Final Erm Playbook

Playbook:
Enterprise Risk Management

for the U.S. Federal Government
Developed and issued in collaboration with Federal Government organizations

to provide guidance and support for ERM.
MEMORANDUM FROM Chief Financial Officers Council (CFOC)
Performance Improvement Council (PIC)
DATE: July 29, 2016
SUBJECT: Playbook: Enterprise Risk Management for the U.S. Federal Government
The Chief Financial Officers Council (CFOC) and the Performance Improvement Council (PIC) release the
Playbook: Enterprise Risk Management (ERM) for the U.S. Federal Government (Playbook). The Playbook
guidance and accompanying appendices are tools designed to help government departments and
agencies meet the requirements of the revised Office of Management and Budget Circular A-123. They
are also designed to provide high-level key concepts for consideration when establishing a
comprehensive and effective ERM program. The Playbook specifically addresses the additional
requirements included in Section II in A-123, which defines management’s responsibilities related to
ERM, to help departments and agencies make better decisions based on a more holistic view of risks and
their interdependencies.
The Playbook is the result of an interagency effort convened by the Office of Executive Councils and
included risk practitioners and cross function representation from more than twenty federal agencies to
gather, define, and illustrate practices in applying ERM in the Federal context. The final document and
subsequent versions will be posted to the CFOC and PIC websites.
To help affected agencies implement A-123, the Playbook will be updated with information and
examples as programs’ and agencies’ ERM capabilities mature. Additionally, forums to discuss issues
that arise and share best practices related to ERM across the Federal Government will be convened. As
part of these on-going efforts, we will continue to accept any comments, suggestions, and examples for
the Playbook at [email protected].
cc: Dave Mader, Controller of the United States of America

Mark Reger, Deputy Controller of the United States of America
Lisa Danzig, Federal Chief Performance Officer, OMB
Dustin Brown, Deputy Associate Director for Performance and Personnel Management, OMB
Table of Contents
I. Introduction .......................................................................................................................................... 5
A. Using This Playbook .......................................................................................................................... 5
B. What is Risk Management? What is ERM? Why Do Government Agencies Need Them? ............... 6
C. Integrating ERM into Government Management Practices ............................................................. 7
II. Enterprise Risk Management Basics ..................................................................................................... 9
A. Outcomes and Attributes of Enterprise Risk Management .............................................................. 9
B. Internal Controls and Risk Management .......................................................................................... 9
C. Common Risk Categories ................................................................................................................ 12
D. Principles of Enterprise Risk Management ..................................................................................... 13
E. Maturity of ERM Implementation................................................................................................... 15
III. ERM Model...................................................................................................................................... 16
A. Step One: Establish Context ........................................................................................................... 17
B. Step Two: Identify Risks ................................................................................................................. 18
C. Step Three: Analyze and Evaluate .................................................................................................. 19
D. Step Four: Develop Alternatives .................................................................................................... 20
E. Step Five: Respond to Risks............................................................................................................ 20
F. Step Six: Monitor and Review ........................................................................................................ 20
G. Step Seven: Continuous Risk Identification and Assessment ........................................................ 21
IV. Developing an ERM Implementation Approach ............................................................................. 22
V. Risk Governance ............................................................................................................................. 22
VI. The Risk Appetite Statement .......................................................................................................... 23
A. What is Risk Appetite ...................................................................................................................... 23
B. Relationship Between Risk Appetite and Strategic Objectives ....................................................... 24
C. Considerations When Developing Risk Appetite ............................................................................ 24
VII. Developing a Risk Profile................................................................................................................. 24
A. Steps to Creating a Risk Profile ....................................................................................................... 25
B. Additional Considerations ............................................................................................................... 34
VIII. GAO/IG Engagement ....................................................................................................................... 35
IX. Appendices ...................................................................................................................................... 35
A. Risk Types ........................................................................................................................................ 37
1. Credit Risk ................................................................................................................................... 39
B. ERM Governance/ Culture/ Framework ......................................................................................... 40
1. Organization Charts .................................................................................................................... 40
2. Position Descriptions .................................................................................................................. 47
3. Risk Committee Charters ............................................................................................................ 61
4. Facilitating an ERM Culture Conversation .................................................................................. 65
5. ERM Frameworks ........................................................................................................................ 68
6. Implementation Plans ................................................................................................................. 73
7. Maturity Models ......................................................................................................................... 75
C. Risk Assessment .............................................................................................................................. 79
1. Establishing Context.................................................................................................................... 79
2. Risk assessments and the ERM Process ...................................................................................... 80
D. Risk Profile....................................................................................................................................... 81
1. Key Questions to Help Develop a Risk Profile ............................................................................. 81
2. Templates.................................................................................................................................... 82
3. Risk Assessment Tools ................................................................................................................ 87
E. Risk Reporting and Monitoring ....................................................................................................... 99
1. Dashboards ................................................................................................................................. 99
2. Monitoring ................................................................................................................................ 101
F. Glossary ......................................................................................................................................... 103
G. References and Resources ............................................................................................................ 109
H. Agency Acknowledgements .......................................................................................................... 110
I. Introduction
Playbook: Enterprise Risk Management (ERM) for the U.S. Federal Government (“Playbook”) is the
result of an interagency effort to gather, define, and illustrate practices in applying ERM in the Federal
context. This Playbook and accompanying appendices are tools designed to help government
departments and agencies meet the requirements of the revised OMB Circular No. A-123. They are also
designed to provide high-level key concepts for consideration when establishing a comprehensive and
effective ERM program. Nothing in this Playbook should be considered prescriptive. All examples
provided should be modified to fit the circumstances, conditions, and structure of each agency (or other
government organization). The goal of the Playbook is to promote a common understanding of ERM
practices in agencies to support effective and efficient mission delivery and decision making processes,
such as policy and program development and implementation, program performance reviews, strategic
and tactical planning, human capital planning, capital investment planning, and budget formulation. The
Playbook is intended as a useful tool for management. It is not intended to set the standard for audit or
other compliance reviews.
The material in this document is intended to be:

1. Useful to employees at all levels of an agency;
2. A useful statement of principles for senior staff, whose leadership is vital to a successful risk
management culture and ERM program implementation;
3. Practical support for operational level staff who manage day-to-day risks in the delivery of the
organization’s objectives;
4. A reference for those who review risk management practices, such as those serving on Risk
Committees; and
5. Helpful for implementing the requirements of OMB Circular No. A-123, ERM Section II1.
To manage risk effectively, it is important to build strong communication flows and data reporting so
employees at all levels in the organization have the information necessary to evaluate and act on risks
and opportunities, to share recommendations on ways to improve performance while remaining within
acceptable risk thresholds, and to seek input and assistance from across the enterprise.
A. Using This Playbook

This Playbook is intended to assist Federal managers by identifying the objectives of a strong ERM
process, suggesting questions agencies should consider in establishing or reviewing their approaches to
ERM, and offering examples of best practices.
An agency-wide ERM program should enhance the decision-making processes involved in agency
planning including strategic and tactical planning, human capital planning, capital investment planning,
program management, and budget formulation. It should build on the individual agency’s risk
management activities already underway and encompass all of the agency’s operations.
1
Note that OMB Circular A-123 does not seek to describe a comprehensive ERM program.
5
The material in this document should not be construed as auditing guidance.
Responsibility for managing risks is shared throughout the agency from the highest levels of executive
leadership to the service delivery staff executing Federal programs. Effective risk management, and
especially effective ERM, is everyone’s responsibility.
This Playbook was written by a group of agency risk practitioners and is not an authoritative part of
OMB Circular No. A-123 or other guidance. While this Playbook provides the foundation for applying
ERM principles and meeting the requirements of A-123, it is not an exhaustive manual with specific
checklists for implementing ERM. Each agency should determine what tools and techniques work best
in its unique context. ERM is an iterative process. As agencies' ERM capabilities mature, their
implementation of the recommendations in this Playbook should be modified to fit the circumstances,
conditions, and structure of each entity. This Playbook is intended to provide guidance to help
managers make better-informed decisions based on a more holistic view of risks and their
interdependencies. It is not intended to set standards for audit or other compliance reviews.
The appendices include examples of documents that some agencies have found helpful. Again, they are
not intended to be prescriptive.
B. What is Risk Management? What is ERM? Why Do Government

Agencies Need Them?
Risk is unavoidable in carrying out an organization’s objectives. Government departments and agencies
exist to deliver services that are in the public interest, especially in areas where the private sector is
either unable or unwilling to do so. This work is surrounded by uncertainty, which both poses threats to
success and offers opportunity for increasing value to the American people.
While agencies cannot respond to all risks, one of the most salient lessons from past crises and negative
reputational incidents is that both public and private sector organizations would benefit from
establishing or reviewing and strengthening their risk management practices. Agencies are well advised
to work to the greatest extent possible to identify, evaluate, and manage challenges related to mission
delivery and manage risk to a tolerable level.
For the purposes of ERM, Risk is the effect of uncertainty on objectives. Risk management is a
coordinated activity to direct and control challenges or threats to achieving an organization’s goals and
objectives. Enterprise Risk Management is an effective agency-wide approach to addressing the full
spectrum of the organization’s significant risks by considering the combined array of risks as an
interrelated portfolio, rather than addressing risks only within silos. ERM provides an enterprise-wide,
strategically-aligned portfolio view of organizational challenges that provides improved insight about
how to more effectively prioritize and manage risks to mission delivery2.
Effective ERM facilitates improved decision making through a structured understanding of opportunities
and threats. Effective ERM also helps agencies implement strategies to ensure effective use of resources,
enable an optimized approach to the identification and remediation of compliance issues, and promote
reliable reporting and monitoring across business units. It helps drive a culture of better understanding,
2
The Office of Management and Budget Circular A-11, Preparation, Submission, and Execution of the Budget,
Section 270.24.
6
disclosure, and remediation of agency risks. ERM also helps agencies strengthen their ability to evaluate
alternatives, set priorities, and develop approaches to achieving strategic objectives. The adoption of
consistent risk management processes and tools can help to ensure that risks are managed effectively,
efficiently, and coherently across an agency.
An ERM framework allows Federal agencies to increase risk awareness and transparency, improve risk
management strategies, and align risks to each agency’s risk appetite and risk thresholds. Risk Appetite3
is the articulation of the amount of risk (on a broad, macro level) an organization is willing to accept in
pursuit of strategic objectives and the value to the enterprise. Risk Tolerance4 is the acceptable level of
variance in performance relative to the achievement of objectives. It is generally established at the
program, objective, or component level. In setting risk tolerance levels, management considers the
relative importance of the related objectives and aligns risk tolerance with risk appetite. Federal agencies
will be most successful in managing risks when there is a high level of awareness and ownership of risk
management at all levels of the agency.
C. Integrating ERM into Government Management Practices

Successful integration of ERM into agencies’ day to day decision-making and management practices
enables agencies to leverage opportunities and avoid, mitigate, and transfer risk, resulting in more
resilient, effective, and efficient programs. ERM can
help to focus and inform decisions, by defining goals ERM Pitfall
and objectives, advocating for and aligning resources,
monitoring progress, and ensuring compliance with
ERM not integrated
ERM should not be an isolated exercise,
applicable laws, regulations, and controls.
but instead, should be integrated into
the management of the organization
Recent OMB guidance calls for the integration of ERM
and eventually into its culture.
into existing Government management practices. As
shown in Figure 1, this means that risks across the
enterprise be considered and prioritized as part of CXO/operations support, program management,
budget decisions, and strategic planning. The importance of integrating ERM into existing government
management practices was also highlighted in the President’s 2017 Budget:
Enterprise Risk Management:

These practices provide the framework to shape future initiatives in Federal performance
management. As work continues on agency internal controls and enterprise risk management, 2017
offers an opportunity to integrate risk management profiles around mission and mission support
functions in agency strategic planning and reviews. Opportunities also exist for collaboration and
integration across evidence, evaluation, and performance teams.
Section II of OMB Circular No. A-123 defines management’s responsibilities for ERM and includes
requirements for identifying and managing risks. It encourages agencies to establish a governance
structure, including a Risk Management Council or Committee (RMC) or similar body; requires the
3
The Committee of Sponsoring Organization of the Treadway Commission (COSO) Enterprise Risk Management-
Integrated Framework, p. 20
4
Ibid.
7
development of “Risk Profiles” to identify major risks arising from mission and mission-support
operations; and analyze those risks in relation to achievement of strategic objectives. It complements
Section 270 of OMB Circular No. A-11 that discusses agency responsibilities for identifying and managing
strategic and programmatic risk as part of agency strategic planning, performance management, and
performance reporting practices. Together, these two Circulars constitute the core of the ERM policy
framework for the Federal Government with specific ERM activities integrated and operationalized by
Federal agencies. The following figure shows the interplay among OMB Circulars A-123 and A-11 and
controls, program management, budget, and strategic decisions within the ERM framework.
Figure 1: The ERM Policy Framework
 Mission/Vision
 Performance Goal Setting/
Strategic Metrics
Decisions  Objective Setting
(OMB A-11)  Establish Risk Thresholds
 Strategic Reviews
 Policy
Budget Decisions  President’s Budget
(OMB A-11)  Congressional Justification
 Cross Agency Priority Goals

Program Management
 Agency Priority Goals
(OMB A-11)  Agency Program Reviews
 Operational Control Objectives

CXO/Operations  Reporting Control Objectives
Support  Compliance Control Objectives
(OMB A-123)  Risk Assessments
As shown in Figure 1, an effective ERM program is an integral part of the agency’s strategic decision
making process. Agencies should establish risk thresholds and identify top risks to the goals and
objectives laid out in their strategic plans. Assessing and prioritizing risks is an important step in
operationalizing the strategic plan through the development of program plans, budgets, and the
establishment of performance goals and controls.
In addition to the ERM guidance laid out in OMB Circulars A-11 and A-123, OMB provides guidance on
integrating risk management practices in the management of Federal credit programs and non-tax
receivables in Circular No. A-129. This includes guidance for risk management, data reporting, and use
of evidence to improve programs through regular program reviews as well as establishing the Federal
Credit Policy Council, an interagency collaborative forum for identifying and implementing best
practices.
Finally, in September 2014, the Government Accountability Office (GAO) released an updated
“Standards for Internal Control in the Federal Government” or “Green Book.” This document sets the
standards for an effective internal control system for Federal agencies and provides the overall
framework for designing, implementing, and operating an effective internal control system. It included
new sections on identifying, assessing, and responding to risks.
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II. Enterprise Risk Management Basics
A. Outcomes and Attributes of Enterprise Risk Management
ERM supports agencies’ ability to articulate risks, align and allocate resources, and proactively discuss
management and mitigation strategies and activities to better equip agencies to deliver on their goals
and objectives and potentially improve stakeholder confidence and trust. ERM should operate with the
purpose of:
 Supporting the mission and vision of the agency;
 Integrating existing risk management practices across functional silos;
 Improving strategic planning and decision-making;
 Improving the flow of risk information to decision makers;
 Including diverse viewpoints while driving towards consensus;
 Establishing early warning systems and escalation policies;
 Identifying, prioritizing, and proactively managing risks;
 Identifying opportunities;
 Supporting budget decisions and performance management;
 Establishing forums to discuss risks across functional silos;
 Promoting accountability and integrity of the agency’s work; and
 Using a common approach to evaluating risks within the agency.
ERM should:
 Help bring clarity to managing uncertainty;
 Facilitate continual improvement;
 Be fully integrated into agency decision making processes, with active leadership support and
engagement (i.e., setting the “tone at the top”);
 Be tailored to the needs of the agency and take human and cultural factors into account;
 Build upon and unite existing risk management processes, systems, and activities;
 Be systematic, structured, and timely as well as dynamic, interactive, and responsive to change;
 Be based on the best available information; and
 Be responsive to the evolving risk profile of the agency.
B. Internal Controls and Risk Management

ERM and internal control activities provide risk management support to an agency in different but
complementary ways. ERM is a strategic business discipline that addresses a full spectrum of an
organization’s risks and integrates that full spectrum into a portfolio view of risk. This encompasses all
areas of organizational exposure to risk, as well as internal controls, which focus on operational
effectiveness and efficiency, reporting, and compliance with applicable laws and regulations. ERM
modernizes internal control efforts by integrating risk management and internal control activities into
an ERM framework to improve mission delivery, reduce costs, and focus corrective actions towards key
risks. ERM allows agencies to view their portfolio of risks as interrelated, helping to illuminate the
relationship between key organizational risks and how and which controls can be used to mitigate or
reduce risk exposure.
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ERM Pitfall
Key leaders should understand how their offices align Focusing too much on
with the risk management structure and be able to
connect the dots across their agency’s internal internal controls
controls, compliance activities, and oversight ERM includes internal controls but
functions. Agencies may find it useful to build an also larger issues of the external
inventory that captures key oversight, compliance, environment, as well as transparency,
and internal control activities, even those that are not business practices, reporting, and
formalized. For agencies that choose to establish a governance that help define the
Risk Management Council or Committee (RMC), the overall risk culture.
resulting diagram could be used to help socialize this
concept across the organization to help key leaders
and staff understand the role of both the ERM organization and the RMC in relation to existing oversight
activities as well as those still under development.
Coordinating ERM with other oversight activities in a complementary way will require both trust and
collaboration between risk personnel and various oversight groups across the organization to ensure a
proper understanding of their respective objectives and authority. It also requires a broad knowledge
and subject-matter expertise by the team inventorying these activities, as well as an ability to identify
and depict interdependencies among various groups. Table 1 highlights how traditional risk
management activities complement ERM.
Table 1: Comparison between Traditional Risk Management and ERM
Traditional Risk Management ERM

Risk Management Internal Controls
(Project or Program)
Definition Coordinated activities to A process affected by an An effective agency-wide
direct and control an entity’s oversight body, approach to addressing
organization with regard to management, and other the full spectrum of the
5
risk. personnel that provides organization’s significant
reasonable assurance that risks by considering the
the objectives of an entity combined array of risks
will be achieved.6 as an interrelated
portfolio, rather than
addressing risks only
within silos.
5
Risk Management – Principles and Guidelines, International Organization for Standardization (ISO) 31000:2009
6
Standards for Internal Control in the Federal Government (United States Government Accountability Office (GAO)
Green Book)
10
Examples  Government Performance  Standards for Internal  OMB Circular No. A-
Highlighted and Results Act Control in the Federal 123 Management's
in Federal Modernization Act Government (GAO Green Responsibility for
Guidance (GPRAMA) of 2010 Book) Internal Control and
 Office of Management  Federal Managers’ Enterprise Risk
and Budget (OMB) Financial Integrity Act of Management(2016)
Circular No. A-133 Audits 1982 (FMFIA)  OMB Circular No. A-11
of States, Local  OMB Circular No. A-123 (Section
Governments and Non- Management's 270) Preparation,
Profit Organizations Responsibility for Submission, and
 Risk Management Internal Control Execution of the
Requirements for the  Chief Financial Officers Budget
Federal Acquisition (CFO) Act of 1990
Certification for Program  Federal Financial
and Project Managers Management
(FAC-P/PM) Improvement Act of
1996 (FFMIA)
Additional  Risk management –  Internal Control – Enterprise Risk

