Risk and Trump’s Reorganization Order

With President Trump’s recent executive order requiring federal agencies to submit reform and reorganization plans, senior leaders are identifying ways to help streamline government by improving their efficiency, effectiveness and accountability. In order to take advantage of this opportunity, they should focus on risk management and data-driven decision making.

Making decisions about which programs to eliminate or how to restructure the organizational functions of an agency is a challenge. It’s even more difficult when an agency lacks adequate information on either performance or risk or a mechanism with which to analyze it.

Recent legislation and guidance from the Office of Management and Budget pushes the federal government toward an evidence-based decision making approach for managing risk and aligning activities with mission. Specifically, OMB’s revised Circular A-123, requiring agencies to undertake enterprise risk management, coupled with the 2014 Digital Accountability and Transparency Act and the 2015 Fraud Reduction and Data Analytics Act, emphasize both risk management and enhanced use of data to inform decisions throughout agencies.

The private sector has long recognized the value of performance-focused risk management. High-performing companies have moved beyond ERM as a compliance exercise and incorporated risk management into their everyday business processes. A March 2017 study by the Institute of Internal Auditors Research Foundation found organizations with higher levels of ERM process maturity are characterized by higher operating performance than their peers.

When it comes to making decisions about where to focus resources — and where cuts can be made that won’t have significant negative consequences on the mission — a performance-focused ERM program is an agency’s best bet. That’s because when done thoughtfully and comprehensively, performance-focused ERM provides answers to four essential management questions:

• What are we trying to achieve?
• What are we doing to get there?
• What is standing in the way of our success?
• What’s the most cost-effective way to remove those barriers?

Often in the course of an assessment in government, management learns that what is standing in the way of success is the fragmented, siloed structure of the organization. The enterprisewide view allows leadership to pull back and see where the stovepipes are creating risk and inhibiting performance. This recognition is the first step in streamlining functions and enhancing efficiency — exactly the type of insights agencies are on the hook to develop in their reorganization plans.

When agencies add data analytics into the mix, management gets answers to a very important fifth question: How do we know? The availability of data offers the opportunity to make decisions with far more precision than ever before.

Using data for risk management includes the ability to identify trends and patterns that can’t be detected without analyzing lots of data. When using data to manage risk, leadership gets answers to much more specific and nuanced questions — questions that are able to focus agency resources (staff and funds) on the actions most likely to make the biggest impact.

By utilizing rigorous data analytics within an agencywide risk management framework, management can see firsthand the outcomes of its activities and whether they are aligned with the high-level objectives of the agency. Aligning information on outcomes with agency goals lets managers quickly identify high- and low-performing areas and reallocate resources as necessary. This can be a powerful tool, enabling leaders to better understand the root causes of lagging performance and make adjustments much faster than they could without data-driven insight.

Far from a compliance exercise, implementing performance-focused ERM — and ensuring it is aligned with an agency’s strategic goals — is the best way for agencies to identify programs that can be streamlined or eliminated due to duplication, misalignment with mission or cost-prohibitive risks. In addition, given that many agencies operate in distinct silos, senior leadership often has limited visibility into the performance and risk of programs agencywide.

Without having done a meaningful risk assessment across the enterprise, and without the benefit of evidence, management will be developing reorganization plans suffering from multiple uninformed and ineffective decisions across the agency. Performance-focused ERM can fix that.

Linda S. Miller a former official with the Government Accountability Office, is a director with Grant Thornton Public Sector’s Risk Advisory Services.

Photo: Flickr user Paul Cross