Managing Risk and Performance A Guide for Government Decision Makers

Federal agencies increasingly recognize the importance of active risk management to help ensure that they can carry out their missions. High impact events, once thought to occur only rarely, now occur with surprising frequency. Managing Risk in Government Agencies and Programs provides insight into the increasingly critical role of effective risk management, while offering analytical tools and promising practices that can help improve the quality of risk management in government organizations.

• Includes chapters that contribute to the knowledge of government executives and managers who want to establish or implement risk management, and especially Enterprise Risk Management (ERM), in their agencies
• Features chapters written by federal risk managers, public administration practitioners, and scholars

Showing government officials how to improve their organization's risk management capabilities, Managing Risk in Government Agencies and Programs meets a growing demand from federal departments and agencies that find themselves increasingly embarrassed by risky events that raise questions about their ability to carry out their missions.

THOMAS H. STANTON teaches at Johns Hopkins University. He is President-Elect of the Association of Federal Enterprise Risk Management (AFERM) and a Fellow of the National Academy of Public Administration. Mr. Stanton is a former member of the Federal Senior Executive Service. He holds a Bachelor of Arts degree from the University of California–Davis, a Master of Arts from Yale University, and a Juris Doctor from Harvard Law School and has written extensively on governance and risk management in the financial crisis.

DOUGLAS W. WEBSTER is the Founder and President of the Cambio Consulting Group, LLC, and co-founder and past President of the Association of Federal Enterprise Risk Management (AFERM). He served as Chief Financial Officer of the U.S. Department of Labor in 2008–2009 and has 20 years of experience consulting to over two dozen federal and state agencies. Dr. Webster received a Bachelor of Science in Engineering from the University of California–Los Angeles, a Master of Science in Systems Management from the University of Southern California, and a Doctorate in Business Administration from United States International University.

Foreword

Preface

Part One: Introduction and Overview

Chapter 1 Managing Risk of Federal Agencies and their Programs Through Enterprise Risk Management (ERM) (Thomas H. Stanton)

I. Risk Management as an Essential Part of Federal Management

II. Risk Management as an Integral Part of Good Decision-making

III. The Unique Challenges of Managing a Government Agency

IV. Establishing Effective Risk Management

V. Managing Risk in Government Agencies: Overview of the Book

References

Chapter 2 The Need for Effective Risk Management (Douglas W. Webster)

I. Defining Risk

II. The Source of Uncertainty: Change

III. Risk and Reward

IV. The Risk Management Process

V. The Essence of Organizational Success: Stakeholder Value

VI. The Role of Information Technology (IT) in Risk Management

VII. The Importance of Organizational Change Management

VIII. Pulling It All Together

IX. Conclusion

References

Chapter 3 Introduction to Risk Management for Government Managers (Thomas H. Stanton)

I. Fitting Risk Management into an Organization

II. Promising Practices in Risk Management

III. Observations about Risk Management in Government: What Works and What Doesn’t

VI. Conclusion

References

Chapter 4 Risk Management and Challenges of Managing in the Public Sector (Paul L. Posner and Thomas H. Stanton)

I. Unique Risk Management Challenges of Public Programs

II. Third Party Governance: The Challenge of Managing Risk Across Organizational

III. Goal-Setting, Accountability, and Prioritization of Risks: Special Challenges Facing Government Managers

IV. Concluding Observations

References

Chapter 5 Creating and Keeping Your Options Open – It’s Fundamental (Brian Barnier)

The Real World is Rarely Simple and Stable

Systems Set the Stage

Managing More Easily – Options in Time

Examples of Options in Time in Practice

Conclusion

Key Points

References

Part Two: Moving Towards ERM

Chapter 6 Introduction to Enterprise Risk Management (ERM) for Government Managers (Douglas W. Webster)

I. Shortcomings of Traditional Risk Management

II. The impact of managing risk within silos—a case study

III. The Maturation of Traditional Risk Management into ERM

IV. Key Principles of ERM

V. What ERM is Not

VI. The Payoff

VII. Summary

References

Chapter 7 Implementation of Enterprise Risk Management at the Office of Federal Student Aid of the U.S. Department of Education (Fred Anderson and Cynthia Vitters)

I. Overview of FSA

II. Initial Implementation of ERM at FSA

III. Initial Activities and Challenges in Implementing ERM at FSA

IV. Expanding the ERM Program – A Change in FSA’s Business Model

V. Key Considerations and Challenges When Implementing the Expanded ERM Program at FSA

VI. Conclusion

References

Acknowledgments

Chapter 8 Integrating ERM into Strategic Planning and Resource Management (Jeffrey Stagnitti)

I. Context

II. ERM and Strategy

III. ERM and Resource Management

IV. Conclusion

Chapter 9 Building ERM (Enterprise Risk Management) into Agency Processes and Culture (John Fraser)

I. Building a shared understanding of risks through conversations

II. The Key ERM Techniques

III. Improved Decision Making and Prioritization

IV. Conclusion

References

For Further Reading

Appendix: Hydro One Inc. Enterprise Risk Management Policy

Part Three: Special Topics in Risk Management and Response

Chapter 10 Risk Management and the Dynamics of Downsizing (Thomas H. Stanton)

I. Dynamics of Protracted Budget Controversy and the Risk and Uncertainty this Creates

II. Long-Term Budget Cuts and the Risks they Create

III. The Role of Risk Management in Reducing Chances of a Major Mishap

IV. Strengthening the Ability of Agencies to Make Better Decisions to Deal with Budget Uncertainty and Budget Cuts

V. Conclusion

References

Chapter 11 Managing Reputational Risk (Gary L. Glickman)

I. What is Reputational Risk and What Does it Mean to Government?

II. What Determines Reputation and How Can Government Address these Factors?

III. External Influences on Reputation

IV. Consequences of Reputational Loss for Government Organizations

V. Reputational Risk Mitigation

VI. Conclusion

References

Chapter 12 Risk Management and Decision Making
Lessons from the Financial Crisis for Federal Managers (Thomas H. Stanton)

I. The Financial Crisis: How it Emerged, What Happened, and the Costs

II. Decision Making at Firms that Failed: Common Shortcomings

III. Decision Making at Firms that Succeeded; The Importance of Culture

IV. Lessons in Governance, Risk Management, and Decision Making

V. Conclusions

References

Part Four: Conclusion

Chapter 13 Effective Enterprise Risk Management: Mapping the Path Forward (Douglas Webster)

I. Recommendations

II. Conclusion

References

For Further Information

For Further Reading

About the Editors

About the Contributors

Index

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