losses of this sizeoccur, it is unsurprising that many companies nowthink seriously about enterprise risk management.

Full abstracts and details of forthcoming seminars can be foundon the CARR website: www.lse.ac.uk/Depts/carr/

CARRSEMINARS

FORTHCOMING LUNCHTIMESEMINARSAsymmetrical Actors and Intentional RiskFrank FurediUniversity of Kent6 May 2003

Risk Regulation and InterestAccommodation in EuropeanPharmaceuticals’ LicensingJürgen Feick Max Planck Institute for the Study of Societies20 May 2003

Misfortune, Insurance, and the LiberalState: the perplexities of fairnessEugene BardachUniversity of California, Berkeley27 May 2003

Regulation and Human GenomicsOliver JamesUniversity of Exeter10 June 2003

ALL WELCOMESeminars start at 1pm, Room H615,Connaught House, LSE

I Spring 2003 I Risk&Regulation I 17 I

Other CARR Booksand Special JournalEditions

The Labyrinths of Information –Challenging theWisdom of SystemsClaudio Ciborra, OxfordUniversity Press 2002‘a series of highly literate

jewel-like essays that are intellectuallyfascinating but could also change the life of any practitioner.’Shoshana Zuboff, Harvard Business School

Environmental Policy in Europe:assessing the costs of complianceAndrew Gouldson and Evan Williams (Eds)European Environment 12(5) 2002

The Politics of Delegation: non-majoritarianinstitutions in EuropeMark Thatcher and Alec Stone Sweet (Eds)West European Politics 25(1) 2002

Biotechnology 1996-2000: the yearsof controversyGeorge Gaskell and Martin BauerLondon: Science MuseumPress and Michigan StateUniversity Press 2001

From Control to Drift:the dynamics ofcorporate informationinfrastructuresClaudio Ciborra and associatesOxford University Press 2001

Rational Analysis for a Problematic WorldRevisited: problemstructuring methods forcomplexity, uncertaintyand conflict (2nd ed.)Jonathan Rosenhead andJohn Mingers (eds.)Wiley 2001

The Government ofRisk: understanding risk regulation regimesChristopher Hood, HenryRothstein and Robert BaldwinOxford University Press 2001

‘...a significant contribution to the existingliterature on risk regulation.’West European Politics

Regulation and Risk:occupational health andsafety on the railwaysBridget HutterOxford University Press 2001‘...a classic and deft piece of

socio-legal scholarship ... sure to have anenduring impact on the debate.’Public Law

Cranston’s Consumersand the Law (3rd ed.)Colin Scott and Julia BlackButterworths 2000

Regulation InsideGovernment:wastewatchers, quality police and sleaze-bustersChristopher Hood, ColinScott, Oliver James, GeorgeJones and Tony TraversOxford University Press 1999

Telecoms Regulation:culture, chaos andinterdependence insidethe regulatory processClare Hall, Colin Scott and Christopher HoodRoutledge 1999

The Politics ofTelecommunicationsMark ThatcherOxford University Press 1999‘an excellent comparativestudy, rich in empirical

findings, given analytical focus by an explicit theoretical framework.’Government and Opposition

The Audit Society:rituals of verificationMichael PowerOxford University Press 1999‘A book like this – so rich in ideas, observations and

interpretations – has to be taken seriously.’European Accounting Review

A Reader inEnvironmental LawBridget Hutter (Ed.)Oxford University Press 1999‘a timely and useful bringingtogether of major socio-legalstatements on the law.’ Environmental Law Review

UnderstandingRegulationRobert Baldwin and Martin CaveOxford University Press 1999‘an excellently constructed

work… provides much food for thoughtfor the times in which we live.’New Law Journal

Rules and RegulatorsJulia BlackOxford University Press 1999‘a refreshing book thataddresses the question of‘self-regulation’ in a new way.’Modern Law Review

New Books by CARR Members

On Different Tracks: designing railway regulation in Britain and GermanyMartin LodgeGreenwood Press 2002(see page 12)

British Rail 1974-97: from integration to privatisation

Terence GourvishOxford University Press 2002

I 18 I Risk&Regulation I Spring 2003 I

CARR Discussion Papers

COMING SOON DP13Regulating Parliament: the regulatory state within WestminsterRobert Kaye

