Federal law enforcement and other operational mission leaders are hearing about new requirements for enterprise risk management, an organizationwide approach to managing risks that has been in practice in the commercial sector for some time.
As they begin to understand ERM, many agency leaders are asking: What is the quickest way to check this box and get back to serving the mission? The concern is valid, and compliance requirements and other guidance from the Office of Management and Budget may sound like a task best delegated far down in the organization. But if operational and mission leaders take a closer look, they will see that ERM represents an opportunity for them—it’s not just a task for the finance and accounting people.
Let’s start with some definitions. OMB recently published Management’s Responsibilities for Enterprise Risk Management and Internal Control. As such, agencies must create an integrated risk governance structure to “improve mission delivery, reduce costs, and focus corrective actions towards key risks.” The process should include “leadership from the agency Chief Operating Officer and Performance Improvement Officer, and close collaboration across all agency mission and mission-support functions.” It lays out requirements for managing risk across the agency, including risks associated with the mission. The requirements include risk identification, evaluation, response, and monitoring, among other things. Agencies were to conduct an initial risk identification, due in June, and prepare an evaluation of risk mitigation by September. Annual updates are required thereafter.
By engaging with agencywide ERM initiatives, mission leaders can align their resource needs to the risks they face. Clear articulation of risks is the first step to getting adequate funding at a time when “doing more with less” has become the new normal.
There are three other primary benefits that ERM brings to the mission:
First, mission leaders manage known risks every day. They manage those risks in real-time, making trade-offs in resources to optimize operations and drive desired outcomes. These decisions impact choices in operational security, technology acquisition and development, personnel management and security, to name a few. Every day mission leaders choose to accept risk in some areas and mitigate risk in others. There is no way to have it all; adding the lens of operational risk to resource assessments helps inform priorities and decision-making.
Second, some agencies have over-corrected for risks identified in the past. For instance, concern over the accuracy and completeness of information used in decision-making may lead to extensive, time-consuming review processes. But this can have a negative impact on operations, particularly in law enforcement, homeland security, and defense missions. The failure to act quickly and on the basis of timely, complete information may endanger people and increase costs, and it expends precious time and attention on non-value add activity. Employing ERM to understand the potential impacts through risk evaluation, mitigation, and monitoring provides valuable insight to managers so they may adjust processes and controls appropriately.
Third, mission risks emerge from changes in the environment. ERM should create a conversation among leaders about how changes in the operating environment (technology, threats, resources, etc.) impact an agency. For example, consider the impact smartphone technology and the rise of social media is having on law enforcement and security organizations. People increasingly record and publicize interactions with officials, shaping public perceptions and in some cases providing bad actors with a wealth of information. Information sharing relationships that have persisted for decades are shifting, and encryption is shielding communications from lawful intercept and collection. ERM can help agencies identify, evaluate, and accept or mitigate risks as they evolve.
Mission leaders should embrace ERM. When the chief risk officer comes looking for support, they should take the opportunity to identify and communicate risks.
How? For known risks, ask managers for the lists of issues they have long told themselves will never be addressed due to a lack of resources. For over-corrected risks, mine existing planning documents and ask stakeholders for input to identify areas where over-correction is increasing costs and slowing response times. Do the same to identify how changes in the mission environment are affecting risk. Communicate these issues to agency leaders through the ERM process.
In short, ERM creates an opportunity to mitigate known risks, revisit over-corrected risks, and identify emerging risks.
John O'Connor advises federal agency leaders on strategy, operations, and change management for PwC's Homeland Security and Law Enforcement practice.