Managing Risk Before and During a Transition

The Office of Management and Budget (OMB) says it’s going to make its much-anticipated change to A-123 this month, institutionalizing enterprise risk management (ERM) within federal agencies.

ERM is a framework for addressing organizational, mission and reputational risks upfront as part of an organization’s overall management, rather than as something to be avoided down the line. It gives agency leaders a set of common principles to use during planning stages so that risk can be mitigated from day one.

“The [Security Exchange Commission] requires public companies to perform risk assessments,” GAO Assistant Director Linda Miller says. “Yet with over $3 trillion of taxpayer dollars on the line, federal agencies are not required to do the same.”

Miller asserts GAO is doing its part by encouraging the use of data transparency to preempt the risk of benefits fraud and minimize improper payments. By employing analytics and other specialized technology in conjunction with shared financial data, she expects to achieve just that.

Treasury’s Senior Advisor for Financial Transparency Amy Edwards is optimistic about the future of ERM. The Digital Accountability and Transparency Act (DATA Act), by providing greater transparency of agency financial data internally and externally, can be a catalyst for moving better risk management practices along.

“The problem with data hasn’t been a lack of standards,” she says.  “It’s been a lack of cohesive standards.”

Government’s increasing adoption of shared services can also help, not only by improving the degree to which agencies leverage financial systems but also by encouraging better practices across the board, including enterprise risk management.

“We are on the precipice of using government data in new and creative ways,” Miller says. But little progress can be made in transparency and fraud reduction without the collaborative modernization shared services make possible.

This gamut of reforms — data transparency, shared services, ERM — works together to reduce risk and improve functionality across government, and every agency requires different efforts to implement them successfully. One thing, though, resonates everywhere.

“Change is all about culture,” says Denise Lippuner, partner and public sector financial management lead at Grant Thornton.

Rather than a “check the box” mentality, Lippuner says agencies implementing ERM should introduce the concepts and let them evolve organically. Indeed, culture shift is key to introducing more effective risk-management practices.

But that shift presents challenges of its own. In fact, change management is the hardest part of delivering new mission support functions, says Elizabeth Angerman, executive director of Unified Shared Services Management (USSM) office at the General Services Administration (GSA).

Angerman and Lippuner agree that success depends on strong leadership.

“It’s about how the leadership demonstrates their commitment and then how that communication strategy is implemented within the agency,” Angerman says.

And Miller says the cultural component most vital to that shift is government’s level of comfort with sharing data. Where there’s currently fear and hesitation, there must be trust and willingness to evolve.

Government, it seems, recognizes the potential to benefit internally from these reforms. As leaders begin to put their growing data sets to good use, cross-government analysis and benchmarking will improve operations and compliance. All in all, Lippuner is impressed that agencies are so forward thinking.    

As a new administration approaches, agencies should hold fast to the progress they’ve made toward more effective risk management while continuing to avoid higher risk.

“Keeping with positive initiatives is a challenge,” Lippuner says. “But government is prepared.”

For more information on what you need to know about risk and financial management, watch this recent Viewcast with Grant Thornton.

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