The global financial crisis has challenged states all over the world - not only since political decision-makers have initiated large public expenditure programs in order to take counteractive measures, but even more so since it had manifested as a severe public debt and, in the Eurozone, also monetary crisis (Kickert et al. 2013). Various aspects of ‘the’ crisis - its development over time, its impact on distinct sectors and the economy as a whole, social cohesion and governmental responses - have dominated news headlines and also different research fields.
In this context, public financial management has gained new momentum, and academia as well as practice have actively engaged in discourses on mitigating austerity and decline. From the practice perspective, economic and monetary policies, but also more management-oriented solutions (e.g. early warning systems, risk management strategies, risk mitigation - debt brakes) have been used in pursuit of adequate responses to the double-edged sword of coping with austerity while initiating economic recovery (Pandey 2010). Most contributions however focus on the national, i.e. the central government level. Although states and local levels have been affected similarly by the financial crisis and the following economic recession and stagnation, sub-national levels have received far less attention.
Relatively little is known about governmental risk management in general, and only a few studies have explored the concept of risk and risk management at sub-national levels yet. The present project addresses this imbalance by investigating the concept of risk and risk management, risk strategies, responsibilities in risk management, and its relationship with financial management in local government. Applying a comparative analysis of cases in Austria and the U.S. and embracing quantitative and qualitative approaches, the study seeks to open the black box of strategic management in dealing with risks, shocks, and decline at the local government level. The investigation is set in the context of the aftermath of the global financial crisis, where governmental entities all over the world had to cope with serious financial problems resulting from rising debt levels and drops in their revenues.