- Urgent need for integrated risk management
- Window of opportunity to act is rapidly closing
- Expected rise in transactional decision-making on the global stage in 2025
In an era defined by unprecedented disruption and evolving public expectations, the foremost challenge for government and public sector leaders is to navigate the rapidly changing risk landscape without compromising public service delivery or fiscal responsibility. Given the financial pressures and economic uncertainty facing both governments and people, “business as usual” is no longer a viable option. According to a recent EY report, Top 10 risks for government and public sector in 2025, there is a critical need for integrated risk management to navigate and address the top 10 public sector risks of 2025.
Government and public sector organizations will need to make a series of difficult and potentially unpalatable trade-offs that are necessary to mitigate risk and prevent larger crises down the line.
Catherine Friday, EY Global Government and Infrastructure Leader, says:
“One such trade-off might be restraining fiscal policy to address mounting public debt or loosening fiscal policy to ease cost-of-living concerns. Another might be balancing the need to recruit new green businesses and investment with potential environmental, public health and other community concerns. Whatever the option, there will always be a cost. Yet, choosing the easy way out by delaying hard choices sets a course to a more precarious future.”
Meeting uncertainty with confidence requires integrated risk management
The need for change is not a novel concept for government and public sector leaders. However, the window of opportunity to act is rapidly closing, and maintaining the status quo will exacerbate existing issues. It is likely that disruption will not only persist, but it will also become more interconnected in the foreseeable future. Many of this year’s top 10 risks intersect and impact one another, compounding the complexity of both governing and the challenge of implementing resilient change.
An increase in transactional decision-making on the world stage is anticipated in 2025, potentially dismantling international agreements, alliances and norms, thereby contributing to instability and economic precarity. This shift could lead to unexpected disruptions in areas such as supply chains, trade and migration. These disruptions, if not effectively addressed and/or mitigated, could undermine public resilience and erode trust in government.
Friday says:
“With a deep sense of mistrust and dissatisfaction pervading many societies, the ability to manage risk effectively isn’t just necessary, it is a chance to build public trust and restore confidence. It is also a real opportunity for governments to prove to a skeptical public that proactive governance isn’t only possible, but also provides tangible benefits. By investing in integrated risk management systems, public sector organizations can become more agile and responsive.”
Effectively mitigating risk can demonstrate value
The report finds that managing risk can no longer be a siloed activity relegated to annual planning or discussions between high-ranking officials. Public sector leaders, regardless of rank, need to continually evaluate risks on the horizon and engage stakeholders in and outside their organizations to effectively adapt and respond.
Friday says:
“In a world that is dominated by uncertainty, demonstrating an ability to anticipate and act upon global risks and public needs has never been more urgent and it is also an opportunity to win back public trust. Government and public sector leaders who take this opportunity can foster greater societal resilience despite ongoing change and shape the future with confidence.”
The full report with the top ten risks can be found here.
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About Top 10 risks for the government and public sector in 2025:
Between July and November 2024, the EY organization collected a variety of inputs to inform the selection on the top 10 risks for the global government and public sector in 2025. EY professionals conducted a horizon-scanning exercise based on the EY Risk Universe™ framework, which divides government and public sector risk into four areas:
- Compliance threats that originate in policies, regulations or governance
- Operational threats that impact the processes, systems, people and overall value chain of government organizations
- Strategic threats that are related to constituents, politics, the private sector and the natural environment
- Financial threats that stem from volatility in investment, markets and macroeconomic conditions
More broadly, EY professionals considered these threats in the context of governments seeking to build a better working world by shaping the future with confidence. Based on this analysis, the EY organization identified the key megatrends and signature issues driving risk and the need for strategic transformation in the sector globally. Interviews with EY professionals around the world, along with proprietary and external data, also informed how the EY organization chose the top 10 key risks for this year. Our Top 10 risks for the government and public sector in 2025 ranks each risk based on how likely it is to occur, along with the breadth of its impact should the risk become a reality (in other words, how many governments would be affected).