Need for Risk Management Dwindling tax bases and Federal funding cutbacks, plus declines in agricultural and natural resources income, have reduced funds available to most local governments. Also, residents of smaller, rural jurisdictions are demanding the level of government services enjoyed by their larger, urban counterparts. Likewise, there are new costs and risks associated with the economic development and rural revitalization efforts of smaller counties and municipalities. On top of this, insurance costs have soared and many coverages are no longer available to local governments. Insurance is the most common risk management technique, but it can be the most expensive if not supplemented with other techniques.
Risk management is part of sound, general management.
It should be used as a tool to augment insurance. Before you can begin to manage local government risks, you need to have an understanding of what a risk might be. Local governments receive income through taxes, fees, licenses and permits, fines, forfeitures, penalties, interest-bearing accounts, and other sources. A disruption in income creates a financial loss. Some losses force local governments to incur additional expenses to function normally or to maintain services.