References Principles and guidelines Integrated Framework Management –
(ISO 31000:2009) (COSO) Integrated Framework
 GAO Internal Control (COSO)
Management and  Management of Risk -
Evaluation Tool Principles and
Concepts, “Orange
Book” (Her Majesty’s
(HM) Treasury (United
Kingdom))
Focus Selected risk areas and Selected risk areas and Enterprise-wide and
processes generally focused processes generally across every level taking
on waste, fraud, and abuse governed under compliance an entity-level portfolio
within Federal Programs activities and assessments view of risk.
(e.g., grants management, (e.g., financial
program-specific risks). management, information
technology).
Emphasis Performance management Conforming to external The use and application
and against scope, time, and reporting requirements of risk information to
Application cost, as well as identifying (e.g., audit reports, improve decisions
and organizing program- identified material related to strategic
level risks (e.g., risk registers weaknesses). A siloed planning, budgeting, and
organized by likelihood and approach to assessing performance
impact). effective operations, management across
reliable financial reporting, programs and activities.
and compliance.
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Key  Risks are traditionally  Primarily addresses  Addresses the full
Differences based on program or traditional financial, spectrum of an
project operational compliance, agency’s risk portfolio
execution, with risk transactional, and across all
tradeoffs made across operational risks, with a organizational (major
cost, schedule, and focus on risk reduction units, offices, and
performance. through the application lines of business) and
 Focus on risks is more of discrete controls. business (agency
forward looking than with  Risk assessments mission, programs,
internal controls, but traditionally review past projects, etc.) aspects.
does not extend beyond performance and  Provides the potential
scope of program or activities and are for a fully integrated,
project. generally not forward prioritized, and
 Some risk integration can looking. forward-looking view
occur, but may not  Risks are identified and of risk to drive
extend past the program managed on a siloed, strategy and business
or project level. non-integrated basis decisions.
 Risk appetite and (e.g., financial reporting,  Allows for more risk
tolerance is usually not human resources, management options
explicitly addressed. physical security). through enterprise-
 Requires domain and  Risk appetite and level tradeoffs, versus
technical program or tolerance is not a primary focus on
product expertise, in lieu addressed. reducing risk through
of functional experience.  Requires specialized, controls.
functional skillsets (e.g.,  Explicitly addresses
financial accounting, IT risk appetite and
security). tolerance.
 Requires more general
and interdisciplinary
skillsets, rather than
functional and domain
knowledge.
C. Common Risk Categories

An effective ERM program promotes a common language to recognize and describe potential risks that
can impact the achievement of objectives. Such risks include, but are not limited to strategic,
compliance, credit, market, cyber, legal, reputational, political, model, and a broad range of operational
risks such as information security, human capital, business continuity, and related risks. ERM addresses
these risks as potentially interrelated and not confined to an agency’s silos. Also, some risks may fall into
multiple categories. A comprehensive list of common risk categories and their definitions are included in
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Appendix A. This list is in no way complete but serves as an example of some of the risks an agency may
face. It is important to not allow the categorization of risk to become a new silo for reviewing risk.
Organizations should define risk categories in a way that supports their business processes and should
use these categories consistently. Agencies may also consider developing a common risk language
dictionary—a glossary of key risk terms to ensure all parties are consistent in their understanding of key
concepts, words, and ideas. Categories of risk evolve over time, with new types of risk becoming salient
and other risks becoming relatively less important.
D. Principles of Enterprise Risk Management

Part of developing an agency’s risk culture is to agree on basic underlying principles. These can be used
as regular reference points to gauge the extent that an agency is making progress. Moreover, these
principles should be embedded in the approach of senior management in setting the “tone from the
top.”
1. Governance Framework is Important: ERM is built around a purposeful governance

framework supported by the most senior levels of the organization and embedded into the
day-to-day business operations and decision-making of the agency. Agencies may choose to
adopt particular standards or frameworks (for example, COSO or ISO 31000), but it is
important that whatever framework is selected, the agency customizes it to meet the
mission, needs, structure, and culture of the organization. More important than
compliance with any ERM framework is the ability to demonstrate that risks are managed in
a way that supports good decision-making and meets its agency objectives. A framework
should be forward-looking with assessments concerning maturity of the ERM program along
the way.
2. Managing Risk is Everyone’s Responsibility: Risk management enables understanding and

appropriate management of the risks inherent in agency activities. It does not eliminate risk.
While agencies cannot respond to all risks related to achieving objectives and goals, they
should work to the extent possible to identify, evaluate, manage, and where appropriate,
address challenges related to mission delivery. Risk management training should be
available to all staff so they are equipped to manage risks associated with their work.
Managers at each level should be equipped with appropriate skills and resources to manage
risk appropriately. Further, agencies should put in place clear lines of communication for
employees at all levels to identify areas of concern/potential risk and encourage such open
communication to escalate reports of risks and bring them to the attention of the
appropriate decision makers without repercussions.
3. Managers Own the Risk: Responsibility for success at each level of the organization means
responsibility for managing risk at that level. For example, agency executives are responsible
for the agency’s enterprise risk, program managers own risks to their programs, and project
managers are responsible for managing risks to their projects. The managers of government
programs and activities should understand and take ownership of risks to achieving program
outcomes, including both inherent risk and the tradeoffs of strategic decisions. Making risk-
informed decisions requires that program managers articulate these risks and opportunities
and to the extent possible manage risk in their portfolio across the organization. If an
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agency creates a distinct ERM office, this is a second line of defense that creates a
partnership with agency leadership and program managers to help them understand and
manage their risk within acceptable levels, rather than taking responsibility for managing
risks directly.
4. Transparency Supports Informed Decision Making: Informed decision making requires the
flow of information regarding risks and clarity about uncertainties or ambiguities, up and
down the hierarchy and across silos, to the relevant decision makers so they can make
informed decisions. It is vital to create a culture where employees are comfortable raising
risk-related concerns to senior managers and discussing risk openly and constructively –
especially when parties disagree. Part of transparency is the need to report information so
that decision-makers have a clear view of risks within and across silos. The reporting of
“bad news” should become the way an agency does business rather than an act of courage
by a lower-level employee.
5. Forums for Discussing Risk are Important: Agencies need to establish forums or
committees to facilitate an open discussion of risk. Members should include policymakers,
program leaders and risk management professionals within the agency, not just risk
executives speaking to each other. Discussions of risk should include those both within and
across silos in agencies. Forum structure will vary by agency. However, it is important that
there be a mechanism in place to funnel important risk information up to the senior
management of the agency or to the ultimate relevant policy maker.
6. Risk Management Should Be Integrated into Key Agency Processes: The risk management
process should be integrated within organizational processes such as strategic planning,
budgeting, and performance management. Agencies should consider risks from across the
agency and use them as important inputs to these processes.
7. Establishing Risk Appetite is Key: Risk is unavoidable and sometimes inherent, as is the
case with a credit program, in carrying out an organization’s objectives. Agencies should
evaluate, prioritize, and manage risks to an acceptable level. Clearly expressed and well
communicated risk appetite statements establishing thresholds for acceptable risk in the
pursuit of objectives are important. These statements help agencies make decisions about
potential consequences or impacts to other parts of the organization, limiting unexpected
losses.
Defining risk appetite needs to be both a top-down and bottom-up exercise. The most
senior members of an organization should define overall acceptable levels in conjunction
with goals and objectives, and within the context of established laws, regulations, standards,
and rules. Risk appetite helps to align risks with rewards when making decisions. Agencies
can accept greater risks in some areas than in others. Each program establishes risk
appetite levels that, when consolidated, are within the risk appetite boundaries established
for the entire organization. Risk appetite can be implicitly established and communicated
when setting strategic or operational goals and objectives. These levels may be expressed
qualitatively or as quantitative metrics. They can also be explicitly set and communicated
through targets associated with performance measures and indicators.
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8. Existing Risk Analysis Models Are Important Within Limitations: Standard risk
management tools, including models and stress testing, can be important tools for
measuring risk in a particular program. These tools can be used to show how the impact of
an event could affect an agency’s ability to achieve one or more of its objectives or
performance goals. As helpful as risk tools can be, they are supposed to help inform
decisions not to make them outright. Every model has simplifications that attempt to define
reality and, thus, all have imperfections. It is important to understand these imperfections
and to use a number of different models and approaches where possible.
9. Planning Fosters a Culture of Resilience: Risk management needs to be forward looking,

learning from past mistakes as well as current best practices. This includes modeling severe
downside scenarios and potential responses, as well as foresight planning exercises that
consider what could go wrong, external factors that could impact mission achievement, gaps
or short-comings in current business processes and resources, and other considerations.
Developing strategies to respond to alternate future scenarios facilitates a culture of
resilience, where programs can continue to meet objectives in the face of changing realities.
10. Diversity of People and Thought Aids Risk Management: The importance of bringing
together different views and perspectives to discuss issues across various departments and
programs (and not just within each program or department) is one of the lessons learned
from the 2008 financial crisis. Risk management is about getting the right people around a
table to discuss risk from various perspectives. This requires diversity of thought, which is
greatly enhanced by a diversity of people, opinions, and perspectives. Agencies can benefit
from diversity across all demographics in risk management discussions – including ethnic,
gender, generational, geographic affiliation, educational, occupational and other factors.
E. Maturity of ERM Implementation

Implementing ERM throughout an agency
requires careful thought and consideration about
the best structure for the ERM function and ERM Pitfall
where it should be located in the organization. Too much too quickly
Every organization has its own level of ERM is an iterative effort that develops
organizational and process maturity. These levels over time. Management may consider an
can be assessed using capability maturity models. incremental approach, initially focusing on
An organization matures as it progresses from the top two or three risks or a type of risk.
having no structure or doing ad hoc work to an Success in a specific area can illustrate the
optimized or leadership structure. A more mature benefits of ERM and build the foundation
risk organization will not only react to issues that for future efforts. Trying to change the
arise but will be able to articulate the risks it fabric of an agency too much or too quickly
faces and have in place management strategies to could result in defensive mechanisms
respond to those risks. It will look forward and try within the agency hampering ERM efforts.
to predict what could happen and develop
strategies to meet those contingencies. It will
have risk dialogue within and across silos. In
essence, a more mature risk organization will help create a culture which embodies the principles
15
discussed in this Playbook. Evaluating and improving the ERM of an organization is a long-term process
that needs to develop and change over time and will be shaped by the unique needs, formal and
informal decision making structures, culture, capacity, and mission of the organization. Examples of
maturity models are available in Appendix B.
III. ERM Model

Each agency will need to determine how it will implement a comprehensive ERM program. Various
frameworks may be considered as resources when making this determination including: 1) The
Committee of Sponsoring Organizations of the Treadway Commission (COSO)’s Enterprise Risk
Management Integrated Framework (September 2014); 2) ISO 310000; and 3) The United Kingdom’s
Orange Book: Management of Risk – Principles and Concepts (October 2004). ERM programs should be
tailored to meet the individual needs of the agency or organization, and different components of these
frameworks may be considered where most appropriate. Examples of ERM Frameworks are available in
Appendix B.
When considering these various frameworks, there are some common elements and phases of ERM that
all approaches or models should include. These common elements are depicted in Figure 2: Illustrative
Example of an ERM Model. Among them are: consideration of the context/environment; risk
identification; analysis and evaluation; prioritization of risks; development of alternatives; risk response;
and monitoring of implementation and outcomes.
It is important that whatever risk management approach is adopted, it be responsive to the unique
needs and culture of the organization. The purpose is to assist those responsible for particular efforts in
understanding, articulating, and managing risks. To complete this circle of risk management, the agency
should incorporate risk awareness into the agency’s culture and ways of doing business.
16
Figure 2: Illustrative Example of an ERM Model
1. Establish
Context
6. Monitor and
2. Identify Risks
Review
Communicate
and Learn
5. Respond To 3. Analyze and

Risks Evaluate
4. Develop
Alternatives
A. Step One: Establish Context

Every agency functions within an environment that both
influences the risks faced and provides a context within which
risk has to be managed. Further, every agency has partners
that it depends on for the delivery of its objectives. Effective 1. Establish
Context
risk management needs to give full consideration to the 6. Monitor and
2. Identify Risks
context in which the organization functions and to the risk Review
Communicate
aspects of partner organizations. and Learn

Risks Evaluate
This broader risk context includes all factors that affect the 4. Develop
Alternatives
ability of an agency to achieve its stated mission and program

objectives, both internal and external. This includes but is not
limited to Congress, the economy, the agency’s capacity, legal
and compliance structures; inter-dependencies with other
agencies, partner organizations, and individual taxpayers; and expectations placed on the agency by the
public.
The first step in establishing the context is to determine the requirements and constraints that will
17
influence the decision making process, as well as key assumptions. This involves taking into account
policy concerns, mission needs, stakeholder interests and priorities, agency culture, and the acceptable
level for each risk, both for the agency as a whole and for the specific program. Program managers
should identify the control environment, delineating the safeguards in place to ensure compliance with
applicable laws, regulations and policies. Finally, agencies should consider how relevant stakeholders,
such as partner organizations, other departments and agencies, other levels of government, industry
associations, employee bargaining groups, Congress, the Judicial Branch, internal and external auditors,
sovereign entities, vendors, and the public interact with the program.
Understanding and defining the context will inform and shape successive stages of ERM
implementation. Key components that should be considered, depending on the scope, timeline and
complexity involved are described in Appendix C.
B. Step Two: Identify Risks

Agencies should use a structured and systematic approach to
recognize potential risks and should strive to address all key risks
significant to the achievement of organizational objectives. As 1. Establish
Context
the ERM process becomes more formal, agencies may want to 6. Monitor and
Review
2. Identify Risks
adopt a risk register in which major risks are listed and their Communicate
and Learn
management is documented. The identification of risk may be an 5. Respond To 3. Analyze and

Risks Evaluate
exercise conducted “top-down,” “bottom-up,” or both. In its 4. Develop
Alternatives
most basic form, developing an agency risk register is an exercise
through which managers and staff at each level of the
organization are asked to list and articulate their major risks (i.e.,
“What keeps you up at night?”). Managers and subject matter
experts, who are closest to the programs and functions and most knowledgeable about the risks faced,
should serve as the primary source for identifying risks. The ERM office or program can provide useful
assistance throughout the risk management process, through its unique background and view into the
agency. After the listing of major risks is complete, agencies should examine them and decide which are
the most significant risks to the agency (e.g., prioritize the risks based on likelihood and impact), and use
the highest ranked risks to create the agency’s risk profile. Agencies also should consider risk velocity.
Some risks, such as disinvestment in systems, may take a long time to cause major harm while others,
such as a systems failure, can cause harm precipitously. For a list of key questions to help develop a risk
profile and examples of risk profile formats, refer to Appendix D.
18
Tips for Documenting Risks
1. Develop meaningful risk categories: When defining or categorizing risks, agencies

should consider categorization in ways that are most helpful and relevant to agency
mission. Agencies should be cautious to not limit categories only within silos or to
neglect categorizing sources of risks not typically associated with a particular silo,
while recognizing any single risk may be associated with more than one category.
2. Use common language: Risks should be described using a common language that
resonates within the agency regardless of program office or individual expertise.
Removing jargon whenever possible improves communication.
3. Document risks regardless of control: Agencies should consider the risks that are
both within and outside of an agency’s direct control, including third parties,
vendors, or contractors, but present a genuine risk to an agency’s mission. For
major risks outside of the agency’s direct control, often the only response may be to
prepare contingency plans.
4. Document action plans and outcomes: It is important for agencies to document
what was done to respond to possible risks and use these as lessons learned that
can be leveraged for future strategic planning and response plans for new risks that
may arise.
C. Step Three: Analyze and Evaluate

Once managers identify and categorize risks, agencies should
consider the root causes, sources, and probability of the risk
occurring, as well as the potential positive or negative outcomes,
and then prioritize the resulting identified risks. 1. Establish
Context
6. Monitor and
2. Identify Risks
Review
As part of the evaluation of risks, it is essential for agencies to Communicate
reflect that risk can be an integral part of what agencies do. As an and Learn

example, Federal credit programs are designed to meet specific Risks Evaluate
4. Develop
social and public policy goals by providing financial assistance to Alternatives
borrowers who may be too risky to obtain private sector credit

under reasonable terms and conditions from lenders. Perceived
risks can be a large factor in the private sector’s unwillingness to
participate in the transaction but the government chooses to step in with specific credit program
objectives because the potential social benefits and objectives are considered to outweigh the risks.
Agencies should appreciate inherent risk within their programs or operations and incorporate them into
their analysis and assessment of overall risk.
19
Assessments of the likelihood and impact of risk events help agencies monitor whether risk remains
within acceptable levels and support efficient allocation of resources to addressing the highest-priority
risks. Agencies can be too risk-averse. It is important to assess risks of standing still and either missing
opportunities or becoming vulnerable to a changing environment. Examples of risk assessment tools can
be found in Appendix D.
D. Step Four: Develop Alternatives

Guided by risk appetite, agencies should systematically identify 1. Establish
Context
and assess a range of response options or strategies to accept, 6. Monitor and
2. Identify Risks
transfer, share, avoid, or mitigate major risks. Compare the cost Review
Communicate
of addressing the risk with the risk of exposure, the value of and Learn

potential benefits and losses, and determine how to allocate Risks Evaluate
4. Develop
resources accordingly. Consider non-financial costs in terms of Alternatives
the reputational or political capital at stake. Also evaluate control

options to respond to risk which may be preventative, corrective,
directive, or detective in design.
E. Step Five: Respond to Risks

After identifying and analyzing major risks, prioritizing them, and
developing appropriate strategies to address the highest priority 1. Establish
Context
risks, the agency leadership must decide how to allocate scarce 6. Monitor and
2. Identify Risks
resources, such as budget resources, analytical capabilities, and Review
Communicate
management attention, to address them. While the risk officer or and Learn

risk office can help to facilitate the process, managing risk is the Risks Evaluate
responsibility of the unit heads where the risk resides. Once risks 4. Develop
Alternatives
are prioritized and risk responses are determined, milestones for

carrying out the risk management process should be
documented. The risk officer or office should then monitor
implementation of the risk management strategy to ensure that
it is being carried out effectively and in a timely manner. Agency leadership may need to adjust the
approach to managing particular risks if implementation somehow fails to bring the risk within desired
limits.
F. Step Six: Monitor and Review

Agencies should regularly review, monitor, and update (as 1. Establish
Context
necessary) risk information documented within the enterprise- 6. Monitor and

Review
2. Identify Risks
level risk profile to identify any changes and determine whether Communicate
and Learn
risk responses and mitigations are managing risks as intended. 5. Respond To

Risks
3. Analyze and
Evaluate
This review should occur semi-annually at a minimum. As part of 4. Develop

Alternatives
this ongoing process, risk personnel should work with senior
leadership to determine if originally identified risks still exist,
identify any new or emerging risks, determine if likelihood or
impact has changed, and ascertain the effectiveness of controls
20
or mitigants put in place. It is a good practice to regularly review and update risk data at all levels of the
agency as appropriate. Any significant changes to the risk profile should be escalated to the appropriate
senior leader for discussion and should be made part of the agenda for discussion with the RMC.
It is expected that this step will result in a risk register, dashboard, or other report to communicate the
status of risk response activities. This includes whether an action has been started, completed, or
delayed, and whether the action taken had the desired effect on the risk. It can also show what the
residual risk is and where additional response is required. Monitoring efforts may include assigning
responsibility for implementing risk responses (usually it lies with the manager where the risk resides);
setting milestones and criteria for success, and monitoring to ensure the intended actions are
completed. Examples of risk communication tools are available in Appendix E.
Progress in implementing risk response strategies provides a performance measure. The results can be
incorporated into the organization's overall performance management, measurement, and external and
internal reporting activities.
G. Step Seven: Continuous Risk Identification and Assessment

Risk identification and assessment should be an iterative process, occurring throughout the year,
including surveillance of leading risk indicators both internally and
in the external environment. Once ERM is built into the agency
culture it can be possible to learn from managed risks, near
misses when risks materialize, and adverse events, and can be
1. Establish
used to improve the process of risk identification and analysis in Context
future iterations. All aspects of ERM, including formal tools such 6. Monitor and
Review
2. Identify Risks
as risk profiles and statements of risk appetite need to be Communicate

and Learn
regularly reviewed and evaluated to determine whether the 5. Respond To

Risks
3. Analyze and
Evaluate
agency’s implemented risk management strategies are achieving 4. Develop

