Why Smart Cities Need Risk Management

Smart city technology is critical to helping local governments become more efficient, while also significantly affecting risk management.

Sponsored by Aon

With decreasing budgets and rising citizen expectations, understanding and utilization of modern technologies is critical for local government efficiency. In addition, issues such as climate change and population growth are straining existing infrastructure, accelerating the evolution of smart cities.

The smart city movement is growing as more local governments implement modern technologies to improve the quality and performance of municipal services. While technology adoption presents novel opportunities, there are challenges and inherent risks that must be understood and managed for all smart city projects.

The Basic Risks


As local governments begin the evolution into smart cities, devices and systems being utilized across government will have greater interconnectivity than ever before, working together in real-time to improve efficiencies. A more integrated government though, makes malicious attacks and system failures of great concern.

Without effective cybersecurity, the potential for such vulnerabilities occurring in a smarty city environment rises due to the increased interdependencies that Internet of Things, artificial intelligence, automation and other emerging technologies bring.

In 2018, the Information Systems Audit and Control Association found that globally, the two most concerning types of smart infrastructure cyberattacks are ransomware and denial of service attacks. Successful smart city systems must share and store information as well as ensure the security of both data and devices.


Effective user adoption is critical in smart city environments; without proper user adoption, the risk of human error can be extremely damaging. An untrained user, for example, could cause internal errors and with an increase in interconnectivity, what once would have been a previously inconsequential mistake may now have ramifications across a municipality. Leveraging data and technology opportunities must also be balanced with regulatory protocols.


Typically, when governments move toward a smart city environment, they inevitably start to utilize technologies that collect vast amounts of data. Using data effectively can help staff make educated and timely decisions. However, without understanding what data is to be collected and for what purpose, it will become extremely difficult to measure the return of investment achieved from governments adopting modern technology. Further, governance is essential to increasing confidence in cities’ abilities to protect data.

The Solutions

Implementing a risk management plan at the beginning of a smart city initiative can help reduce these risks and enable municipalities with knowledge to effectively deal with an issue, if one should occur.

The basic risks are by no means an exhaustive list of potential pitfalls when adopting modern technologies. Local governments looking to better understand and prepare for such risks can benefit greatly by engaging professionals with specific experience in government risk management. Those experienced in public-sector risk management can provide information and insights on global trends and best practices that are being utilized by municipal governments to ensure the long-term success of smart city initiatives.

There are also specific technology solutions which can be acquired to enhance the success of smart initiatives and mitigate risks. Municipalities that choose to invest in analytics solutions can greatly increase the effectiveness of their risk management strategies. Being able to accurately quantify risk through analytics enables local governments to identify, measure and understand existing and potential challenges.

For the many local governments desiring modernization with smart city initiatives, understanding and managing risk will be key factors to their success.

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