Peter GronwaldStrategisches Ergebnis- und Risikomanagement innerhalb des neuen kommunalen Finanzmanagements

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“Strategic profit and risk management within the new local government financial management”

The cameralistics system, which is referred to as a major obstacle for modern management, is or will be replaced in many municipalities by double-entry bookkeeping. In addition to the handling of issues, the introduction currently strongly focuses on the operational instruments of the new accounting method. But the new local government management system will go beyond the mere operational instrument functionality. If local government fiscal policy really aims at sustainably ensuring that local governments fulfill their tasks and functions and at ensuring intergenerational equity, it has to integrate strategic aspects into management and even develop a complete strategy as a management requirement for operational management.

This paper makes an important contribution to strategic local government management, which focuses on this financial management aspect, its instruments and strategy development operationalization, to close the existent strategy and management gap between operations and strategy research from a high-level management perspective in science and local government practice in terms of theoretical concepts and practical application approaches. In contrast to previous procedures of defining strategic models and goals, which primarily applied a top-down approach, this gap is successfully closed using an approach that has been developed on the basis of operational management. This is not only substantiated by the transfer and enhancement of economic methods, but also by the generation of calculable strategy scenarios. Thanks to the consequently enabled quantitative assessment, a controlling-oriented numerical basis for management-oriented decision making is provided to the quality-driven management of models and goals for local governments.

Firstly, the paper illustrates and specifies the existing strategy and management gap in local government financial management. The detailed target system of local government financial management is developed as a management basis once the scope of action of local government financial management has been defined. Following the clarification of fundamental profit and risk parameters and the consistent application to the financial management target system in an overall local government controlling context, the paper then describes the development of strategic management concepts using the highly relevant interest risk management controlling area within debt management and proves their feasibility by means of model calculations. This operationalization of strategy development actually closes the strategy and management gap. The paper then focuses on the development of the cornerstones of a state-of-the-art liquidity management for local governments as an additional scope of action of financial management.

Furthermore, the core areas of financial management are embedded in the overall local government risk context by including even profit and loss and balance sheet items in the overall concept, for which financial management is not primarily responsible. However, strategic risk measurement and management of these items very well represent an area of financial management responsibility. Therefore, identification and quantification methods have been developed for each single risk type. Systematic aggregation, comparison with local government risk-covering potentials and presentation of risk management instruments constitute further modules for closing the initially identified gap in strategic local government management. Finally, the paper illustrates the implications of extending traditional local government management from a core administration perspective to the overall management of the “municipal group”.

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