Alternatives
the stated goals and objectives, whether the identified risks

remain a threat, whether new risks have emerged, and how ERM
processes can be improved.
Integrating risk management into existing agency planning, performance management, and budget
processes is essential if ERM is to be effective. Agency strategic plans, for example, should reflect an
assessment of current and future risks to mission achievement and plans for how the agency may
respond to such eventualities including risks of standing still while the context changes. The
Government Performance and Results Act Modernization Act (GPRAMA) requires that agencies revise
strategic plans every four years and assess progress toward strategic objectives annually. Incorporating
a review of the risk appetite and identified risks associated with each objective into this process
encourages an ongoing dialogue about risk and performance. Finally, integration with the budget
process is needed so that the agency seeks to allocate its scarce budget resources to address the highest
priority risks preferably before adverse events materialize.
21
IV. Developing an ERM Implementation
Approach
Agencies should develop plans for implementing ERM into management practices. The planned
approach to implementing ERM should include a planned risk governance structure, processes for
considering risk appetite and tolerance levels, methodology for developing a risk profile, and general
implementation timeline and plan for maturing the comprehensiveness and quality of the risk profile
over time.
It will be up to each agency to decide the best way to complete each of these plans. Because every
agency is different, each will have a different way that it wishes to create a risk management
governance structure and develop a risk appetite and risk profile. Links to examples of implementation
plans are available in Appendix C.
V. Risk Governance
A strong culture of risk awareness is needed throughout the agency. This culture can only occur if top
agency leaders champion ERM and the flow of information needed for effective decision making. Risk
management training, risk assessments conducted collaboratively with operational and program staff,
agency-wide communications about the importance of
risk identification and management, performance
ERM Pitfall
incentives that encourage risk management, and
regular reports identifying significant risks across the Absence of support from
agency all can help build the needed culture. A strong senior leaders
ERM governance structure and program will Strong leadership at the top of the
significantly help agency leaders make risk-informed organization, including active
decisions about resource allocation, policy, and participation in oversight, is
operations that can lead to improved mission extremely important for achieving
performance and agency resilience to changes in success in an ERM program. ERM
internal and external factors. also requires active involvement and
commitment from leaders in each
As an agency develops its risk governance structure it is business and program area (i.e.,
important that it promotes communication and across silos) to develop and
consultation with stakeholders. This will result in the maintain a risk aware culture.
identification of risks and response strategies that
include the perspectives of program managers and key
stakeholders. The governance structure needs to be built on the understanding that stakeholders can
be internal or external to the agency. Agencies should consider the desired outputs of communication
and consultation, and decide where in the risk process to engage stakeholders. Communications can
include formal and informal meetings with internal and external stakeholders, verbal or written reports,
surveys, or emails, and meetings with teams to address specific risks, programs, objectives, or leadership
22
activities. Part of the ERM process will be to define and establish documentation requirements and
reporting methods.
Effective risk governance requires continuing and focused support from the top of the organization. One
effective approach is to create a RMC, chaired by the COO or a senior official with responsibility for the
enterprise. In Cabinet level agencies, this is the Deputy Secretary. The RMC should meet regularly (e.g.,
monthly) to consider a range of major risks. It is essential that senior leadership be willing to respond to
important risks identified and prioritized by
the committee by making decisions about
how to respond to a risk and then allocating
the needed resources (in terms of budget,
ERM Pitfall
staffing, or management attention, for Lack of a core team
example) to ensure that the risk is properly Hiring one individual to stand-up the ERM
addressed. If the RMC limits its dialogue to program for a mid to large size agency is
identifying and prioritizing risks without problematic. Each agency should assess the
implementation of effective responses it will level of support necessary to implement and
quickly become an empty forum for manage ERM effectively. To be effective, the
discussion rather than a source of value in ERM program will need the appropriate team
addressing major risks. with knowledge and experience in risk
management, leadership, and gravitas to build
An effective governance structure for ERM, the ERM function. If an agency does not have a
internal controls, and performance CRO or intend to hire one, it should also
management would define the roles, carefully consider where the core team fits in
responsibilities, and ownership of these the agency to make it most effective. While
functions and ensure they complement each agencies should be careful about building an
other. In defining the ERM governance ERM empire, the size of the ERM team should
structure, leadership and those in the risk reflect the needs of the organization to support
management role should think about how to effective risk management.
leverage existing risk management activities
and coordinate with current efforts in the
organization for reviewing strategic direction and goals such as quarterly performance reviews and the
Strategic Objective Annual Review (SOAR) required by GPRAMA.
Examples of ERM governance structures, roles and responsibilities, and risk governance committee
charters are available in Appendix B.
VI. The Risk Appetite Statement

A. What is Risk Appetite
As noted earlier, risk appetite is the amount of risk an organization is willing to accept on a broad level in
pursuit of its objectives given consideration of costs and benefits. Without closely considering risk
appetite, an organization may take more or less risk than may be appropriate to achieve the associated
23
gains. Clearly expressed and well-communicated risk appetite statements can provide guidance on the
amount of risk that is acceptable in the pursuit of objectives and can help policymakers make informed
decisions. These statements help agencies make risk-informed decisions with regard to allocation of
resources, management controls, and potential consequences or impacts to other parts of the
organization, and can reduce surprises and unexpected losses. Again, a practical approach is
recommended. Discussing qualitative aspects and general appetite for risks materializing is more
important than trying to apply a quantitative formula or mathematical precision regarding such risks.
B. Relationship Between Risk Appetite and Strategic Objectives

Risk appetite should be informed by the public policy purpose of the program and the agency’s mission
as well as the environment in which it operates. For example, if the stated objective of a program is to
encourage home ownership, agencies may tolerate a higher risk of default when backing mortgage loans
for low-income borrowers than would be suitable for a private lender. However, if the desired result of
the program emphasizes access to affordable, high quality housing (including rental housing), rather
than home ownership, the acceptable risk of default may be much lower, which means a lower risk
appetite. Similarly, if the purpose of a program is to inject capital into an under-served market during a
recession in which private lenders are “de-risking”, or cutting back on lending to high-risk borrowers, the
government may determine a higher risk of default is acceptable at that point in order to fulfill that
market need. In this case, the government would have a higher risk appetite than in more expansive
times.
C. Considerations When Developing Risk Appetite
Agencies should visualize the relationship among likelihood, impact, and tolerability of risk and
consider the relative severity of each risk in terms of impact on the mission objective. In doing so,
agencies may adopt rating scales, such as a scale ranging from 1-5, and set relative differences across
the levels.
Risk appetite levels should be developed by merging ideas both top-down and bottom-up, with top
leadership approval of the final risk appetite statement. The most senior members of an organization
should be involved in setting overall risk appetite levels in conjunction with goals and objectives. Risk
appetite should be considered within the context of established laws, regulations, standards, and rules.
Each program should also set out its own individual risk appetite level so that all of the individual levels,
when consolidated, fall within the appetite for the entire organization.
VII. Developing a Risk Profile

OMB Circular No. A-123 requires each agency to develop a “risk profile.” Circular No. A-123 defines a
risk profile and its purpose in the following terms:
The primary purpose of a risk profile is to provide a thoughtful analysis of the risks an
Agency faces toward achieving its strategic objectives and arising from its activities and
24
operations. The risk profile assists in facilitating a determination around the aggregate
level and types of risk that the agency and its management are willing to assume to
achieve its strategic objectives.
The risk profile differs from a risk register in that it is a prioritized inventory of the most significant risks
identified and assessed through the risk assessment process versus a complete inventory of risks.
A. Steps to Creating a Risk Profile

When developing a risk profile or a listing and assessment of the agency’s top risks, agencies will want to
ask themselves questions each step of the way so that the risk profile will be tailored to their agency’s
circumstances. Examples of questions agencies may consider as part of developing a risk profile are
available in Appendix D. The answers to these questions will enable agencies to identify the most
significant risks, assess those risks, and determine appropriate response strategies.
There is no single best way to document an agency’s risk profile and agencies will have discretion in
terms of the appropriate content and format for their risk profiles. However, Circular No. A-123 calls for
agencies to include the following seven components:
1. Identification of Objectives
2. Identification of Risk
3. Inherent Risk Assessment
4. Current Risk Response
5. Residual Risk Assessment
6. Proposed Risk Response
7. Proposed Action Category
Although it is logical that these seven components will often be involved in risk analysis at all levels of an
agency, it is important to note that for purposes of A-123 these seven components only need to be
documented for the major risks at the overall Agency level in preparation of their discussion with OMB.
Step One: Identification of Objectives

Agencies should begin by identifying their objectives. There are four objective categories outlined in
OMB’s Circular No. A-123: strategic, operations, reporting, and compliance. These four categories also
align with the Objective Setting component of the COSO ERM Integrated Framework. The categories
provide guidance on the intended scope of the objectives which should be defined as part of the agency
process, but agencies do not necessarily need to use these four objective categories for their analysis.
Per COSO, some organizations develop risk categories based upon the categorization of their objectives,
using a hierarchy that begins with objectives relevant to organizational units, functions, or business
processes. OMB Circular No. A-123’s four objective categories and corresponding definitions are
outlined below, as well as more enhanced definitions relating to corresponding risk areas that may align
or overlap with each objective category.
25
Table 2: Objectives as outlined in Circular No. A-123 and their corresponding risk categories
A-123 Objective Corresponding Risk Category

Strategic: Relating to the strategic Strategic Risk: The risk of failing to achieve strategic or tactical
goals and objectives aligned with objectives because the strategic and tactical planning process,
and supporting the agency’s leadership, or implementation of the strategic plan is not fully
mission effective. Strategic risks can be affected by changes in the political
environment such as changes in administration and resulting
changes in strategic priorities. Strategic risk can also be triggered
by actions of key stakeholders such as other Federal agencies or
by law makers as described in the definition of political risk.
When thinking about strategic risk, agencies should also consider
the concept of effectiveness – the ability of agencies to
demonstrate and measure the effectiveness of a particular
program.
Operations: Relating to the Operational Risk: The risk of direct or indirect loss or other
effective and efficient use of the negative effects on an agency due to inadequate or failed internal
agency’s resources related to processes, or from external events that impair internal processes,
administrative and major program people, or systems. Operational risk encompasses a broad range
operations, including financial and of risks (e.g., legal, compliance, and other risk types identified in
fraud objectives this section, as well as business continuity, business processes,
human capital, and technology) which can have a direct impact on
daily operations of an agency. Included in operational risk is
reporting risk – the risk associated with reliability of reporting
information needed to manage the agency and monitor its
progress.
Reporting: Relating to the Reporting Risk: The risk associated with the accuracy and
reliability of the agency’s reporting timeliness of information needed within the organization to
support decision making and performance evaluation, as well as,
outside the organization to meet standards, regulations, and
stakeholder expectations. This is a subset of operational risk.
Compliance: Relating to the Compliance Risk: Failure to comply with applicable laws and
agency’s compliance with regulations and failure to detect and report activities that are not
applicable laws and regulations compliant with statutory, regulatory, or organizational
requirements. Examples include laws and regulations governing
procurements and Federal assistance, privacy statutes and
regulatory requirements. Compliance risk includes risks resulting
from a lack of awareness or ignorance of the pertinence of
applicable statutes and regulations to operations and practices.
Some key questions agencies should consider during this step are as follows: What are our objectives?
What do we need to consider when we assess the risks of achieving our objectives? What criteria will we
use to assess our risks? Who will conduct the assessment? How will we validate the quality of our risk
profile?
Risk exists only in the context of trying to achieve something. At the enterprise level, it may be a vision,
a mission, a set of strategic goals, a legislative imperative, or a mix of these. At the program, project, or
26
transaction level, objectives will be more narrowly defined, but they should be explicit. Objectives may
be defined by level (enterprise, program, project, transaction) or by category (strategic, operations,
compliance, reporting).
Additionally, both the internal and external environments in which the agency seeks to achieve its
objectives should be considered. A Strengths, Weaknesses, Opportunities, and Threats (SWOT) analysis,
which is also useful for analyzing the external environment, can be helpful in analyzing internal factors.
External considerations include but are not limited to stakeholders, including elected officials and the
public; legal and regulatory requirements; economic and financial considerations; technological
capabilities; and requirements and trends that impact the organization’s objectives. Internal
considerations include anything within the organization that can influence the way in which the agency
will manage risk such as mission, culture, structure and governance, goals and objectives, risk tolerance,
performance metrics, resources, internal stakeholders, information systems, decision making processes,
policy, standards, and guidelines.
By the end of this step you will have clarified the enterprise, program, office, or other objectives for
which you are assessing risk. You should have an understanding of the internal and external
environment in which you are trying to achieve those objectives. You should know what approach you
will use to identify risk, who will be involved, and the criteria you will use to assess risk.
Step Two: Identification of Risk

In this step, an agency will generate a list of the barriers (threats) and enablers (opportunities) to
achieving its objectives. Risk management is an art more than a science. This step is the art of turning
threats and opportunities into risk statements. This is a way of verbalizing what it is agencies are making
decisions about and why.
Information captured for each risk should include the related strategic objective, if applicable, whether
or not the risk is in fact a control deficiency or high-risk area previously identified, and any remediation
plans, corrective actions, or mitigation strategies for the risk. The assessment process should consider
both positive and negative risks and may focus on information collected from previous reports and
sources, such as those in the following list.
27
Sources for Identifying Risks
 Agency Reports and Self-Assessments

o Previous year Federal Managers and Financial Integrity Act reports and A-
123, Appendix A self-assessments and related assurance statements.
Specifically, this may include:
 Entity-level control interviews and evidence documentation;
 Assessment of agency processes and thousands of documented
controls;
 Documentation of control deficiencies, including the level of
significance of those deficiencies (simple, significant, or material
weakness); and
 Corrective actions associated with the deficiencies and tracked to
either remediation or risk acceptance.
o Financial Management Risks documented in the agency’s Annual Report.
o Project management risks documented in the agency’s investment and
project management processes.
o Anything raised during Strategic Objectives Annual Review, quarterly
performance reviews, RMC, etc.
 Inspector General (IG) and Government Accountability Office (GAO)
o IG Management Challenges documented annually in the agency’s AFR.
o IG audits and the outstanding corrective actions associated with those
audits.
o GAO audits and the outstanding corrective actions associated with those
audits.
 Congress
o Issues and risks identified during Congressional Hearings and Questions
for the Record.
 Media
o Issues and risks identified in the news media.
Upon completing the initial identification of risks, an agency may wish to consider conducting an initial
analysis of the compiled risk information and create a working list of risks based upon review of existing
documentation above. This may serve as a preliminary list of risks to use during interviews with key
stakeholders and other key personnel. Results analyses could then be conducted on a rolling basis
throughout the risk identification and assessment process.
Agencies may wish to consider conducting interviews and discussions with key stakeholders and other
key personnel. These interviews and discussions will help to validate the preliminary risk list and identify
28
additional risk items. These interviews and discussions will also help to identify and document
additional areas of known or emerging risk, current and proposed risk responses, and other relevant risk
information including ratings for inherent and residual risk. Some key questions to consider during this
step are: What current events or longer term developments are occurring that would affect my program
areas or objectives? What are the corresponding impacts? How quickly will particular major risks cause
an impact?
The risk officer can conduct interviews and facilitate

workshops designed to generate information about
major risks as perceived by people in all parts of the ERM Pitfall
agency. From this consultative and interactive
process, the risk office can generate a preliminary
Failure to work closely with program
list of major risks or add to an initial risk list leaders
compiled from existing documentation, as discussed In building out an ERM program, it is best to
in the previous section. The nature of the risk work with those within the agency that already
identification process will affect the results and the own and manage risk to gain insights into the
time required to perform the analysis. Workshops most significant and relevant risks facing the
with people from multiple disciplines may provide a organization. It is an ERM program’s role and
more complete perspective but will require time and responsibility to provide risk management
facilitation, compared to interviews only with key assistance to others in the agency, not the
managers. Relying on a subject matter expert may other way around. The ERM program’s first
seem efficient, but this may preclude consideration questions to agency managers should always
of a larger range of threats and opportunities, and be: What are your major risks? And, how can
especially those that are cross-cutting. we support you in better managing them?
Communication and consultation with partners or
other stakeholders may provide mutual
understanding and confirmation of preliminary
determinations. Known risks identified from prior assessments should be vetted with key managers and
stakeholders to address any changes in their context.
A simple narrative statement should be developed to describe each major risk identified. The statement
should give some context to the issue and describe the perceived impact from the risk. It may be helpful
to use the “if/then” format to identify the risk events and the resultant impacts. Be sensitive to
potentially serious risks that cut across organizational units so they do not get lost. Also consider
possible linkages of events and risks.
It is expected that this step will generate a comprehensive list of risks based on those events that might
create, enhance, prevent, degrade, accelerate, or delay the achievement of objectives. An agency wants
to strive to be as comprehensive as possible to avoid missing risks that should be included in further
analysis. When identifying risks, an agency should consider and include risks whether or not their source
is under the control of the organization. During risk identification, agencies should not just look vertically
for risks, but horizontally across the agency and external partners to find risks that would affect
achievement of agency objectives. Risk identification should include consideration of the secondary and
cumulative effects of particular impacts. It should also consider a wide range of impacts even if the risk
source or cause may not be apparent. It is necessary to consider all possible causes and scenarios so that
all significant consequences are considered. This is not to say that multiple strategies need to be
29
devised. Understanding all of the possible risks will help an agency develop a thorough response
strategy.
Step Three: Inherent Risk Assessment