COMING SOON DP12Business History and RiskTerry Gourvish

Business Risk and Antitrust: comparative perspectivesTony Freyer

The Risks of Working and the Risks of Not Working: historicalperspectives on employers, workers, and occupational illnessJoseph Melling

COMING SOON DP11Strategies, Methods and Reactions:questioning the open method of co-ordinationMartin Lodge

NEW DP10Drivers and Drawbacks: regulation andenvironmental risk management systemsMarius Aalders

DP9Conceptualising Insurance: riskmanagement under conditions of solvencyMichael Huber

DP8Social Licence and EnvironmentalProtection: why businesses go beyond complianceNeil Gunningham, Robert Kaganand Dorothy Thornton

DP7Neglected Risk Regulation:the institutional attenuation phenomenonHenry Rothstein

DP6Mass Media and Political AccountabilityTimothy Besley, Robin Burgess and Andrea Pratt

DP5Embedding Regulatory Autonomy: the reform of Jamaican telecommunicationsregulation 1988-2001Lindsay Stirton and Martin Lodge

DP4Critical Reflections on RegulationJulia Black

DP3The New Politics of Risk Regulation in EuropeDavid Vogel

DP2The EU Commission and NationalGovernments as Partners: EC regulatoryexpansion in telecommunications 1979-2000Mark Thatcher

DP1Regulating Government in a ‘Managerial’Age: towards a cross-national perspectiveChristopher Hood and Colin Scott

DP0Is Regulation Right?Robert Baldwin

Business Risk Management in Government:pitfalls and possibilitiesChristopher Hood and Henry Rothstein

Risk Management and Business RegulationBridget Hutter and Michael Power

CARRPRINT

CARR publications and other publications by CARRmembers can be viewed on the CARR website:www.lse.ac.uk/Depts/carr/

Selected RecentPublications

The Wrong Type ofRegulation? The regulatorystate, policy failure and theregulation of railways inBritain and GermanyMartin LodgeJournal of Public Policy 22 (3) 2002:271-97

Embedding RegulatoryAutonomy in CaribbeanTelecommunications Martin Lodge & Lindsay StirtonAnnals of Public and Co-operativeEconomics 73 (4) 2002: 667-693

Auditing and the productionof legitimacy Michael Power Accounting, Organizations andSociety28 2002: 379-394

Neglected Risk Regulation:the institutional attenuationphenomenonHenry RothsteinHealth, Risk and Society5 (1) 2003: 85-103(see page 11)

Regulation (Law and LegalTheory Library 2nd Series)Colin ScottDartmouth-Ashgate 2003

The Bonn Guidelines onAccess to GeneticResources and BenefitSharing Stephen Tully Review of European Community and International Environmental Law 12 2003

Risk&Regulation is also published on CARR’s website andback issues are available free on request. Please emailrisk@lse.ac.uk if you wish to order copies.

Risk&RegulationMagazine of the Centre for Analysis of Risk and Regulation No.2 Autumn 2001

BureaucraticCompetencies: A contradiction in terms?

OrganisationalLearning and Risk Management

Why We Need to UnderstandCorporate Life

The Government of Risk

Risk&Regulation

CARR REVIEW

Magazine of the Centre for Analysis of Risk and Regulation No.1 Spring 2001

Risk&RegulationMagazine of the ESRC Centre for Analysis of Risk and Regulation No.3 Spring 2002

Deirdre Hutton onconsumer-drivenregulation and Michael Spackman on regulatorypopulism

also Navigating the debate on corporate socialresponsibility

Regulating MP’s conduct

Decentralising governanceacross the world

Lessons of Caribbeanregulatory reform fordeveloping countries

Is Japan on the brink of an audit explosion?

customer care?

I Autumn 2002 I Risk&Regulation I 19 I

CARR research staff

Michael BarzelayPwC Senior Research Fellow in Risk Management

Reader in Public Management

Executive leadership in government;Managing government operations; Internal regulation of government; Casestudy research methodology.

Tim BesleyDirector of Suntory and Toyota International Centres for Economics and Related Disciplines (STICERD)

Professor of Economics

Public economics; Developmenteconomics; Political economy.

