Top Risks In The Australian Public Sector

Senior executives and leaders in the public sector face a complex web of uncertainties. These may generate opportunities for strategic advantage or risks leading to unexpected disruption and performance shortfalls. An ability to anticipate risks that may be on the horizon before they become imminent can help leaders navigate unfolding developments – particularly those that are uncontrollable – that may impact their reputations and delivery outcomes to the public.

Our 13th annual Executive Perspectives on Top Risks Survey contains insights from 1,215 board members and C-suite executives around the world regarding their views on the top risks they see on the near- and long-term horizon. Specifically, our global respondent group provided their perspectives about the potential impact over the near-term (two to three years ahead) and long-term (over the next decade) of 32 risk issues across these three dimensions:

Macroeconomic risks likely to affect their organisation’s growth opportunities
Strategic risks the organisation faces that may affect the validity of its strategy for pursuing growth opportunities
Operational risks that might affect key operations of the organisation in executing its strategy

Topics

Cybersecurity and Privacy Internal Audit and Corporate Governance IT Management, Applications and Transformation Risk Management and Regulatory Compliance Business Performance

Industries

Government

Key areas of concern for government and public sector leaders in Australia

Australia’s government and public sector leaders are navigating a complex landscape shaped by geopolitical, economic, technological and social forces. One of the foremost concerns is the shifting geopolitical climate and regional instability. Australia faces a delicate balancing act between working with its largest trading partner, China, and its key strategic ally, the United States. National defence and capability development have come to the fore, particularly for agencies involved in defence, industry, resources and foreign affairs, though these issues reverberate less through sectors such as healthcare or social services.

Economic conditions in the country are defined less by inflationary trends and more by persistent productivity risks, particularly in government. Agencies are under mounting pressure to deliver more with fewer resources, prompting a strong push for systemic productivity improvements. This drive for efficiency is at the heart of efforts to drive public sector reforms.

Workplace culture and values are also under the microscope. The move toward hybrid work models and the imposition of return-to-office mandates, which are often received negatively, is creating challenges in sustaining a positive organisational culture. Additionally, public sector agencies are struggling to attract top-tier talent, hindered by rigid salary bands and lingering perceptions of inefficiency.

Organisational resilience and agility remain crucial. Government agencies have demonstrated robust crisis response capabilities, particularly during natural disasters. Yet increasing demands are not being matched by commensurate resource allocations. Compliance requirements continue to grow without corresponding increases in funding, stretching the capacity of agencies to their limits.

Other concerns include:

Cybersecurity – The ever-present threat of cyber breaches, underscored by recent high-profile incidents, highlights the need for ongoing vigilance and investment in cyber resilience.
Third-party and procurement risk – Recent incidents involving compromised supply chains have exposed vulnerabilities in procurement processes and heightened the focus on ethical sourcing and supply chain resilience. Furthermore, there is growing focus in the public sector on sovereign capability and supporting local industry (e.g., Buy Australia Plan and the Future Made in Australia measure); this requires a broader examination of supply chain risks, consideration of ESG and managing new procurement policy requirements.
AI adoption and governance – AI presents both opportunities and risks. Despite the technology’s potential, resistance to change among staff and unions, national security requirements, lack of sufficient training, and a need to protect sensitive data have slowed AI adoption. This hesitancy hampers the public sector’s ability to leverage digital transformation fully.
Integrity in government – There is a growing tide of public distrust, with government decisions – particularly around procurement, recruitment and funding – subjected to increased examination. Ensuring integrity in these processes is more important than ever.
Access to talent and skills – Agencies are under pressure to reduce reliance on consultants while simultaneously struggling to build internal expertise. Recruitment remains a challenge due to pay scale and geographic limitations, exacerbating capacity shortfalls.

Recommendations to address these challenges

To address the challenges summarised above, we believe government and public sector leaders in Australia must adopt a comprehensive and forward-thinking approach. Following are our recommendations:

Productivity enhancement – Undertake functional and operational process reviews to pinpoint areas for efficiency gains. Implement robust performance management frameworks and pursue process redesigns to streamline operations. Invest in and implement modern infrastructure and digital tools –including AI – to enable leaner, more effective government functions.
Resilience planning – Prioritise resource sustainability across financial, human and infrastructure domains. Advocate for funding approaches that are responsive to the increasing demands of compliance and performance reporting, ensuring agencies are adequately resourced to meet their obligations.
Workforce and culture – Reassess talent recruitment strategies that extend the reach for people and skills beyond traditional hubs like Canberra, optimising new working arrangements (e.g., hybrid) and increasing access to more diverse skillsets. Align organisational culture and values with expectations of employees, fostering an environment that supports both productivity and staff well-being.
Cybersecurity – Maintain the resilience of legacy systems while pursuing secure modernisation. Enhance governance structures and improve cross-system communication and integration to bolster overall cyber defences. The Protective Security Policy Framework (PSPF) is the primary security compliance framework for Australian Government entities. It ensures a coordinated and holistic approach to protective security across Commonwealth agencies and entities. The PSPF underwent a structural improvement in the November 2024 release, with an adjustment of domains based on the current threat landscape and business operations. The July 2025 update to the PSPF reinforces expectations around supply chain assurance, personnel vetting and protective information security.
Procurement and supply chain integrity – Reinforce ethical procurement practices and ensure transparency throughout the supply chain. Evaluate third-party risks rigorously, particularly in sectors handling sensitive information or critical infrastructure. Examine supply chain risks, particularly given the growing focus on sovereign capability and supporting local industries. Update and manage new procurement policy requirements. Ethical supply chains will enhance broader integrity programs (see next point).
Public trust and integrity – Increase transparency and probity in decision-making processes. Develop and enforce integrity frameworks that ensure recruitment, procurement and funding decisions meet public expectations and legislative obligations, thereby strengthening public trust in government institutions, which has waned in recent years.
AI governance – Focus on the design and implementation of AI pilot projects so that they deliver tangible value. Assess results against predefined metrics and agreed-upon ROI measures. Address cultural resistance through targeted training and effective change management initiatives, paving the way for responsible AI adoption.
Talent development – Develop and enhance internal capabilities, while employing the strategic use of external expertise where necessary. Innovate recruitment and retention strategies to secure the talent required to meet evolving public sector needs.

By addressing these interconnected challenges with a holistic strategy, Australia’s government and public sector leaders can build organisations that are resilient, agile and equipped to serve the nation’s interests in an era of rapid change and heightened scrutiny.

About the Executive Perspectives on Top Risks Survey

We surveyed 1,215 board members and executives across a number of industries and from around the globe, asking them to assess the impact of 32 unique risks on their organisation over the next two to three years and over the next decade, into 2035. Our survey was conducted online from mid-November 2024 through mid-December 2024. For the near-term outlook, each respondent was asked to rate 32 individual risks on a five-point Likert scale, where 1 reflects “No Impact at All” and 5 reflects “Extensive Impact.” For each of the 32 risks, we computed the average score reported by all respondents and rank-ordered the risks from highest to lowest impact.

We also asked executives to share their perspectives about long-term risks (over the next 10 years – 2035) by selecting the top two risks from each of the three dimensions (macroeconomic, strategic and operational). For each of the 32 risks, we calculated the percentage of respondents who included that risk as one of their two top risks for each dimension. Read our Executive Perspectives on Top Risks Survey executive summary and full report at www.protiviti.com or https://erm.ncsu.edu.