The preliminary risk list compiled as a result of risk identification activities will need to be analyzed to
rate the inherent risk level based on impact and likelihood. Inherent risk is the exposure arising from a
specific risk before any action has been taken to manage it beyond normal operations. Inherent risk is
often referred to as “the risk of doing business”. Impact refers to the effect of an event on strategic
goals and objectives. Impact can be positive or negative related to the organization’s objectives.
Likelihood is the probability that a given event will occur.
These criteria should be used to assess the level at which a risk requires a response and the level of that
response. To approach this process, it can be helpful to create a multi-disciplinary committee with
representatives from major operating and mission units to assess the level of risk response. Sometimes
it can be helpful to draw on subject matter experts, or involve external or specified internal
stakeholders. Root-cause analysis can help an agency to link otherwise disparate occurrences and
determine that a set of risks together may be more significant than they seemed at first. Agencies need
to decide on the tools that seem most effective in identifying, assessing, and documenting major risks.
Examples of a three level rating scale for measuring impact and likelihood respectively, (taken from
OMB Circular No. A-123) are shown below:
Table 3: Example of a Risk Impact Rating Scale
Rating Description
High The impact could preclude or highly impair the organization’s ability
to achieve one or more of its objectives or performance goals.
Medium The impact could significantly affect the organization’s ability to
achieve one or more of its objectives or performance goals.
Low The impact will not significantly affect the organization’s ability to
achieve one or more of its objectives or performance goals.
The impact assessment is used to gauge how large the impact will be. For example, is there a threat to
human life? Is there a threat of fraud waste and abuse? Is there an opportunity for technology
implementation? Is there an opportunity to meet strategic goals?
Estimate the level of impact based on what will happen if the event occurs. Make the assessment based
on informed judgment of knowledgeable individuals and groups.
30
Table 4: Example of a Risk Likelihood Rating Scale7
Rating Description
High The risk is very likely or reasonably expected to occur.
Medium The risk is more likely to occur than unlikely.
Low The risk is unlikely to occur.
The likelihood assessment is used to gauge how likely an event is to occur. For example, events that may
happen every day have a far greater likelihood than events that may only happen once in 10 years.
Estimate the likelihood based on data when available with a future projection or based on an expert’s or
a group’s knowledge and assessment of the risk. Certain conditions may increase or decrease the
likelihood of a risk event and its impact. Another key aspect to keep in mind is risk velocity. While some
risks such as disinvestment in a key system may materialize slowly, their impact could be substantial.
Other risks, such as a systems failure, could materialize quite rapidly.
Agencies will assess their risks based on the impact of threat or opportunity being triggered and the
likelihood of the event happening. Assessing risks gives agencies a way to better understand and
prioritize them. Risk analysis involves consideration of the causes and sources of risk, their positive and
negative impacts, and the likelihood that those impacts can occur. Given that risk assessment is more of
an “art” than a science, it ultimately may depend on qualitative analysis, informed by discussions based
on subject matter experience. It may be in some agencies, or for some programs within agencies, that
quantitative risk assessments are appropriate to back up more qualitative assessments.
Identifying existing controls is an important step in the risk analysis process. Internal controls (such as
separation of duties or conducting robust testing before introducing new software) can reduce the
likelihood of a risk materializing and the impact. This step in the risk analysis process provides an
opportunity to identify controls that may reduce risk. Audit reports and management reviews may
provide useful reference points for this part of the analysis. One way to estimate the effect of a control
is to consider how it reduces the threat likelihood and how effective it is against exploiting
vulnerabilities and the impact of threats. Execution is key—the presence of internal controls does not
mean they are necessarily effective.
Prioritizing risks will allow agencies to examine the impact level and likelihood resulting from the
analysis step to help determine a relative importance and a priority ranking for risk. Creating a priority
ranking communicates the most important issues on which you are making decisions. Not all of your
priority risks will require actions. At this point it is recommended that you decide which risks represent
your top risks without regard to resource constraints. What are the impact levels and likelihood of your
risks? How do the risks compare, such as on a heat-map? How do the risks compare to your risk
appetite? What risks do leadership consider “top risks?” What risks will require a response?
Sort your risks based on their likelihood and impact. A “heat-map” can be useful to for plotting risks
based on the analysis results to visually compare risks. Decide which represent your top risks and assign
7
Likelihood may be based on the risk occurring in a given period of time as determined by the agency.
31
a priority to each. The heat-map is only a tool and examples of heat maps are available in Appendix D.
Leadership should validate the list of top risks and the supporting analysis results. Agency leaders can
provide a perspective from the appropriate level of the organization to normalize information across
objectives, programs, and performance areas.
Prioritized risks from across the enterprise can be aggregated to assist in developing an agency risk
profile. Keep in mind that while risks have relative importance within programs or units based on their
context, simply aggregating risks from across the organization does not indicate “enterprise” level risks.
Senior leadership should evaluate and prioritize risk to the organization as a whole.
Step Four: Current Risk Response

Risk responses are the actions taken to manage or treat risks. Per Circular No. A-123, types of risk
responses may include:
 Acceptance: No action is taken to respond to the risk based on the insignificance of the risk;
or the risk is knowingly assumed to seize an opportunity.
 Avoidance: Action is taken to stop the operational process, or the part of the operational
process causing the risk.
 Reduction: Action is taken to reduce the likelihood or impact of the risk.
 Sharing: Action is taken to transfer or share risks across the organization or with external
parties, such as insuring against losses.
Current risk responses in place should be guided by an agency’s risk appetite and tolerance levels. In
instances where appropriate risk responses included implementation of formal internal control
activities, it is recommended that the risk group work with the A-123 Internal Controls team to ensure
these risk items are addressed and included in the A-123 testing.
A-123 Requirement: Criteria for risks that require formal internal controls
 The Agency is working to reduce exposure to the risk.

 Internal control objectives related to reporting, compliance, or operations, including
both administrative operations and the major operational components of programs.
 The risk is identified in the Agency risk profile as at least medium impact and medium
likelihood (i.e., the risk is greater than low).
 Public reporting on the risk will not negatively impact services provided to the public,
national security, or agency operations.
 Control objectives can be clearly specified.
As part of this step, agencies will need to decide whether to pursue a new strategy or continue with
their current one based on program risk. Selecting the most appropriate risk response strategy involves
balancing the costs and efforts of treatment against the benefits derived. Your risk response strategies
will help you identify actions and priorities to be included in your performance plans.
32
Key questions to consider during this step include: What actions will be taken to avoid, mitigate,
transfer, share, or accept our risks? Are these actions actually mitigating the risk? How long will the
ongoing actions continue? Who is accountable for ensuring the success of these risk responses?
Current risk response strategies and activities should be documented within the risk profile. Avoiding or
transferring risks may require little effort but should be documented to show there is a strategy in place.
Step Five: Residual Risk Assessment

Residual risk is the amount of risk left over after action has been taken to manage it using the same
assessment standards as in the Inherent Risk Assessment. These risks should be communicated along
with the other identified risks. These risks will tend to be addressed during the agency’s ongoing
updates of risk identification processes.
Finalizing the draft Agency Risk Profile
Upon completion of Steps 1 through 5, agencies should finalize the draft Risk Profile for
discussion and vetting with senior leadership. As part of the finalization process, agencies
will determine which risks should be included as part of their draft Risk Profile. Agencies
should present their final draft Risk Profile to senior leadership for discussions and vetting.
This draft Risk Profile may be shared with leadership on an individual basis, as part of a
current standing meeting such as an Operating Committee Meeting, the Strategic Review
process, or as part of the formal risk management governance process. Agencies should use
their discretion when determining appropriate process and venue for sharing the draft Risk
Profile. Once this vetting process has occurred, the draft Risk Profile should be formally
shared with the risk governance body or RMC so that determinations can be made around
additional proposed risk responses, risk owners, and proposed risk response categories.
Note: The processes to develop annual assurance statements for FMFIA and A-123, Appendix
A should consider the risks identified in the agency’s risk profile, to the degree they are
relevant. This will help to ensure that the assurances the agency COO, or equivalent, provides
to the Department Senior Management Council, where applicable, includes consideration of
all risks.
Step Six: Proposed Risk Response

Proposed risk responses are actions planned or suggested to further reduce residual risk. After agency
senior leadership have completed their review of the draft agency risk profile, it should be forwarded to
the RMC or equivalent for deliberative discussion and consideration around additional actions
(proposed risk response) that may be suggested or required to reduce the overall level of residual risk
and align to the organization’s risk appetite. An organization’s risk appetite and tolerance levels must be
clearly understood when considering and developing proposed risk responses.
33
The draft risk profile should be shared with the RMC in advance of any meeting to encourage greater
discussion regarding additional proposed actions to further mitigate risk. It is also important for RMC
members to understand their organization’s complete draft risk profile when determining additional
proposed risk response as they must be considered and prioritized in the context of the overall
enterprise and its existing risk appetite.
The RMC or the agency head, as appropriate, should make the final determinations relating to
appropriate management approaches and proposed actions based on the agency’s risk appetite and
tolerance levels.
A risk owner or primary accountable official or office, should be named for the additional proposed risk
response. Naming a primary accountable official increases the likelihood that action will be taken.
Step Seven: Proposed Risk Response Category

The identification of existing management processes that will be used to implement and monitor the
proposed actions is also required. This will promote a more organized approach to executing the
proposed actions. Examples of proposed risk response categories might include: internal control
assessment, strategic review, budget process, etc. Just as naming a primary accountable official
increases the likelihood that action will be taken, naming a proposed risk response category will also
help to ensure that additional proposed risk responses are being considered as part of the most
appropriate processes.
B. Additional Considerations
Finalizing Risk Profile
The final risk profile differs from the draft risk profile in that it includes additional proposed risk
responses, risk owners, and proposed risk response categories. The inclusion of this additional
information assists with the ongoing tracking, review, and analysis of the achievement of additional
proposed risk responses and ultimately the reduction of risk exposure to meet risk tolerance levels and
better alignment to the organization’s risk appetite.
Sharing Risk Profile Results with OMB

As discussed in Circular No. A-123, agencies should plan to make key information identified as part of
the risk profile available for discussions with OMB by June 2, 2017 as part of the Strategic Review
meetings and/or FedSTAT. The final determination on information to be shared with OMB will be
provided in early 2017. This information will be communicated to agencies by OMB.
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VIII. GAO/IG Engagement
As stated in A-11 Section 270.28, ERM and audit functions perform two independent but
complementary functions. ERM is a highly engaged yet independent source of holistic and dynamic risk
assessment that supports program leads to help them better identify and manage their risks. As such
ERM is considered a business line function. However, Federal auditors, namely the GAO and IG, are
statutorily mandated to conduct independent and objective audits, evaluations, and investigations of an
agency’s programs and operations and its ability to manage risk. Both are designed to add value and
improve an organization’s operations.
The engagement between the risk and audit functions will be pursuant to a maturation process that will
develop over time. Both groups have the same goal as the ERM function– better management of the
organization – and, thus, a mature risk/audit engagement will see the creation of risk registers, risk
assessments, and risk profiles by management as a valuable tool for advancing and protecting the
mission of the organization. Also, as previously mentioned, the risk management function will benefit
from audit findings that identify and assess additional risks.
IX. Appendices
The following appendices include a collection of examples and templates provided by various
government organizations to support ERM implementation. They may be modified to fit the culture,
circumstances, conditions, and structure of other agencies. The appendices are intended to be
illustrative of what other agencies have done for ERM and are not intended to set the standard for audit
or other compliance reviews.
35
Appendix Contents
A. Risk Types ........................................................................................................................................ 37
1. Credit Risk ................................................................................................................................... 39
B. ERM Governance/ Culture/ Framework ......................................................................................... 40
1. Organization Charts .................................................................................................................... 40
2. Position Descriptions .................................................................................................................. 47
3. Risk Committee Charters ............................................................................................................ 61
4. Facilitating an ERM Culture Conversation .................................................................................. 65
5. ERM Frameworks ........................................................................................................................ 68
6. Implementation Plans ................................................................................................................. 73
7. Maturity Models ......................................................................................................................... 75
C. Risk Assessment .............................................................................................................................. 79
1. Establishing Context.................................................................................................................... 79
2. Risk assessments and the ERM Process ...................................................................................... 80
D. Risk Profile....................................................................................................................................... 81
1. Key Questions to Help Develop a Risk Profile ............................................................................. 81
2. Templates.................................................................................................................................... 82
3. Risk Assessment Tools ................................................................................................................ 87
E. Risk Reporting and Monitoring ....................................................................................................... 99
1. Dashboards ................................................................................................................................. 99
2. Monitoring ................................................................................................................................ 101
F. Glossary ......................................................................................................................................... 103
G. References and Resources ............................................................................................................ 109
H. Agency Acknowledgements .......................................................................................................... 110
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A. Risk Types
Risk Type Risk Description
Compliance Risk Risk of failing to comply with applicable laws and regulations
and the risk of failing to detect and report activities that are
not compliant with statutory, regulatory, or organizational
requirements. Compliance risk can be caused by a lack of
awareness or ignorance of the pertinence of applicable
statutes and regulations to operations and practices.
Credit Program Risk The potential that a borrower or financial counterparty will fail
to meet its obligations in accordance with their terms. If the
credit exists in the form of a direct loan or loan guarantee,
credit risk is the risk that the borrower will not fully repay the
debt and interest on time.
Cyber Information Risk that could expose the agency to exploitation of
Security Risk vulnerabilities to compromise the confidentiality, integrity, or
availability of the information being processed, stored, or
transmitted by its information systems.
Financial Risk Risk that could result in a negative impact to the agency(waste
or loss of funds/assets).
Legal Risk Risk associated with legal or regulatory actions and agency’s
capacity to consummate important transactions, enforce
contractual agreements, or meet compliance and ethical
requirements.
Legislative Risk Risk that legislation could significantly alter the mission
(funding, customer base, level of resources, services, and
products) of the agency.
Operational Risk Risk of direct or indirect loss or other negative effects to an

entity due to inadequate or failed internal processes arising
from people, systems, or from external events that impair
those internal processes, people or systems. Operational risks
are a broad risk category in part because a broad range of risks
(e.g., legal, compliance and other risk types identified in this
section) can have a direct impact on daily operations of an
enterprise.
Political Risk Risk that may arise due to actions taken by Congress, the
Executive Branch or other key policy makers that could
potentially impact business operations, the achievement of the
agency's strategic and tactical objectives, or existing statutory
and regulatory authorities. Examples include debt ceiling
impasses, government closures, etc.
37
Risk Type Risk Description
Reporting Risk The risk associated with the accuracy and timeliness of
information needed within the organization to support
decision making and performance evaluation, as well as,
outside the organization to meet standards, regulations, and
stakeholder expectations. This is a subset of operational risk.
Reputational Risk Risk that a failure to manage risk, external events, and external
media or to fail to fulfill the agency’s role (whether such failure
is accurate or perceived) could diminish the stature, credibility
or effectiveness of the agency. Reputational risk can arise
either from actions taken by the agency or third party partners
including service providers and agents. Reputational Risk can
also arise from negative events in one of the other risk
categories such as Legal and Compliance risks.
Strategic Risk Risk that would prevent an area from accomplishing its
objectives (meeting the mission).
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1. Credit Risk
Although the government is often able to achieve these policy goals in a cost effective way using credit
assistance, credit assistance exposes taxpayers to unique risks not be present in other forms of Federal
assistance, such as repayment risk, prepayment risk, and market risk. Legislators and agencies must
consider and account for these risks when determining if credit assistance is appropriate, as well as
when designing and operating Federal credit programs.
The goal of risk management functions in the Federal credit context is to ensure the agency achieves
policy outcomes at lowest cost to the taxpayer, and to identify, measure, monitor, and control risks that
may reduce the agency’s ability to achieve its objectives. Federal credit risk managers must also
minimize risk subject to statutory and other program requirements. It is essential for Agencies to
include programmatic requirements and objectives as a part of any credit risk presentation or
discussion. This information is critical to performing appropriate cost benefit analyses that should be
the basis of program decisions; as these risks are often deliberately taken to achieve a specific policy
objective.
Additional challenges faced by Federal agencies in implementing credit programs are the increased
administrative burden and operational risks associated with running credit programs compared with
other forms of Federal assistance. Agencies require robust management and oversight structures to
ensure progress towards policy goals, costs, and risks are measured and accounted for correctly, and
that staff at all levels have the appropriate experience and expertise necessary to perform the range of
duties involved in running a credit program.
Due to the unique challenges and risks faced by agencies in running Federal credit programs, OMB
issued Circular No. A-129, “Policies for Federal Credit Programs and Non-Tax Receivables” which
prescribes policies and procedures for justifying, designing, and managing Federal credit programs and
for collecting non-tax receivables. It also sets standards for extending credit, managing lenders
participating in Government guaranteed loan programs, servicing credit and non-tax receivables, and
collecting Program Reviews, credit risk oversight structures, dashboards, pipeline reports and watch lists
specific to credit that Agencies can incorporate into their ERM processes.
39
B. ERM Governance/ Culture/ Framework
1. Organization Charts
a. Relational Organization Chart in Agency with CRO Function at Senior Level (Example)
40
b. Relational Organization Chart in Bureau with CRO Function at Senior Level (Example)
Chief Operating Officer
Chief Risk Officer
Chief of Staff
Internal Review Risk Analysis &

Division Reporting Division
Audit Liaison Group
41
c. Relational Organization Chart in Bureau with CRO Function Embedded (Example)
42
d. Risk Management Committee (Example)
Senior Advisor to COO

(Committee Chair)
RM Directors
Chief Chief
Chief Chief Head of
Chief of Chief Risk Business Customer
COO Performance CFO Compliance Experience CIO Acquisitions
Staff Officer Operations Officer
Officer Officer
Officer
43
e. Relational Organization Chart in Agency with No Formal CRO (Example)
44
f. Relational Organization Chart in Agency with No Formal CRO (Example)
Role Responsibilities
Standing Management  Responsible for identifying risks associated with their respective
Committees, for example: subject areas (i.e., budget and finance; human resources; IT;
 Executive strategic planning, performance planning, and strategic review
Management Council processes)
(EMC)  Solicit, track, analyze, monitor, and report risks identified during
 Risk Management committee meetings, presented by the Office Directors/Goal
Council (RMC) Leaders/Cost Center Managers, to the Executive Management
 Senior Assessment Council (EMC), other committees, and other internal and external
Team (SAT) sources
 Audit Committee  Respective committee chairs work with the Chief Operating
Officer, Chief of Staff and Director of Internal Control and Risk
Management (ICRM) to consolidate, prioritize, and present
agency-wide risks to the Head of the Agency
Chief Operating Officer  Identify and coordinate actions that improve results, enhance
(COO) efficiency, manage risks, and reduce waste
 Incorporate risk discussions in the strategic planning and
performance management processes
 Track risks
 Facilitates discussions on risk prioritization for the agency
 Analyzes the impact of specific risk to the agency
 Coordinates the development of risk mitigation plans where and if
applicable
 Works with the EMC, ICRM, PIO, and Committee chairs and members
to present risks to the Head of the Agency
Chief of Staff and Deputy  Ensures that risks, as identified in decision memos, are
Chief of Staff communicated to the Head of the Agency, to the
EMC/appropriate committees, the COO, and ICRM
Internal Control and Risk  Provides guidance to help the Agency develop a common
Management Division vision, definition, and strategy for managing risk
(ICRM)  Facilitates the development of a common language and
clarifies terminology to enable constructive discussions
 Provides guidance to establish and implement an ERM framework
that facilitates the use of the risk cycle approach
 Works with the CAO, CFO, CIO, COO, GC, PIO, and Office of
Budget to track and report organizational risks
 Monitor and validate risks identified within the ERM Database
Performance Improvement  Promotes the application and execution of risk management
Officer (PIO) practices in the strategic planning, performance planning and
reporting, and strategic review processes
Office of Budget  Incorporates risk management practices in the budget formulation
and execution processes
Office Directors/Goal  For their areas of responsibilities:
Leaders/Cost Center o Conduct risk analysis:
Managers  Description of risk
45
Role Responsibilities
 Annual Performance Plan Objective (if applicable)
 Related Project or Function
 Risk Treatment Category and Description
 Resources Required and Cost
 Probability of Occurrence of Identified Risk
 Impact of Identified Risk
 Type of Risk
 Consult with ICRM as needed
 Document and validate risks using the Enterprise Risk
Management Database
 Present risk analysis to the appropriate committee(s)
46
2. Position Descriptions
a. Chief Risk Officer (Financial Agency) Position Description (Example)

Chief Risk Officer (CRO)
Introduction
The incumbent of this position serves as the Chief Risk Officer (CRO), Office of Risk Management,
[AGENCY]. The Office of Risk Management (ORM) serves as an agency-wide mechanism ensuring that (a)
risks across the [AGENCY] are considered in aggregate; (b) risk management activities across the
[AGENCY] are coordinated so that similar risks are considered in a similar fashion; and (c) there is an
independent viewpoint on major risk related decisions and assumptions across the [AGENCY].
Risk management functions in operations, credit programs, other financial exposures, and activities
within the government are envisioned to act as a check-and-balance to those that make operational,
credit and market-risk decisions, and to advise management concerning actual and potential risks,
particularly changes in risk levels in real time. While the objective is not to second-guess decisions after
they have been made, review of failures or other issues should be undertaken to further improve
processes, as appropriate. It should be clear from these potential roles that the risk management
function is intended to partner with existing program staff and leadership to foster a culture of risk
management within [AGENCY] and a comprehensive understanding of potential risks.
The CRO will provide executive-level management, leadership, direction and oversight to the ORM and
expertise to the [AGENCY] by identifying and advising on mitigation efforts regarding the most
significant risks facing the [AGENCY] including operations, credit programs, financial exposures and
activities including credit, market, liquidity, operational, governance, and reputational risks. The variety
and technical complexity of issues and problems require (a) an in-depth understanding of Federal credit
programs and other programs that present financial exposure and other risks to the U.S. government,
(b) mature judgment, and (c) thoughtful and constructive analysis. The work requires flexibility in
developing solutions and executing actions, while maintaining adherence to law, regulation, and rule.
The work requires a constructive approach to problem solving, which includes taking initiative in (a) the
identification of needs and potential problems, (b) finding potential solutions, and (c) supporting active
and well-informed management and supervisory participation.
Assignments are complex, sensitive, and wide reaching in scope.