Julia BlackReader in Law

Regulatory techniques and processes;Interpretive- and discourse-basedapproaches to regulation; Rule making;Financial services regulation.

Claudio CiborraPwC Professor of Risk Management

Global information technologyinfrastructures; Business risk strategy in relation to building and managingintegrated infrastructures.

Filippa CorneliussenESRC Postdoctoral Fellow

Governance and regulation ofbiotechnology; Regulation practices and requirements.

George GaskellProfessor of Social Psychology

Organisational management oftechnological risks; Public opinion and public policy; Expert and layunderstandings of risk and uncertainty;Public perceptions of biotechnology.

Terence GourvishDirector, Business History Unit

Business and corporate history in the 19thand 20th centuries; Comparative study ofstate-owned enterprises; Mergers andindustrial concentration.

Christopher HoodCARR Programme Director: Regulation of Government and Governance

Gladstone Professor of Government and Fellow of All Souls College, University of Oxford

Regulation of public-sector bodies;International comparative analysis of riskregulation regimes; Institutional factors in shaping regulation; Transparency and‘better regulation’.

Michael HuberAon Senior Research Fellow in Risk Management

Environmental regulation; Risk regulation;Organisation theories and social theory.

Bridget HutterCARR Co-Director

Peacock Professor of Risk Management

Sociology of regulation and riskmanagement; Regulation of economic life;Corporate responses to state and non-state forms of regulation.

Robert KayeESRC Research Officer

Self-regulation and parliamentary self-regulation; Good government; British government and politics.

Martin LodgeCARR Deputy Programme Director:Regulation of Government and Governance

Lecturer in Political Science and Public Policy

Comparative regulation and publicadministration; Government and politics ofthe EU and of Germany; Railway regulationin Britain and Germany; Regulatory reformin Jamaica.

Richard MacveProfessor of Accounting

Conceptual framework of financialaccounting and reporting; Financialreporting in the insurance industry;Accounting history; Environmentalaccounting and reporting.

Peter MillerProfessor of Management Accounting

Accounting and advanced manufacturingsystems; Investment appraisal and capitalbudgeting; Accounting and the public sector;Social and institutional aspects of accounting.

Yuval MilloESRC Postdoctoral Fellow

Historical sociology of financial derivativesmarkets; Regulatory infrastructure; Financialrisk management; Political sociology.

Joan O’MahonyLeverhulme Special Research Fellow

Business regulation and civil society; Roleof non-state sources in risk management;Political sociology.

Michael PowerCARR Co-Director and ProgrammeDirector: Organisations and RiskManagement

PD Leake Professor of Accounting

Role of internal and external auditing; Riskreporting and communication; Financialaccounting and auditing regulation

Henry RothsteinESRC Research Fellow

Comparative analysis of risk regulationregimes; Risk regulation and public opinion,the media, interest groups and regulatoryprofessionals; Transparency andaccountability.

Colin ScottReader in Law

Regulation of government,telecommunications regulation andregulation of consumer markets; Newdimensions of regulation of the publicsector and regulatory innovation.

Mark ThatcherSenior Lecturer in Public Administrationand Public Policy

Comparative European ComparativeEuropean public policy; Telecommunicationsand other utilities; Institutional design andindependent regulatory agencies.

Stephen TullyBP Postdoctoral Fellow

Corporate risk management; Interaction of non-governmental organisations with corporations.

CARR research associates

Damian ChalmersReader in Law, LSE

Andrew GouldsonLecturer in Environmental Policy, LSE

Carol HarlowProfessor of Public Law, LSE

Edward PageProfessor of Political Science, LSE

Larry PhilipsVisiting Professor of Operational Research,LSE

Nick PidgeonDirector, Centre for Environmental Risk, UEA

Tony ProsserProfessor of Public Law, Bristol University

Judith ReesDeputy Director, LSEProfessor of Environmental and Resource Management, LSE

Lindsay StirtonLecturer in Law, University of East Anglia

Brian WynneProfessor of Science Studies,Lancaster University

CARR administrative team

Sabrina AntâoEvents and Publications Administrator

Louise Newton-ClareCentre Manager

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