Duties and Responsibilities
 The CRO has responsibility for forecasting the [AGENCY]’s risk management needs, and
independently oversees the development and implementation of an integrated risk
management framework for the [AGENCY].
 Works closely with senior [AGENCY] and other Administration officials to recommend and
promote best practices in risk management and ensures that all such analyses are thorough,
accurate, and authoritative. Makes recommendations concerning which options are most
appropriate.
 Compares existing [AGENCY] program-level risk-management practices against public and
private sector "best practices" to propose and implement improvements, as needed. Develops
plan to further formalize risk management practices across the [AGENCY]. Reviews existing
program level risk reporting and works to enhance where necessary.
 Promotes a best-practice risk-management culture at the [AGENCY].
 Formulates and plans strategic and operational direction and expertise to the Office of Risk
47
Management. Hires and supervises the Office's professional and support staff, and promotes
the career development of each member of the staff. Provides both administrative and
substantive direction, guidance, and encouragement to the staff, formulates performance
expectations for each staff member, provides performance feedback, and prepares annual staff
evaluations.
 Provides executive leadership and overall direction to the Office of Risk Management’s
administrative support functions. This includes the programs of strategic planning, human
capital management, budget, accounting and financial systems, organizational and management
analysis, program performance analysis, and administrative services.
 Leads multiple projects simultaneously and directs and supervises the crafting of briefing
materials, issue papers, memoranda, reports, and studies. Develops [AGENCY]-wide risk
monitoring reports, including risk assessments.
 Provides senior [AGENCY] officials and other Administration officials with quantitatively and
qualitatively rigorous analyses on key risks including credit, market, liquidity, operational,
governance, and reputational risks.
 Formulates an integrated risk management framework with emphasis on analyzing and
developing policy, mitigation of risks, determination, measurement and monitoring of risk
appetite, and understanding the interrelationships of various types of risk.
 Plans, develops, recommends, coordinates, and implements financial management policies and
strategies, as well as designs management techniques to achieve risk-management goals.
 Represents [AGENCY] in departmental, interdepartmental, Congressional, and private sector
meetings and conferences. Establishes and maintains close and continuing contact and effective
liaison with [AGENCY] policy offices and bureaus, congressional and agency staffs, and high-
ranking representatives of the financial community, consumer and community organizations,
and other government agencies, and government officials.
 Collaborates with the other offices within the [AGENCY] in the development of policies,
proposals, reports, briefings, and other assignments, and, as appropriate, in administrative and
staffing matters.
Supervision and Guidance Received
The incumbent reports directly to the Deputy Secretary of the [AGENCY] who (a) provides policy
direction and guidance; (b) defines the role of the incumbent; (c) delegates sufficient authority to allow
fulfillment of that role; (d) communicates relevant policy information; and (e) evaluates the incumbent's
performance in terms of results achieved, effective leadership of subordinates, and contribution to the
overall management and administration of the [AGENCY]. Within the overall goals established by the
Deputy Secretary, the incumbent has broad discretion and is responsible for selecting and defining both
short-term and longer term program objectives.
Subject areas are broad and complex and accomplishing the duties of the position requires considerable
ingenuity and originality, as well as considerable knowledge of financial institutions and markets,
economic theory, and the legal and regulatory environment. Results of work are considered to be
professionally authoritative and are normally accepted without significant change.
The incumbent is expected to initiate analytical work and policy analysis and completed work is
reviewed by the Deputy Secretary to assure conformance to broad [AGENCY] policies, and to ascertain
that the broad policy objectives of the [AGENCY] are carried out.
48
Job Competencies (The full range of competencies for the occupational series is provided for
information and development purposes.)
 Executive knowledge of risk management best practices in the public and/or private sector.
 Demonstrated ability to resolve complex risk-management issues and create financial analysis
documents on an executive level.
 Executive knowledge of complex risk-related financial analysis techniques, applications, records,
and reporting.
 Ability to communicate effectively, brief senior officials regarding options and
recommendations, and inspire confidence in those recommendations and decisions.
 Ability to quickly develop a strong understanding and knowledge of the major operational
functions of [AGENCY], including the organization's mission and function, programs, policies,
procedures, rules, and regulations.
 Ability to quickly identify and analyze problems, distinguish between relevant and irrelevant
information to perform logical risk-related financial analyses, and propose solutions to individual
and organizational problems.
 Demonstrates the ability to lead, manage, and facilitate change; demonstrates the vision to
define and effectively manage strategies, change structures, and change processes necessary to
address program priorities of the [AGENCY].
 Ability to develop steps, schedules, and assignments to meet strategic goals and targets;
manage implementation of projects and initiatives; anticipate and adjust for problems; measure
outcomes; and evaluate and report results.
 Ability to instill trust and confidence; create a culture that fosters high standards of ethics;
behave in a fair and ethical manner toward others, and demonstrate a sense of responsibility
and commitment to public service.
 Ability to respond appropriately to the needs, feelings, and capabilities of different people in
different situations; to be tactful, compassionate, and sensitive; and to treat others with
respect.
 Ability to facilitate collaboration, cooperation, peer support, open dialogue, shared
responsibility and shared credit among work group members; develop leadership in others
through coaching, mentoring, rewarding, and guiding.
 Ability to plan and develop a workforce prepared to meet current and future [AGENCY] risk
management needs.
 Ability to apply Equal Employment Opportunity and Merit System principles to ensure staff
members are appropriately selected, developed, utilized, praised, and rewarded.
49
b. Chief Risk Officer (Financial Agency) Position Description (Example)
Introduction
This position is located in [Office], [Agency], Enterprise Performance Management Services (EPMS).
EPMS is responsible for providing best service in business service for project management oversight and
strategic planning, contract management, risk management, internal review and internal audit tracking,
as well as operational performance analysis and reporting.
The incumbent of this position serves as the Chief Risk Officer (CRO) for [Agency] and reports to the
General Manager for EPMS. Responsibilities include implementing a coordinated approach for
identifying, assessing, monitoring, and reporting on risk throughout the organization, managing the
internal audit resolution process for [Agency], and developing an internal review capability to evaluate
the programs, policies, procedures, systems, and controls at [Agency], its contractors, and program
partners. The incumbent serves as the agency’s risk management expert and internal consultant and
change agent with a strategic business focus. Generates creative solutions to issues and concerns that
are in keeping with the overall agency mission, vision, and goals.
Major Duties
 The CRO is responsible for the management and oversight of the Enterprise Risk Management
Group, which includes the Internal Review and the Risk Analysis and Reporting Divisions. The
incumbent directs the activities of those organizations in an effort to ensure that they meet
their objectives as established.
 The incumbent fosters close ties with the Government Accountability Office (GAO), Office of
Inspector General (OIG), and other agencies or offices both outside and inside the agency, in an
effort to facilitate their activities, coordinate efforts, and ensure that all significant matters
receive the appropriate attention of agency Management.
 The CRO provides expertise, leadership and overall strategic guidance to the General Manager
of EPMS, the Chief Operating Officer (COO) and members of the agency’s Management Council,
in areas such as risk assessment, risk management, project funding oversight, internal reviews,
compliance with Federal regulations and evaluation of internal controls. The incumbent will
serve as a principal advisor and expert to the General Manager of EPMS, and will be responsible
for providing regular reports to the Chief Operating Officer along with conducting special
reviews, risk assessments, or other special projects at her/his request, which includes accessing
sensitive data.
 Responsible for implementing an ERM framework and strategy for the organization.
Coordinates an annual high-level risk assessment at the agency and helps to facilitate an
integrated and enterprise-wide view of risk, risk tolerances and risk mitigation efforts. Oversees
the development of improved methodologies for identifying, quantifying, and reporting on risks
affecting the organization and the organization’s overall risk profile.
 Serves as an internal consultant to the General Manager for EPMS and the COO. Develops
creative solutions to unique and systemic problems and acts as a change agent through the
implementation of solutions, recommending systems and structures needed to support
changes, preparing staff to manage change, and anticipating and dealing effectively with
resistance to change.
Supervision Received
The incumbent reports directly to the General Manager of EPMS who provides broad policy guidance
and direction. The incumbent is allowed a wide degree of latitude in making independent decisions with
regard to planning and managing projects and major activities of the organization. Work performance is
evaluated in terms of overall effectiveness and accomplishment of goals and objectives established by
50
the General Manager for EPMS.
Supervision Exercised
The incumbent will be required to independently develop recommendations for other EPMS staff to
implement.
51
c. Director, Risk Analysis and Reporting (Example)
Director, Risk Analysis and Reporting
Introduction
This position is located in the [AGENCY], [PROGRAM], Enterprise Performance Management Services
(EPMS), Enterprise Risk Management Group (ERMG). EPMS is responsible for providing best in business
service for project management, oversight and strategic planning, contract management, enterprise-
wide risk management, internal review and tracking of internal audits, and operational performance
analysis and reporting.
Major Duties
 Directs the implementation of agency’s Enterprise Risk Management (ERM) Program.
 Implements strategies and provides guidance for improving risk management practices across
the organization.
 Manages staff of Risk/Data Analysts, providing direction on various risk management and data
analyses efforts including: activities supporting the implementation of the agency’s ERM
Program; conduct of, or involvement with risk assessments, risk training or the development of
risk management strategies across the agency; and the development & maintenance of ERMG’s
Risk Tracking System (RTS), other data initiatives and risk analyses supporting the goals of the
agency and ERMG.
 Directs and develops plans for project teams or other groups to complete projects, studies, and
risk assessments.
 Analyzes and evaluates on a quantitative and qualitative basis the effectiveness of line program
operations in meeting established goals and objectives and identifying/managing risks.
 Provides day to day oversight and technical direction to contractors supporting the agency’s
ERM Program and other ERMG initiatives.
 Develops, analyzes, and evaluates new or modified program and management policies,
regulations, goals, or objectives.
 Develops procedures and systems for assessing the effectiveness of programs and management
processes.
Factor Levels
FACTOR 1 KNOWLEDGE REQUIRED Level 1-8 1550 points
 Knowledge at a level to serve as an expert in the application of a wide range of qualitative and
quantitative methods for the assessment and improvement of program effectiveness or the
improvement of complex management processes and systems.
 Knowledge of a comprehensive range of administrative laws, policies, regulations, and
precedents applicable to the administration of one or more programs.
 Knowledge of program goals and objectives, the sequence and timing of key program events
and milestones, and methods of evaluating the worth of program accomplishments.
 Knowledge of relationships with other programs and key administrative support functions
within the agency or other agencies.
 Knowledge of advanced risk management and analytical practices, standards, and procedures.
 Skill to plan, organize, and direct team study work and to negotiate effectively with
management to accept and implement recommendations, where the proposals involve
substantial agency resources, require extensive changes in established procedures, or may be in
conflict with the desires of the activity studied.
52
FACTOR 2 SUPERVISORY CONTROLS Level 2-5 650 points
The employee is subject only to administrative and policy direction concerning overall project priorities
and objectives. The employee is typically delegated complete responsibility and authority to plan,
schedule, and carry out major projects concerned with the analysis and evaluation of programs and
organizational effectiveness. Analyses, evaluations, and recommendations developed by the employee
are normally reviewed by management officials only for potential influence on broad agency policy
objectives and program goals.
FACTOR 3 GUIDELINES Level 3-5 650 points
Guidelines consist of basic administrative policy statements concerning the issue or problem being
studied. The employee uses judgment and discretion in interpreting and revising existing
policy/regulatory guidance for use by others. Some employees review proposed regulations that would
significantly change the basic character of programs, the way the agency conducts its business with the
public or with the private sector. Develops study formats for use by others on a project team or at
subordinate echelons in the organization.
FACTOR 4 COMPLEXITY Level 4-5 325 points
The work consists of complex projects and studies that require extensive analysis of interrelated issues
of effectiveness, efficiency, and productivity of substantive mission-oriented programs. Decisions about
how to proceed in planning, organizing and conducting studies are complicated by conflicting program
goals and objectives. Options, recommendations, and conclusions developed by the employee take into
account and give appropriate weight to uncertainties about the data and other variables that affect
long-range program performance.
FACTOR 5 SCOPE AND EFFECT Level 5-5 325 points
The purpose of the work is to analyze and evaluate major management and program aspects of
substantive, mission-oriented programs. The work involves identifying and developing ways to resolve
problems or cope with issues that directly affect the accomplishment of principal program goals and
objectives. Work products are complete decision packages and staff studies, and typically contain
findings and recommendations of major significance that serve as the basis for new administrative
systems, legislation, regulations, or programs.
FACTORS 6&7 PERSONAL CONTACTS AND

PURPOSE OF CONTACTS Level 3c 180 points
Contacts are with persons outside EPMS and with high-level program officials in a moderately structured
setting. The purpose of contacts is to influence managers or other officials to accept and implement
findings and recommendations on organizational improvement or program effectiveness. The employee
may encounter resistance due to organizational conflict, competing objectives, or resource problems.
FACTOR 8 PHYSICAL DEMANDS Level 8-1 5 points
No unusual physical exertion is required.
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FACTOR 9 WORK ENVIRONMENT Level 9-1 5 points
The work is performed in an office setting.

Unique Position Requirements
 Develops and maintains good working relationships with program, Departmental and external
management and staff, represents ERMG and/or EPMS at Departmental meetings, and
participates in interagency or Departmental work groups.
 Develops, conducts, and documents assessments of internal agency processes, which includes
accessing sensitive data, designed to identify areas of operational risk and makes
recommendations for risk management, monitoring strategies, and enhancements to processing
efficiency.
 Facilitates Risk Management activities, policies, practices and standards and disseminates
relevant information to agency and Departmental management and staff.
 Develops training programs, and provides training to agency and Departmental management
and staff, on agency’s Risk Management Strategy and Framework.
 Assists and advises agency managers in responding to audit findings, which include sensitive
data that identify areas of risk /internal control weaknesses to agency programs.
 Monitors the execution of corrective action plans implemented to address audit/risk
recommendations and reports on their effectiveness and value.
 Develops analytical and comparative risk reports for monthly/quarterly/annual statistical
reporting.
 Analyzes various risk data and information applicable to agency’s ERM Framework and helps to
institutionalize and encourage behavior consistent with that framework.
 Designs, develops, and documents qualitative and quantitative statistics and tolerance levels in
order to proactively monitor potential high risk issues.
 Designs, develops, and documents risk-related scorecards and other risk management tools in
support of agency’s ERM Framework.
 Presents and communicates results of analytical activities and findings in a manner consistent
with target audience (technical/financial/operational).
 Interprets work requests and applies appropriate business logic.
 Oversees Risk Analysts, Data Analysts, and Management Program Analysts and directs them in
interpretation and application processes.
 Provides management with timely communication on project status and needs; updates
timesheets/project status reports as necessary/requested.
 Assumes responsibility for the accuracy and quality of work performed. Takes ownership of all
assigned projects.
 Consults on agency policies and procedures.
54
d. Senior Policy Advisor (Financial Agency) Position Description (OFFICE OF RISK
MANAGEMENT) (Example)
Senior Policy Advisor
Introduction
The purpose of this position is to serve as a Senior Policy Advisor, Office of Risk Management, [AGENCY].
The incumbent will advise the Chief Risk Officer, the Deputy Secretary, and the Secretary of the
[AGENCY] on policies relating to the risk management of the operations and programs of [AGENCY] and
throughout the Federal government. The incumbent will also assist in the development and
implementation of policy that directly impacts the risk management of programs.
This position will serve as an expert specialist on a wide range of risk management matters, and provide
assistance in identifying and advising on mitigation efforts regarding the most significant risks facing
[AGENCY] and the Federal government. This position will involve handling difficult and responsible
assignments, including research and analysis of current law and legislative proposals involving highly
complex financial, legal, and budgetary issues. The position will plan and prepare reports that include
recommendations and conclusions on which [AGENCY] policy may be developed.
Major Duties and Responsibilities
Under the general direction of the Chief Risk Officer, the Senior Policy Advisor shall:
 Plan, develop, recommend, coordinate, and implement risk management policies and strategies,
as well as design management techniques to achieve risk management goals.
 Compare existing [AGENCY] program-level risk management practices against public and private
sector (best practices) to propose and implement improvements as needed.
 Review existing program-level risk reporting, and work to enhance risk reporting where
necessary.
 Develop [AGENCY]-wide risk monitoring reports, including detailed risk assessments.
 Provide technical support and analyses on credit, market, and liquidity issues, as well as on non-
financial risks, such as operational, governance, and reputational risks.
 Summarize findings and research in written products of various types, including tables, charts,
short summaries, as well as longer analytical policy memos and reports.
 Conduct complex and authoritative research relating to proposals that affect the financial
exposure of [AGENCY] programs.
 Develop, produce and prepare policy statements, written materials, including briefing or issue
papers, and memoranda for the Chief Risk Officer and other senior [AGENCY] officials, including
the Secretary, and for White House officials, including for the purpose of meetings, speeches,
interviews, and testimony.
 Prepare responses to Congressional, press or other public inquiries.
 Coordinate with senior officials at the Office of Management and Budget and other Federal
agencies to effectively assess and mitigate risks, and ensure that applicable OMB guidelines,
directives, and standards are effectively met by [AGENCY] programs.
 Maintain strong working relationships and ongoing lines of communication with officers and
other staff members.
 Promote a strong culture of risk management.
 Provide guidance to junior-level staff as needed.
 Perform other duties as assigned.
Factor Levels
FACTOR 1: KNOWLEDGE REQUIRED BY THE POSITION (1-8 1550 Points)
55
 Expert knowledge of risk management best practices in the public and/or private sector.
 Expertise in analyzing complex risk management issues affecting Federal credit, insurance, and
other programs.
 Ability to analyze and convey detailed financial information presented in the U.S. budget.
 Expert knowledge of budgetary and legislative processes and practices relating to Federal credit
programs, as well as a deep understanding of the Federal Credit Reform Act of 1990 and related
law.
 Expert knowledge of risk management directives and policies set forth by [AGENCY] and OMB.
 Knowledge of complex risk-related financial analysis techniques, applications, records, and
reporting.
 Skill in quickly gathering information about a new, complex topic, and summarizing orally and in
writing information gathered.
 Ability to communicate effectively with senior [AGENCY] officials and provide recommendations
to the Chief Risk Officer and the Deputy Secretary.
FACTOR 2: SUPERVISORY CONTROLS (2-5 650 Points)

Reports to the Chief Risk Officer, who provides limited supervision. The Senior Policy Advisor has
complete authority to plan and carry out the work. Often, assignments require originality and ingenuity
to determine how to approach any particular task in light of the overall goals. Work is reviewed by
evaluating work product for potential influence on broad agency policy objectives.
The incumbent is viewed as a technical authority.
FACTOR 3: GUIDELINES (3-5 650 Points)

The Senior Policy Advisor uses judgment in interpreting and adapting guidelines such as administrative
policy statements, which may include reference to pertinent legislative history.
The incumbent uses initiative and resourcefulness in deviating from traditional methods or in
developing new methods, criteria, or proposed new approaches. The incumbent is recognized as an
expert in the development and interpretation of guidance for the Office of Risk Management.
FACTOR 4: COMPLEXITY (4-6 450 Points)

Assignments vary in complexity due to the variety of tasks performed. Generally, the Senior Policy
Advisor is required to quickly and independently perform analysis and develop recommendations that
often require a high degree of complexity. The incumbent must effectively communicate, orally and in
writing, summary findings on a range of risk management issues.
The incumbent plans, organizes, and carries out analysis of the economic, financial, and policy
implications of matters relevant to the Office of Risk Management. Studies require input and assistance
from other analysts and subject-matter specialists. The incumbent must determine the nature of issues
and problems to be studied, which involves extreme difficulty when planning, organizing, and
determining the scope and depth of the study. The nature and scope of the issues are largely undefined.
FACTOR 5: SCOPE AND EFFECT (5-6 450 Points)

The purpose of this position is to support the goal of improving risk management practices and
56
outcomes among operations and programs within [AGENCY] and throughout the Federal government. It
involves providing the necessary analytical, evaluative, and communications skills to substantive
mission-oriented programs of the Office of Risk Management. The scope of work assignments is
unusually broad and often serve as a basis for new administrative systems, legislation, regulations, or
programs.
FACTOR 6: PERSONAL CONTACTS (6-4 7-D 330 Total Points)

Contacts are with the personnel in [AGENCY], other Federal agencies, and representatives of business
and non-profit organizations. Contacts also are high-ranking officials such as agency heads and
congressional staff officials.
FACTOR 7: PURPOSE OF CONTACTS (Points combined with factor 6)

The purpose of this position is to make recommendations to the Chief Risk Officer and to justify or settle
matters involving significant or controversial issues. Also, personal contacts are for the purpose of
gathering information and gaining insight into issues related to the effective risk management of
[AGENCY] operations and programs. The incumbent participates in meetings and discussions on these
issues.
FACTOR 8: PHYSICAL DEMANDS (8-1 5 Points)

The work is generally sedentary, however, there may be some walking, standing, carrying of light items.
No special physical demands are required to perform the work.
FACTOR 9: WORK ENVIRONMENT (9-1 5 Points)

Work is usually performed in an office setting.
Total Points = 4090
In accordance with the implementation of the Homeland Security Presidential Directive 12 (HSPD 12)
- Policy for a Common Identification Standard for Federal Employees and Contractors all employees
must meet the following requirements:
(1) Be eligible for a Personal Identity Verification (PIV) Credential;
(2) Have a successfully adjudicated NACI or equivalent background investigation; and
(3) Maintain PIV credential eligibility during their service with the [AGENCY].
57
e. Senior Risk Analyst Position Description (Example)
Senior Risk Analyst
Introduction
This position is located in the [Agency], [Program], Enterprise Performance Management Services
(EPMS), Enterprise Risk Management Group (ERMG). EPMS is responsible for providing best in business
service for project management, oversight and strategic planning, contract management, enterprise-
wide risk management, internal review and tracking of internal audits, and operational performance
analysis and reporting.
Major Duties and Responsibilities

 Directs and develops plans for project teams or other groups to complete projects, studies, and
risk assessments.
 Analyzes and evaluates on a quantitative and qualitative basis the effectiveness of line program
operations in meeting established goals and objectives and identifying and managing risks.
 Evaluates and advises on organization, methods, and procedures.
 Analyzes management information requirements.
 Develops, analyzes, and evaluates new or modified program and management policies,
regulations, goals, or objectives.
 Develops procedures and systems for assessing the effectiveness of programs and management
processes.
Factor Levels
FACTOR 1 KNOWLEDGE REQUIRED Level 1-8 1550 points
 Knowledge at a level to serve as an expert in the application of a wide range of qualitative and
quantitative methods for the assessment and improvement of program effectiveness or the
improvement of complex management processes and systems.
 Knowledge of a comprehensive range of administrative laws, policies, regulations, and
precedents applicable to the administration of one or more programs.
 Knowledge of program goals and objectives, the sequence and timing of key program events
and milestones, and methods of evaluating the worth of program accomplishments.
 Knowledge of relationships with other programs and key administrative support functions
within the program or other agencies.
 Skill to plan, organize, and direct team study work and to negotiate effectively with
management to accept and implement recommendations, where the proposals involve
substantial program resources, require extensive changes in established procedures, or may be
in conflict with the desires of the activity studied.
FACTOR 2 SUPERVISORY CONTROLS Level 2-5 650 points
The employee is subject only to administrative and policy direction concerning overall project priorities
and objectives. The employee is typically delegated complete responsibility and authority to plan,
schedule, and carry out major projects concerned with the analysis and evaluation of programs and
organizational effectiveness. Analyses, evaluations, and recommendations developed by the employee
are normally reviewed by management officials only for potential influence on broad agency policy
objectives and program goals.
FACTOR 3 GUIDELINES Level 3-5 650 points
58
Senior Risk Analyst
Guidelines consist of basic administrative policy statements concerning the issue or problem being
studied. The employee uses judgment and discretion in interpreting and revising existing
policy/regulatory guidance for use by others. Some employees review proposed regulations that would
significantly change the basic character of the program, the way it conducts its business with the public
or with the private sector. Develops study formats for use by others on a project team or at subordinate
echelons in the organization.
FACTOR 4 COMPLEXITY Level 4-5 325 points
The work consists of projects and studies that require analysis of interrelated issues of effectiveness,
efficiency, and productivity of substantive mission-oriented programs. Decisions about how to proceed
in planning, organizing and conducting studies are complicated by conflicting program goals and
objectives. Options, recommendations, and conclusions developed by the employee take into account
and give appropriate weight to uncertainties about the data and other variables that affect long-range
program performance.
FACTOR 5 SCOPE AND EFFECT Level 5-5 325 points
The purpose of the work is to analyze and evaluate major management/program aspects of substantive,
mission-oriented programs. The work involves identifying and developing ways to resolve problems or
cope with issues that directly affect the accomplishment of principal program goals and objectives.
Work products are complete decision packages and staff studies, and typically contain findings and
recommendations of major significance that serve as the basis for new administrative systems,
legislation, regulations, or programs.
FACTORS 6&7 PERSONAL CONTACTS AND

PURPOSE OF CONTACTS Level 3c 180 points
Contacts are with persons outside EPMS and with high-level program officials in a moderately structured
setting. The purpose of contacts is to influence managers or other officials to accept and implement
findings and recommendations on organizational improvement or program effectiveness. The employee
may encounter resistance due to organizational conflict, competing objectives, or resource problems.
FACTOR 8 PHYSICAL DEMANDS Level 8-1 5 points
No unusual physical exertion is required.
FACTOR 9 WORK ENVIRONMENT Level 9-1 5 points
The work is performed in an office setting.

Unique Position Requirements
 Experience and expertise with risk management and/or data analysis applications.
 Assists in the development and maintenance of effective data mining and analysis capabilities to
support risk management and internal review efforts throughout EPMS.
 Designs, develops, documents and implements processes and supporting analytical models to
59
Senior Risk Analyst
be used to evaluate risk and help ensure the accuracy and quality of data received from internal
and external sources.
 Provides data acquisition and application development support of risk-related projects including
project design, data collection and transformation, source system data analysis, database
design, analysis and presentation of results.
 Analyzes and evaluates sensitive data within the agency’s systems to identify any patterns,
trends, or data anomalies. Interprets the data results in the context of laws and regulations
governing the program.
 Obtains, analyzes, and reviews various risk data and information applicable to the program’s
Enterprise-wide Risk Management Framework, which includes accessing sensitive data.
 Produces analytical and comparative risk reports and utilizes various risk monitoring tools (i.e.,
scorecards, dashboards, etc.) to provide for regular (monthly/quarterly/annual) management
reporting in support of the agency’s Enterprise-wide Risk Management program.
 Develops and maintains good working relationships with program, Departmental, and external
management and staff, represents EPMS at Departmental meetings, and participates in
interagency workgroups.
 Presents and communicates results of analytical activities and findings in a manner consistent
with target audience (technical/financial/operational).
 Provides management with timely communication on project status and needs and updates
timesheets and project status reports as necessary or as requested.
 Assumes responsibility for the accuracy and quality of work performed. Takes ownership of all
assigned projects.
 Works cooperatively with independent contractors hired to assist with ERM efforts and
supporting activities. Assists with the monitoring of contractors as directed.
 Supervises, mentors, and trains junior staff as appropriate.
60
3. Risk Committee Charters
a. Risk Committee Charter – Agency with a CRO (Example)

This Charter describes the objectives, scope, functions, organizational structure, and operating
procedures of [AGENCY] Risk Management Committee (“Risk Committee”).
Objectives The purpose of the Risk Committee is: (i) to monitor financial exposures and activities
for various risks, including credit, market, liquidity, and operational risks; (ii) to receive
updates on developments and discuss risks associated with financial exposures and
activities with managers of these exposures and activities (“program managers”); and
(iii) to review risk governance structure, including risk management practices and
related issues.
Scope The Risk Committee shall monitor and discuss the financial exposures and activities of
the Agency for credit, market, liquidity, and operational risks.
Functions The Risk Committee shall have the following functions:
A. Monitor risk profiles and progress towards achieving policy goals for financial
exposures and activities.
B. Receive updates on and discuss risk management matters and risk profiles of
financial exposures and activities.
C. Advise program managers on the development and implementation of risk
management guidelines, policies, and procedures with respect to financial
exposures and activities.
D. Discuss Agency-wide risk management practices.
E. Help develop risk management best practices.
Organizational The Risk Committee will be comprised of the following Members:
Structure A. Deputy Head of Agency, who will serve as Co-Chair
B. Chief Risk Officer, who will serve as Co-Chair
C. All Program Under Secretaries and Assistant Secretaries
Meetings The Risk Committee will endeavor to meet at least quarterly. Either Co-Chair will call
meetings of the Risk Committee. A majority of the Members of the Risk Committee
present at a meeting shall constitute a quorum.
A. Minutes. The Office of Risk Management shall be responsible for preparing
minutes of meetings.
B. Agenda. The Office of Risk Management shall provide to Members the
meeting agenda at least 48 hours in advance of the meeting.
C. Attendance. Whenever appropriate, program managers and their supervisors
will be invited to attend meetings of the Risk Committee at which their
programs are being discussed or those where their expertise would be helpful
to other programs.
Staffing The Office of Risk Management shall support the Risk Committee at the direction of
the Co-Chairs, and will perform administrative and other duties, including preparing
minutes of meetings, as appropriate, in connection with the work of the Risk
Committee.
Amendments The Risk Committee will review this Charter at least annually, and may amend it in its
discretion.
Effective Date This Charter is effective immediately.
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b. Risk Committee Charter – Agency without a CRO (Example)
Purpose The purpose of the risk committee (the “Committee”) is to assist the AGENCY in
fulfilling its oversight responsibilities with respect to the AGENCY’s enterprise risk
management tolerance (including its risk appetite statement and risk management
framework, including key strategic, reputational, regulatory, operational, and financial
risks).
Authority The Committee has authority to conduct or authorize reviews into any matters within
its scope of responsibility. Specifically, it is empowered to:
a) retain independent counsel, advisors or others to advise the Committee or
assist in the conduct of its duties;
b) seek any information it requires from employees, all of whom are directed to
cooperate with the Committee's requests;
c) meet with the officers, external advisors, auditors, or outside counsel, as
necessary; and
d) discharge any other duties or responsibilities delegated to it.
Composition The Committee will consist of at least three and no more than five members of the
AGENCY leadership.
Committee members should have:

a) expertise in risk governance and management, the risks the AGENCY faces,
and methods for managing such risks;
b) expertise in business activities (including finance), processes and risks similar
to the size and scope of the AGENCY;
c) expertise in risk committee functions; and
d) the time, energy, and willingness to serve as active contributors.
Meetings The Committee will meet periodically throughout the year at the call of the Chair as
necessary to discharge its responsibilities, but not less than semiannually. A majority
of the Committee members shall constitute a quorum (i.e., two members constitute a
quorum if the Committee consists of three members; three members constitute a
quorum if the Committee consists of four or five members). Members may attend in
person or via conference call or any other means by which all members may hear and
respond to each other's statements contemporaneously.
The Committee will invite members of management, contractors, or others to attend

meetings and provide pertinent information, as necessary or appropriate. The
Committee will hold private meetings and executive sessions as necessary. Meeting
agendas will be prepared and provided in advance to the Committee, along with
appropriate briefing materials. Minutes will be prepared.
Committee AGENCY management has the duties and responsibilities of risk assessment,
Duties and monitoring, and management.
Responsibilities
The Committee has an independent oversight role and, in fulfilling that role, relies on
reviews and reports provided by AGENCY’s management.
The Committee's duties and responsibilities shall include the following:
62
a) review and discuss with AGENCY management, and provide guidance on:
i. risk governance structure and framework;
ii. risk appetite statement;
iii. policies for enterprise risk assessment, monitoring, and management
of, strategic, reputational, regulatory, operational, and financial risks;
iv. periodic reports on selected risk topics as the Committee deems
appropriate; and
v. effectiveness of the system for monitoring the AGENCY's compliance
with laws and regulations and the results of the AGENCY's
management's investigation and follow-up (including disciplinary
action) of any instances of noncompliance.
b) receive reports from management on the metrics used to measure, monitor,
and manage risks, and management’s views on acceptable and appropriate
levels of exposures; and
c) receive reports on the status of internal and external reviews and audits and
reports from internal and external reviewers and auditors.
The Committee will report its activities and recommendations to the head of the
AGENCY. Such reports will be made as necessary, but not less than annually.
Management Management shall provide support sufficient to allow the Committee to carry out its
Responsibilities duties and responsibilities and manage the schedule of the Committee such that all
matters necessary to fulfilling the Committee's duties and responsibilities are properly
and timely brought before it.
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c. Risk Committee Informal Charter (Example)
This group will identify, track, and mitigate operational, portfolio, project, and technology risks across
the organization. Representatives from the following areas will comprise the membership of this
committee.
 Chief Risk Officer (chairperson)
 Chief Operating Officer (COO)
 Deputy COO
 Enterprise Performance Management Services
 Chief Financial Officer
 Chief Business Operations Officer
 Chief Compliance Officer
 Chief Customer Experience Officer
 Chief Information Officer
64
4. Facilitating an ERM Culture Conversation
a. Vision Statement (Example)
65
b. ERM Policy Memo (Example)
The purpose of this memorandum is to establish an agency risk management policy. The
international definition of risk is '"the effect of uncertainty on objectives" In [AGENCY] we define
risk as "a future event that may or may not occur and has a direct impact on the program,
stewardship or organizational objectives, to their benefit or detriment." The [AGENCY] is
committed to the responsible management of risks associated with achieving our program and
national objectives. The goal of risk management within [AGENCY] is to provide reasonable
assurance that we understand the risks associated with achieving those objectives and that we are
responding appropriately. [AGENCY] is committed to establishing an appropriate risk
management culture that will contribute to good corporate governance through aconsistent risk
management approach. The main elements of the [AGENCY] risk management process are depicted
below.
The practices of risk management within [AGENCY] are governed by the approach outlined in the
risk management framework. [AGENCY] employs the risk management framework to evaluate
program areas and strategic initiatives to balance risk with consideration of staffing and budget
resources, stewardship and oversight responsibilities, funding within the programs, and
transportation needs. The [AGENCY] risk management framework establishes a consistent
process where we identify and prioritize risk and strategies to address risks. Applying the
principles of risk makes it possible to identify threats and opportunities; assess and prioritize those
threats and opportunities; and plan strategies to address future issues affecting agency and
national objectives. In [AGENCY], risk management is a way to:
 Focus limited resources - focus staff and budget resources, to maximize opportunities and
minimize events that threaten [AGENCY] programs and national objectives.
 Strengthen the ability to efficiently manage program delivery -make informed decisions about
the scope, approach, and intensity of our efforts.
 Improve communication and manage risk corporately - communicate consistently about what
the agency should focus on and why.
66
Risk management is an ongoing process, embedded in our business practices at all levels
(corporate/strategic, program, unit, & project), stewardship and oversight, program
management, and performance planning.
The [AGENCY] policy is to provide training, tools, and resources to assist those accountable
and responsible for managing risk. All units are required to assess and report their top risks,
along with associated risk response strategies annually. Agency leadership regularly monitors
the status of the risk response implementation. [AGENCY] periodically reviews and improves
the risk management framework.
This policy applies to all organizational units of the [AGENCY].
If you have any questions or concerns regarding the information contained in this
memorandum, please contact NAME AND CONTACT INFO.
67
5. ERM Frameworks
a. COSO ERM Framework (Example)8
8
Committee of Sponsoring Organizations of the Treadway Commission. Enterprise Risk Management- Integrated
Framework, Executive Summary. 2004. http://www.coso.org/documents/COSO_ERM_ExecutiveSummary.pdf
68
b. ISO 31000 ERM Framework (Example)9
9
International Organization for Standardization. ISO 31000:2009 Risk Management- Principles and Guidelines. 2009.
https://www.iso.org/obp/ui/#iso:std:43170:en
69
c. UK Orange Book ERM Framework (Example)10
10
UK Treasury. The Orange Book, Management of Risk – Principles and Concepts. 2004.
https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/220647/orange_book.pdf
70
d. Alternative Framework (Example)
FHWA Risk Management Process - Overview and Outputs
Annual cycle
Analyze the Risks Plan and

Monitor,
Identify the Identify the Prioritize Execute
Evaluate,
Context Risks Assess Assess Risks Response
and Adjust
Strategies
Impact Likelihood
An Risk Tracker -
Output: A prioritized Risk response A risk register,
understanding
What is risk register. strategies are with current
of the risk A risk register, with risk events,
Key risks are developed and status of
the context and A list of risk likelihood of occurrence, and
selected for included in response
product the objectives events impact levels. Draft response
response and agency, unit, strategies.
of this against which strategies may be included. Leadership
reporting at the and individual
step? risk will be Team
national level. plans
managed Dashboard
Risk Assessment
Communication and Consultation occur at each step
71
e. Alternative Framework (Example)
Define the
Context
Evaluate & Identify

Monitor Potential Risk
Ongoing
Communication
& Collaboration
Formulate &
Assess and
Document Risk
Analyze Risk
Based Decisions
72
6. Implementation Plans
a. Implementation Plan (Example)
AGENCY A-123 Implementation Plan

Governance Structure (what is currently happening or what is planned)
1. Agency has a Chief Risk Officer who reports to the (reporting chain).
2. An Office of Risk Management (ORM) supports the Chief Risk Officer (CRO). This office includes
(number) Senior Policy Advisors (Grade), (number) Analysts (Grade).
3. The Agency Risk Management Committee is comprised of (describe who is on the committee).
This group meets (describe frequency). (Briefly describe the meetings, what happens).
4. [Describe any other group that has been put together that feeds into the ERM process including
any working groups, any groups that discuss risks across silos]
Processes for Considering Risk Appetite and Risk Tolerance Levels

1. [Describe a planned or implemented process of working with program managers to develop risk
appetite and risk tolerance levels that will be approved by senior leadership on the Agency Risk
Management Committee or other forum].
Methodology for Developing a Risk Profile

1. The Office of Risk Management will lead the identified offices and leadership team through a
series of discussions to identify risks to mission, assess the likelihood and impact of those risks,
prioritize accordingly and develop strategies to accept, transfer, share, avoid, or mitigate the risk
and leverage opportunities.
2. Meeting 1: Risk Identification
 Participants: CRO; Assistant Secretary/Bureau head; members of office/bureau
leadership team (identified by AS/Bureau head); and ORM staff
 Purpose: ORM will facilitate discussion of program goals and objectives and risks
(internal and external) to achieving those objectives.
3. Meeting 2: Risk Assessment/Prioritization
 Participants: ORM staff; office/bureau leadership team (as identified above)
 Purpose: For each identified risk, ORM will facilitate discussion of the severity of the risk
and potential strategies to mitigate or neutralize the risk.
4. Interim work: bureau/office leadership develop/flesh-out/validate risks and risk management
strategies; ORM staff provide support as needed.
5. Meeting 3: Review and Validate Profile
 Participants: Treasury CRO; Under Secretary; Assistant Secretaries/Bureau heads; and
ORM staff
 Purpose: Review and approve risk profiles for each office/bureau.
6. As a starting point for these meetings, ORM has consolidated risks identified by offices/ bureaus
through Quarterly Performance Reviews, Strategic Objective Annual Reviews, discussions at Risk
Management Committee meetings, [other].
73
General Timeline for Maturing the ERM Process
1. If a governance structure has not been put into place, describe when each piece is expected to
be completed. If they are completed, you can discuss how long each piece has been in place.
2. If risk appetite and risk tolerance levels have not been established, describe when they are
expected to be completed. If they are completed, describe how often they are reviewed and
process for reviewing.
3. If a risk profile has not been completed, describe when it is expected to be completed. If it is in
progress, describe progress made so far. If it has been completed, describe how often it is
refreshed and process for refreshing.
74
7. Maturity Models
a. Five Step Maturity Model (Example)
75
b. Maturity Across Eleven Areas (Example)
Maturity Levels
Maturity Sub-
1 2 3 4 5
Factors
Nascent Emerging Integrated Predictive Advanced
CULTURE
Re l a ti ons hi ps be twe e n
Fa i l ure to ha ve Functi ons a cros s
a l l uni t functi ons a nd
congrue nce be twe e n Se l e ct uni t uni ts a re
ove ra l l goa l s a re Uni t functi ons a cros s the
the ove ra l l goa l s of functi ons a re s ynchroni ze d to
Alignment cons i s te ntl y e nte rpri s e a re a l i gne d to s upport
the orga ni za ti on a nd a l i gne d to ove ra l l s upport
communi ca te d a nd a chi e ve me nt of ove ra l l goa l s
s pe ci fi c uni ts a nd goa l s a chi e ve me nt of
unde rs tood by
the i r pe rs onne l ove ra l l goa l s
pe rs onne l
Dys functi ona l
Qua l i ty pol i ci e s ,
pol i ci e s , proce s s e s , Qua l i ty pol i ci e s , Pol i ci e s , proce s s e s , a nd control s
Gove rna nce proce s s e s , a nd
a nd control s wi th l a ck proce s s e s , a nd control s a re i n pl a ce to prote ct the
Governance progra m i s control s a re i n
of e ve n ba s i c a re i n pl a ce for s e l e ct e nte rpri s e a nd a re cons i s te ntl y
e s ta bl i s he d pl a ce for a l l
communi ca ti on a nd proce s s e s communi ca te d a nd moni tore d
proce s s e s
moni tori ng
PROCESS - ANALYTICAL
RM pol i cy
RM pol i cy i s RM conce pts a re e mbe dde d i n
No Ri s k Ma na ge me nt RM pol i cy i s wri tte n for i nte gra te d i nto
Policy wri tte n for s e l e ct [AGENCY] pol i cy throughout the
(RM) pol i cy i s wri tte n a l l a ppl i ca ti ons orga ni za ti ona l
a ppl i ca ti ons e nte rpri s e
pol i cy
Gui da nce de ve l ope d I nte rre l a ti ons hi ps RM me thodol ogi e s e na bl e
Gui da nce
No gui da nce of for ove ra l l RM be twe e n RM e ffi ci e nt a nd e ffe cti ve
de ve l ope d for
Method pre fe rre d RM fra me work, e na bl i ng proce s s e s a re ma na ge me nt a nd communi ca ti on
s e l e ct RM
me thodol ogi e s i nte gra ti on be twe e n de fi ne d a nd of ri s k a cros s a l l proce s s e s a nd
me thodol ogi e s
proce s s e s l e ve ra ge d throughout the e nte rpri s e
No forma l
Ri s k tol e ra nce
docume nta ti on or Es ta bl i s he d ri s k Es ta bl i s he d ri s k Cl e a r i de nti fi ca ti on a nd
a ppl i e d
Risk Tolerance cons i s te nt tol e ra nce for s e l e ct tol e ra nce for a l l ri s k a cce pta nce of ri s k tol e ra nce
cons i s te ntl y for
unde rs ta ndi ng of ri s k a ppl i ca ti ons a ppl i ca ti ons throughout the e nte rpri s e
s e l e ct a ppl i ca ti ons
tol e ra nce
PROCESS - ORGANIZATIONAL
RM cha rte r i s
Li mi te d forma l i za ti on wri tte n, forma l l y Cl e a r de s i gna ti on of RM rol e s a nd
Roles & Pol i cy for ma na gi ng ri s k Orga ni za ti on I s
of RM rol e s a nd e s ta bl i s hi ng RM re s pons i bi l i ti e s from top to
Responsibilities e ndors e d by l e a de rs hi p ful fi l l i ng RM pol i cy
re s pons i bi l i ti e s rol e s a nd bottom a nd a cros s the e nte rpri s e
re s pons i bi l i ti e s
RM orga ni za ti on tha t i s
Ri s k duti e s a re
Pocke ts of s e l f-ta ught Some ful l -ti me RM a mi x of pa rt- a nd ful l - Mi ni ma l ove rhe a d re qui re d to
i nte gra te d i nto
RM compe te nce re s ource s ti me re s ource s i s a dmi ni s te r RM a cti vi ti e s a s the y
Resources workforce , i ncl udi ng
pe rforme d by pa rt- s upporte d by s upporte d by forma l a re pe rforme d a s pa rt of bus i ne s s
pos i ti on
ti me pe rs onne l forma l tra i ni ng [AGENCY] tra i ni ng cul ture
de s cri pti ons
progra m
76
Maturity Levels
Maturity Sub-
1 2 3 4 5
Factors
Nascent Emerging Integrated Predictive Advanced
IMPLEMENTATION
Ri s ks a re e ffe cti ve l y
a nd e ffi ci e ntl y
Ri s k i s Ri s ks a re e ffe cti ve l y a nd
Ri s k da ta a re i de nti fi e d a nd
Risk s ys te ma ti ca l l y e ffi ci e ntl y i de nti fi e d a nd
Ri s ks a re i de nti fi e d s e a ml e s s l y s ha re d qua l i ta ti ve l y
Identification, i de nti fi e d a nd qua nti ta ti ve l y a s s e s s e d, i ncl udi ng
a nd a s s e s s e d on a n a cros s proce s s e s . a s s e s s e d a cros s a l l
Assessment, a s s e s s e d for s e l e ct re turn-on-i nve s tme nt e s ti ma te s ,
a d hoc ba s i s . Unce rta i nty i s l e ve l s of the
and proce s s e s . a cros s a l l l e ve l s of the e nte rpri s e .
Unce rta i nty i s i gnore d e xpre s s e d qua l i ta ti ve l y e nte rpri s e .
Communication Unce rta i nty i s Unce rta i nty i s e xpre s s e d
for s e l e ct proce s s e s Unce rta i nty i s
l a rge l y i gnore d qua nti ta ti ve l y
e xpre s s e d
qua l i ta ti ve l y.
Al l RM proce s s e s
us e the s a me tool s ,
Di ffe re nt tool s a re a nd da ta a re
Al l RM proce s s e s us e
us e d by di ffe re nt Sta nda rd tool s a re i nte gra te d a cros s RM tool i s i nte gra te d wi th a l l
the s a me tool s a nd
Tools groups to a s s e s s a nd us e d a cros s the a l l proce s s e s , a nd a ppropri a te e nte rpri s e tool s a nd
da ta a re i nte gra te d
ma na ge ri s ks for e nte rpri s e s e l e ct proce s s e s da ta s ource s
a cros s s e l e ct proce s s e s
di ffe re nt proce s s e s l e ve ra ge [AGENCY]
e nte rpri s e da ta
s ource s
OUTCOME
Cons i s te ntl y fa i l i ng Cons i s te ntl y e s ti ma ti ng

Long hi s tory of fa i l i ng to a de qua te l y the fre que ncy or Cons i s te nt
Sus ta i ne d re cord of pre ve nti ng
to a de qua te l y e s ti ma te the cons e que nce of pre ve nti on a nd/or
a nd/or ma na gi ng a nti ci pa te d ri s ks
a ddre s s a nti ci pa te d fre que ncy or a nti ci pa te d e ve nts a nd a de qua te
a nd l e a rne d from the e ve nts to
Anticipated ri s ks be fore the y occur cons e que nce of occa s i ona l l y ma na ge me nt of
a voi d re curre nce of re l a te d e ve nts
Risks or e xpe ndi ng a nti ci pa te d e ve nts a de qua te l y ma na gi ng a nti ci pa te d ri s ks .
whi l e a l s o i nte gra ti ng the
s ubs ta nti a l re s ource s or ove r e xpe ndi ng a nti ci pa te d ri s ks a nd Focus of re s ource s
i nforma ti on throughout the
on re l a ti ve l y mi nor re s ource s on re ducti on of re s ource s on a nti ci pa te d hi gh-
pe rforma nce ma na ge me nt proce s s
ri s ks re l a ti ve l y mi nor a ppl i e d to re l a ti ve l y ri s k e ve nts
ri s ks . mi nor ri s ks
Pe ri odi ca l l y Re gul a rl y e xe cute d we l l -pre pa re d

Ra re l y e xe cute d e xe cute d we l l - re s pons e s to una nti ci pa te d e ve nts
Occa s i ona l l y e xe cute d
Long hi s tory of fa i l i ng we l l -pre pa re d pre pa re d re s pons e s a nd l e a rne d from the e ve nts to
Unanticipated we l l -pre pa re d
to a nti ci pa te re s pons e s to to una nti ci pa te d a voi d re curre nce of re l a te d e ve nts
Risks re s pons e s to
pote nti a l ri s ks una nti ci pa te d e ve nts a nd l e a rne d whi l e a l s o i nte gra ti ng the l e ve l of
una nti ci pa te d e ve nts
e ve nts from the e ve nts to unde rs ta ndi ng throughout the
a voi d re curre nce pe rforma nce ma na ge me nt proce s s
77
c. Five Step Maturity Model (Example)
1. Level 1: Ad hoc. Undocumented; in a state of dynamic change. Depends on individual heroics

rather than well-defined processes.
2. Level 2: Preliminary. Risk is defined in different ways and managed in silos. Process discipline is
unlikely to be rigorous.
3. Level 3: Defined. A common risk assessment/response framework is in place. An organization-
wide view of risk is provided to executive leadership. Action plans are implemented in response
to high priority risks.
4. Level 4: Integrated. Risk management activities are coordinated across business areas. Common
risk management tools and processes are used where appropriate, with enterprise-wide risk
monitoring, measurement, and reporting. Alternative responses are analyzed with scenario
planning. Process metrics are in place.
5. Level 5: Optimized. Risk discussion is embedded in strategic planning, capital allocation, and
other processes and in daily decision-making. An early warning system is in place to notify the
board and management of risks above established thresholds.
78
C. Risk Assessment
1. Establishing Context
a. Defining Context (Example)

Key Steps in Defining Context When Applying Risk Management Principles
Risk Tolerance and Risk Risk management efforts often involve tradeoffs between positive and
Appetite less positive/ideal outcomes. Having a current and accurate
perspective on an organization and decision makers’ risk tolerance and
risk appetite will help shape the assessments and the development of
actionable risk management alternatives.
Scope & Criticality of Understand the decision or range of decisions that have to be
the Decision made and the range of options available to leaders. Also consider
the breadth and depth of the decision’s impact. The risk analysis
and effort should be commensurate to that criticality.
Establish Goals & Objectives Ensure that the goals and objectives of the project and risk
management analysis align with the desired requirements, outcome, or
end-state of the decision making process. Clearly defined goals and
objectives are essential for identifying, assessing and managing risks.
Decision Timeframe Consider the timeframe in which a decision must be made,
socialized and executed including time available for conducting
formal analysis and decision review.
Resources and Risk Identify the staffing, budget, skill sets/expertise, and other resources
Management available for successful project completion including risk analysis and
Capabilities risk management efforts. Resources applied should be commensurate
with the complexity of the issues involved and the magnitude of the
decision.
Availability and Quality of Consider the availability and quality of information that exists within
Information the Agency or that can be accessed as needed, based on the design of
the risk analysis approach, the time available for analysis and other
factors. In engaging with decision makers at the outset of a risk based
analysis cycle, it is important to convey anticipated data limitations,
including expected levels of data availability.
Decision Makers and Organizational leaders must be engaged at the beginning of a risk
Stakeholders management/analysis process so the approach and presentation of
results are tailored to their preferences and the analysis is responsive to
the breadth of issues upon which they’re seeking guidance.
Policies and Standards Ensure risk management efforts utilize, complement and take into
account any risk management policies, standards or requirements the
Agency already has in place. The Enterprise Risk Management program
is designed to leverage and complement these and other existing
processes to identify monitor and mitigate risk.
79
2. Risk assessments and the ERM Process
a. Using Risk Assessments to Inform the ERM Process (Example)
80
D. Risk Profile
1. Key Questions to Help Develop a Risk Profile
Step Questions
1. Communication and  Who needs to be involved?
Consultation  How will we communicate and consult with them?
2. Identify Risk Context  What are your objectives?
 What are the things to consider when we assess the risks of
achieving our objectives?
 What criteria will we use to assess our risks?
 Who will do the assessment?
3. Identify the Risks  What events could happen that would affect my program areas or
objectives?
 What are the corresponding impacts?
4. Analyze the Risks  What is the severity of this impact according to accepted agency
criteria?
 What is the likelihood that this risk event will occur?
5. Prioritize the Risks  What are the impact level and likelihood of your risks?
 How do the risks compare, such as on heat-map?
 Which risks does leadership consider the “top risks?”
 Which risks will require a response?
6. Identify and Prioritize  What actions will we take to mitigate, avoid, accept, transfer, or
Risk Responses enhance our risks?
 What actions are important to take now?
 Are there ongoing actions to continue?
 Who is accountable, when will they start, and when will it be
done?
7. Monitor, Evaluate,  What is the status of our response actions?
and Adjust  Are they completed, in progress, not started, or has the action
been deferred?
 Did the action have the desired effect? What is the residual risk
and how should we respond?
81
2. Templates
a. Sample Risk Profile #1
82
b. Sample Risk Profile #2
Risk Short Risk Primary Threat or Likelihood Impact Order Response Response
Description Event Impact Opportunity Category of Strategy Strategy
Priority Type
c. Sample Risk Profile #3
Program Risk Short Mission Area/ Risk Short Mitigation Current Key Risk Type/ Likelihood Impact Source Notes
Office/ Name Objective Description Strategy Status Stakeholders Category (1-5) (1-5)
Contact
83
d. Sample Risk Profile #4
84
e. Sample Risk Profile #5
85
f. Sample Risk Profile #6
Significant Operational Issues Dashboard

DATE DATE
Risk Likelihood Risk Likelihood Trending
Impact of Impact of
Occurrence Occurrence
Current Risks Mitigation Strategies
A. Sample Risk #1 ● Mitigation Strategy #1.
● Mitigation Strategy #2. Neutral
● Mitigation Strategy #3.
B. Sample Risk #2 ● Mitigation Strategy #1.
● Mitigation Strategy #2. Negative
C. Sample Risk #3 ● Mitigation Strategy #1.
● Mitigation Strategy #2. Positive
D. Sample Risk #4 ● Mitigation Strategy #1.
● Mitigation Strategy #2. Neutral
E. Sample Risk #5 ● Mitigation Strategy #1.
● Mitigation Strategy #2. Negative
F. Sample Risk #6 ● Mitigation Strategy #1.
● Mitigation Strategy #2. Positive
86
3. Risk Assessment Tools
a. Example #1
Likelihood Scale
Likelihood Definition
1 - Very Low Risk event rarely to occur, or occurs less than once every 10 years.
2- Low Risk event unlikely to occur, or occurs less than once a year, but more than once
every 10 years.
3- Medium Risk event possible to occur, or occurs between 1-10 times a year.
4. High Risk event highly likely to occur, or occurs between 11-50 times a year.
5- Very High Risk event almost certain to occur, or occurs > 50 times a year
Impact Scale on Quality of Operations/Activity/Mission
Measured Impact 1 - Very Low 2 – Low 3 – Moderate 4 - High 5 - Very High

Reduced quality Degradation Degradation Degradation in Degradation Degradation of
and performance in in Activity/Role in Activity or Activity or Role
Activity/Role Activity/Role has Material Role Severely Impacts
is negligible is noticeable Impact on Requiring Key Deliverable or
Performance of Escalation Performance
Key Function(s) Measure
.
87
Risk Prioritization Matrix based on Calculated Risk Score (Likelihood x Impact)
Likelihood of Very Low Low Medium High Very High

Incident (Very (Unlikely) (Possible) (Likely) (Frequent)
Scenario Unlikely)
Very Low 1 2 3 4 5
Business Impact
Low 2 4 6 8 10
Moderate 3 6 9 12 15
High 4 8 12 16 20
Very High 5 10 15 20 25
Likelihood Score: Ranges from Very Low (1) to Very High (5). Risk likelihood refers to the overall likelihood of the occurrence and should
consider the presence and effectiveness of controls to mitigate risks.
Impact Score: Ranges from Very Low (1) to Very High (5). Risk impact refers to the presumed impact if the risk becomes reality.
Overall Risk Score: Risk scores are derived by multiplying the value identified for likelihood by the value identified as the potential impact if a
risk materialized.
(Example: Risk Likelihood Score of 3 with Estimated Impact Score of 4 = Medium Risk Prioritization High Priority 15 - 25
Rating of 12) Medium Priority 5 - 14 o
Low Priority 1-4
88
b. Example #2
Likelihood Criteria
Staffing (Levels & Operational Guidance Problem History
New Program, Complexity Outside Control Potential for Work Force Agency Consultant Use Other
Experience) Procedures Phase or Waste, Fraud Development Involvement
Component and Abuse and Training
Is the staff assigned to Are there Is there Have there been Is program area or Is there a high Is there an What is the Is there Is our division Are consultants Are there other
the effort sufficient? Do documented relevant significant objective of the level of opportunity for opportunity program in office staff actively actively being areas of concern
Likelihood Level
they have a clear and relevant guidance? problems or program is truly intricacy or outside agencies waste, fraud, place to keep is involved in applied as related to this
knowledge, procedures for ongoing series novel? challenge to assert control or and abuse? training and managing the primary program area or
understanding, and this program of problems associated interference? development in program area or resources in the objective that are
ability with the program area or objective related to this with the place for the objective? effort? not addressed in
area or objective and its of the program? program area or program area personnel the frequency
implications objective? or objective? related to this criteria?
program area (Document the
or objective? criteria below)
Severely understaffed or None: There are None: There A lot of: There Cutting Edge: No Almost Certain: Almost Certain: A lot of: There None: There None: Division A lot of: The
no experience: It is no documented are no are historical one has addressed The program Numerous outside is almost no are no training office personnel Agency is using
unrealistic to expect the or relevant documented events that tie this type of work in area or agencies and the oversight and a or mentoring have no visibility a broad range of
Almost Certain
staff assigned not to procedures or relevant directly to the this program area or objective public have the almost no programs or no consultant to
need supplementation or guidance problem history objective before involves opportunity and ability to management address the
augmentation before the integration of ability to voice identify waste, control program area or
end of the effort multiple concerns, fraud and objective
agencies, influence or direct abuse
consultants
and
contractors
Understaffed or no Some: There Some: Some: There Done in other Likely: The Likely: One or two Some: There is Limited: There Limited: Division Some: The
experience: Staff are some There is have been transportation program area outside agencies some are training office personnel Agency is
assigned will be over documented some some incidents agencies: This type of or objective and the public oversight, but and/or have visibility but sharing
utilized and likely procedures or documented of problems w ork has been done in involves have the certain gaps in mentoring no management significant
Likely
incapable of completion tangentially guidance or related to this other transportation integration of opportunity and our ability to programs, but control responsibilities
agencies, but no
of with out immediate related tangentially program area or multiple ability to voice identify waste, no funding with consultants
experience at this
training. procedures related objective in this agencies concerns, fraud and and/ or related to this
agency
guidance type of program influence or direct abuse leadership program area or
commitment objective
Understaffed or some Out-of-date: Out-to-date: Possible: There Some experience: Possible: This Possible: One or Possible: Some: There Some: Division Limited: The
experience: Staff There are There are are rumors or Some people have program area two outside There is are training office personnel Agency is
assigned will be over documented documented organizational done this type of or objective agencies have the oversight, but and/or have sharing limited
utilized and run the risk of procedures, but guidance, legend of work in the past or involves opportunity and possible gaps mentoring management responsibilities
Possible
being incapable of they are out-of- but they are problems have done related integration of ability to voice in our ability to programs, but control over some with consultants
completion if additional date with out-of-date related to this work Agency and concerns, identify waste, they are not aspects of the related to this
responsibilities are existing laws with existing program area or one other influence or direct fraud and universally program area or program area or
assigned, or lack and regulations. laws and objective in this outside agency abuse available objective objective
experience regulations. type of program
Adequately staffed or Good and up-to- Good and None: There Old news: It’s what Unlikely: This Unlikely: There is None: There is A lot of: There A lot of: Division None: The
competent: Adequately date: up-to-date: have been no we do, routine program area virtually no virtually total are training office personnel Agency has full
staffed or competent Procedures are Guidance is significant or or objective opportunity or oversight and a and mentoring have active responsibility for
Unlikely
good and up to good and up ongoing involves only ability for outside high programs, management all aspects of
date. to date. problems. Agency agencies to voice opportunity to broadly control over most this program
personnel concerns related to identify waste, available to aspects of the area or objective
this program area fraud and personnel program area or
or objective abuse objective
89
Impact Criteria
Legal and Infrastructure Re sourc e s a nd Hum an and Natural
Financial Reputation Business Operations Safety Civil Rights Econom ic
Com pliance Assets Effort Re quire d Environm ent
Large unacceptable financial Very significant harm to image w ith Large and unacceptable Material Significant or Impact cannot be The event will Many Program or critical Significant,
loss, severe budget variance. substantial impact on effectiveness. operational impact, long term compliance critical managed w ithin permanently affect the fatalities. component of a program long lasting
Critical long term impact on Significant adverse community business interruption. System infraction. infrastructure the organization's human and natural declared unconstitutional the negative
budget/finances, not recoverable impact and condemnation. failure and overall survival of the Significant assets are existing environment. The impact US Supreme Court, thereby impacts to the
Catastrophic
w ithin current or next fiscal year. Consistent extreme negative media organization is threatened. Full prosecution and destroyed. resources and covers a wide area and is effectively eliminating it economy of a
Critical business functions could attention (months). Irreconcilable business disruption for more than Significant or threatens the nationally. Complete inability
fines. Major difficult to contain. The major
be vulnerable or ineligible. community loss of confidence in the one w eek or a key service more critical survival of the to achieve any of the
litigation involving effects are irreversible. metropolitan
Systematic and extensive major organization's intentions and than tw o w eeks. Majority of critical infrastructure organization. program’s objectives, or any
class actions. Threat to survival of flora, area, a State or
fraud. Results in qualified audit capabilities and possibly in the programs cannot be achieved. assets are Department objectives of a critical
opinion. government. Secretary level Secretary level intervention
Major non- unusable for Secretary level
fauna, and or cultural component of a program.
the nation
intervention compliance with months. intervention. heritage.
legislation.
Very significant financial loss, Major embarrassment leading Unacceptable operational Reportable Non critical Impact Medium to long term Fatalities Long-term impact on the Significant
major budget variance. to significant impact on impact, short term business compliance infrastructure requires impact to the the human or protected rights, intended economic
Significant impact on effectiveness. Considerable interruption. Continued infraction. Major assets are significant long and natural environment. permanent benefits, or ability to disruption to a
budget/finances/eligibility, not and prolonged community capability of the organization is breach of destroyed. term The impact covers a wide disabilities implement effective major
recoverable within current or impact and dissatisfaction threatened. Full business regulations. Major Significant or management area but can be . nondiscrimination metropolitan
Major
next fiscal year. Significant publicly expressed Community disruption for up to one week litigation. critical and contained. Able to be programs. Numerous area or entire
fraud waste or abuse. Leads loss of confidence in the or a key service up to two infrastructure organizational remediated but will and continuous State
to material weakness. organization's and capabilities weeks. One or more critical assets are resources to require dedicated expert complaints in multiple
(weeks) Consistent negative programs, projects, or agency unusable or respond. resources. program areas that
media attention (weeks) priorities cannot be achieved restricted for cannot be addressed
Administrator or Executive weeks. timely.
Director level intervention
Significant financial loss and Moderate embarrassment Moderate operational impact, Significant Some assets, Impact Medium term impact to Injuries Impact results in Some
variance to budget. Major impacting short term business not interrupted. compliance not including requires the the human and requiring noncompliance affecting economic
impact on effectiveness. Community Effectiveness and efficiency of infraction. Serious significant or management natural environment. medical protected rights or disruption to a
budget/finances/eligibility, impact and concerns publicly major elements of the incident requires critical assets, and resources Limited to a small area. treatment intended benefits. Issues metropolitan
investigation and
Moderate
may be recoverable within expressed (days) Negative organization are reduced. Full are unusable from a key area Able to be remediated but with are addressed, but over area or portion
legal representation
current year, but requires media attention (days) Loss of business disruption for one or restricted for of the will require intervention or possible unreasonably long period of a State;
to determine legal
reprioritization. Limited confidence by the community in day or a key service disruption weeks. organization to management by external fatalities. of time. Numerous impacts may or
liability. Non
instances fraud waste or organization processes up to one week. Ability to respond. parties. complaints in one or may not be
compliance w ith
abuse. Leads to several Administrator or Executive achieve one or more critical regulation.
more program areas. long lasting
audit findings. Director level concern programs, projects, or agency
priorities is reduced.
Minor financial loss, small Minor embarrassment, but no Minor operational impact, business Minor compliance A number of Impact Short term impact to the Injuries Minor impact on protected Some
budget variance. Slight but harm to image or reputation. not interrupted. Effectiveness and infraction. assets are requires the human and natural requiring rights or intended economic
noticeable impact on Local community impact and efficiency elements of the Complex legal unusable or additional local environment. Able to be medical benefits with isolated disruption to a
budget/finances/eligibility, concerns Occasional or once organization are reduced, Partial issue to be restricted but management remediated through treatment. lawsuits and/or metropolitan
business disruption for less than
Minor
recoverable within year. Minor off negative media attention addressed. can be effort and existing processes. complaints that do not area or portion
three days. Opportunity or ability to
instances of fraud waste or replaced within redirection of Minimal threat to flora, involve cross-cutting of a State, but
achieve objectives or deliver
abuse. Leads to audit an acceptable resources to fauna, and or cultural program issues. effects are both
outcomes is affected.
findings. timeframe. respond. heritage manageable
and short term
Minimal impact on Isolated local community or Negligible impact on the Legal issues Assets receive Impact can be No measurable impact to Incident No measureable impact Some
Insignificant or Neutral
budget/finances/eligibility. individual issue-based effectiveness of the managed by minimal managed the the human and with or to protected rights or localized, short-
Recoverable within current concerns organization. Isolated or short routine damage or are through routine natural environment. No without intended benefits of term economic
year. Some waste or abuse. term business service procedures. only activities. action required for minor individuals. disruption
Leads to immaterial audit disruption. temporarily management or injury.
findings. unavailable or containment. No impact
restricted. to flora, fauna, and or
cultural heritage.
90
Heat Map
Likelihood Unlikely Possible Likely Almost Certain
The event could The event could The event is most The event is
possibly occur, but occur under specific likely to occur in expected to occur in
is unlikely at this conditions and some most circumstances. most circumstances
Description time. of those conditions or is happening now.
Impact are currently
evidenced.
Large unacceptable financial loss, severe budget

Catastrophic
variance. Very significant harm to image with

substantial impact on effectiveness. Large and
unacceptable operational impact, long term
business interruption. Qualified audit finding.
Very significant financial loss, major budget

variance. Major embarrassment leading to
Major
significant impact on effectiveness. Unacceptable

operational impact, short term business
interruption. Leads to material weakness.
Significant financial loss and variance to budget.

Moderate embarrassment impacting short term
Moderate
effectiveness. Moderate operational impact,

business not interrupted.Leads to reportable
findngs.
Minor financial loss, small budget variance. Minor

embarrassment, but no harm to image or
Minor
reputation. Minor operational impact, business

not interrupted. Leads to audit findings.
Minimal or no measurable operational impact.

Insigificant or
Can be managed with routine activities. Leads to

Neutral
immaterial audit findings.
How to use this Tool: Assess your risk for levels of impact and likelihood. Find where the two values intersect. Use this intersection value to sort
your risks and help with risk prioritization. Use your prioritization to help decide which risks require response strategies.
91
c. Example #3
Likelihood Criteria
Time Basis
Likelihood Numerically Based Event Based
Level Representative
Numerical Boundaries Value Operational Benchmark Internal
Example: Lifting incidents

Highest Severity
Expect to see once per Example: Inability to meet
Very High 2/yr  Safe: Two or fewer deaths
year or more some activity-based targets
 Clean: Spill of 20,000 bbls or
less
Example: Black Elk

Expect to see between Highest Severity Example: Senior staff is
High once per year and once 0.2/yr  Safe: 2 to 10 deaths replaced and some internal
in 10 years  Clean: Spill of 20,000 to reorganization occurs
100,000 bbls
Example: Fundamental
Example: Deepwater Horizon
inability to successfully
Expect to see between tragedy
perform key mission
once in 10 years and Highest Severity
Medium 0.02/yr elements and requiring
once in 100 years  Safe: 10 to 100 deaths
complete re-commissioning
 Clean: Spill of 100,000 to
of personnel and
500,000 bbls
management systems
Example: Having severe

challenges to performing
Example: Major releases from
mission (like the Nuclear
Expect to see between multiple sites following hurricane
Regulatory Commission at
once in 100 years and Highest Severity
Low 0.002/yr time of Three Mile Island) and
once in 1,000 years  Safe: 100 to 1,000 deaths
needing some new leadership
 Clean: 500,000 to 5 million
with substantial
bbls
reorganization and updating
of management systems
Example: Completely unable

to perform mission and
Example: Major releases from
requiring complete re-
more than 20 sites following
commissioning with new
Expect to see less than earthquake/tsunami
Very Low 0.0002/yr leadership and complete re-
once in 1,000 years Highest Severity
organization with new
>5 million
management systems and/or
alignment at the Federal
government level
92
Impact Criteria
Severity External Impact or Consequence Type
Internal Impact
Category Safe Clean Economic Reputation
Completely unable to perform

mission and requiring complete
> 5 million re-commissioning with new
bbls of ˃ $100 leadership and complete re-
Very High
crude oil Billion organization with new
released management systems (Mission
impacts exceeding the Deepwater
Horizon impacts)
Multiple formal investigations Severe challenges to performing

(e.g., Congressional mission and needing some new
500,000 to
investigative hearing; OIG and leadership with substantial
5 million $10 Billion
>1,000 GAO investigations); prolonged reorganization and updating of
High bbls of to $100
deaths national media coverage; management systems (Mission
crude oil Billion
industry/public outrage and impacts between one-tenth to up
released
loss of confidence in [AGENCY] to the Deepwater Horizon
to perform its mission. impacts)
Congressional investigative
100,000 to hearing; OIG investigation; Director is replaced and senior
100 to 500,000 GAO forensic audit or special staff is replaced (Mission impacts
$1 Billion to
Medium 1,000 bbls of investigation; sustained between one-hundredth to up to
$10 Billion
deaths crude oil national media coverage; one-tenth of the Deepwater
released industry/public backlash and Horizon impacts)
decrease in confidence.
Senior staff is replaced and some
20,000 to GAO, Congressional, and White
internal reorganization occurs
100,000 House inquiries; sustained
10 to 100 $100 Million (Mission impacts between one-
Low bbls of regional media coverage;
deaths to $1 Billion thousandth to up to one-
crude oil unfavorable industry/public
hundredth of the Deepwater
released response.
Horizon impacts)
Needing minor organizational or
1 to 20,000 Limited Congressional and management system adjustments
Very ˂10 bbls of ˂$100 departmental inquiries; short- to accomplish mission (Mission
Low deaths crude oil Million term regional media coverage; impacts below one-thousandth of
released industry/public concern. the Deepwater Horizon impacts
[e.g., Black Elk])
93
Heat Map
In the figure below, the enterprise risk heat map is divided into five regions. Each color indicates regions
of cells expecting similar responses to the risk exposure mapped in that region. Cell groupings are based
on consecutive risk cell numbers, which increase with importance. Events with higher severity generally
require a more significant risk response. For example, the risk cell with Very High Likelihood and Very
Low Severity (cell 11) is colored yellow while the risk cell with Very Low Likelihood and Very High
Severity (15) is colored orange.
Each color region on the risk heat map reflects a different degree of risk tolerance to a strategic risk
falling in that region and consequently the suggested need for response. The following paragraphs
provide brief descriptions of notional responses when an assessed strategic risk falls in a particular risk
region.
 DARK RED (Risk Region V or Very High): Any risk in this zone substantially exceeds both the
program’s risk tolerance and risk appetite. All risks must be reduced by additional/modified risk
treatments or must be approved by program leadership and communicated to the agency.
 RED (Risk Region IV or High): Any risk in this zone exceeds both program’s risk tolerance and risk
appetite. All risks must be reduced by additional/modified risk treatments or must be approved
by program leadership and communicated to the agency.
 ORANGE (Risk Region III or Medium): While a risk is within the [AGENCY]’s risk tolerance in this
zone, more than some agreed-upon number of strategic risks in this zone would exceed
[AGENCY]’s risk appetite and the number of strategic risks falling in the zone must either be
reduced or approved by program leadership and communicated to the agency.
 YELLOW (Risk Region II or Low): While risks within this zone are within [AGENCY]’s risk tolerance
and risk appetite, additional risk treatments may still provide sufficient risk-reward to justify
implementation.
94
 GREEN (Risk Region I or Very Low): Risks within this zone are within [AGENCY]’s risk tolerance
and risk appetite and are not expected to require any additional risk treatments.
Strategic risks with assessed risk levels exceeding [AGENCY]’s risk tolerance require additional risk
treatments. A key benefit in performing ERM is the collective management of risk treatments across all
enterprise risks. With the risks and associated confidence assessed, specific risk treatments will be
proposed for each strategic risk category. [AGENCY] leadership may then pursue the balance between
the most efficient and effective risk treatments across all strategic risk categories.
95
d. Example #4
Risk Significance refers to the magnitude, potential impact or effect of a specific risk. Significance is
rated on a numerical scale of 1 to 5.
Extreme (Rating-5) – Risks that are likely to have critical impact on the agency and/or the business unit
in that order. Extreme risks are potentially business ending events, or at the very least could prevent
the business unit from accomplishing its mission, not just a single goal or objective. Extreme risks have
significant potential for grave consequences on an organization, its people, and /or processes. Very few
risks fall in to this rating category, and many business units will not have any such risks.
Major (Rating-4) – Risks that are likely to have substantial impact on the agency, the business unit
and/or area, in that order. Major risks can significantly hamper an organization’s ability to achieve
multiple and/or key goals and objectives. They also could rise to the level or preventing or impairing an
organization from achieving its mission. Major risks often have serious internal and/or external
repercussions. This is often the top rating category in terms of significance for the majority of business
units. Usually, only a small percentage of risks fall into this category.
Significant (Rating-3) – Risks that have the potential to have considerable impact on the business unit
and/or area. Significant risks can affect the achievement of one or more goals and objectives, but
usually will not rise to the level of preventing an organization from achieving its mission. Significant risks
may have substantial internal and/or external repercussions. A large percentage of risks fall into this
rating category.
Moderate (Rating-2) – Risks that may have discernable impact on the business unit and/or area.
Moderate risks can hamper the ability of a business unit or area to achieve one or more objectives,
usually those of lesser significance. Occasionally they will rise to the level where they could actually
prevent the achievement of a business unit’s goals or objectives, but are unlikely to have any impact on
the business unit’s ability to achieve its mission. Many risks fall into this rating category.
Minor (Rating-1) – Risks that have little or no impact on the business unit and/or area. Minor risks can
hamper the ability of a business unit or area to achieve a goal or objective, usually one of lesser
significance. Rarely will they rise to the level where they could actually prevent the business unit or area
from achieving a goal or objective. They do not have any discernable impact on the business unit’s
ability to achieve its mission. Usually, only a small percentage of risks fall into this category.
96
Risk Likelihood is the probability of the occurrence of a specific risk event. Risk likelihood is also rated
on a numerical scale of 1 to 5.
Likelihood scores are based on empirical evidence and are discussed with key accountable parties.
Scores are updated to reflect changes in the environment or status. Likelihood scores are based on a
scale of 1-5 with 5 being the highest likelihood rating. Definitions for the risk scores are listed below:
Risk Scores Definition Likelihood Treatment of Issues / Level of

Percentage Action
(%)
A risk that has little to no chance to Key accountable parties
occur. A risk that has very robust and / monitor these risks and
or long-standing mitigation and / or escalate issues if / when they
Very
1 management strategies in place. 0 – 10 arise. As mitigants / strategies
Remote
are usually in place, these risks
require less intensive
monitoring.
A risk that is not likely to occur. A risk Key accountable parties
that has strong mitigation and /or monitor these risks and
management strategies in place that escalate issues if / when they
2 Unlikely 10 - 35
are functioning as intended. arise. RM works with key
accountable parties on an
intermittent basis.
A risk that has a chance to occur. Reasonably certain that some
Mitigation and / or management level of mitigation or
strategies are in place but may not be management strategies exist.
robust enough to prevent the risk from RM works with accountable
3 Possible 35 - 65
occurring. However, the mitigation / parties on an “as-needed”
management strategies in place would basis.
most likely lessen the chance of
occurrence.
A risk that is more likely to occur than RM works with key
not to occur; a high degree of certainly accountable parties on a
that the risk will occur. A risk that has regular basis to ensure
more than a 50% chance of occurring. mitigation and management
4 Probable 65 - 90
Effective mitigation and /or strategies exist.
management strategies are not in
place or are not functioning as
intended.
A risk that is occurring or is certain to RM works aggressively with
occur given the environment or factors key accountable parties to
Very involved. Mitigation and /or ensure mitigation and
5 90 - 100
Likely management strategies are not in management strategies exist.
place or are not functioning as
intended.
97
5 5 10 15 20 25
4 4 8 12 16 20
Significance
3 3 6 9 12 15
2 2 4 6 8 10
1 1 2 3 4 5
1 2 3 4 5
Likelihood
Aggregate Risk Scores11

Critical (20-25) -
High (12-16) -
Medium (6-10) -
Moderate (4-5) -
Low (1-3) -
11
Cumulative risk scores are calculated by multiplying the significance and likelihood ratings of a
particular risk.
98
E. Risk Reporting and Monitoring
1. Dashboards12
Portfolio Summary Dashboard DATE
Program Status Bond Loan Payment Cycle Portfolio Summary Characteristics
FY 20xx FY 20xx FY 20xx Program
Program Metrics Cohort Cohort Cohort Total
Portfolio Metrics
Bond Loan Pmt. Last Payment Next Payment
Loan Authority ($, millions) Frequency Date Received Date Due # Weighted Avg. Portfolio Duration: (modified)
Applications Monthly Interest Rate Spread (gross of fees)
Semi-Annual* Collateral
Funds Requested ($, millions) Weighted Avg. Term-to-Maturity
Funds Obligated ($, millions) Weighted Avg. Interest Rate
Loans Status of Condition

Advances Stable Watch List Special Asset
Watch List
Portfolio Risk Assessment Summary Key Program Developments and Ongoing Risk
Loan Geographic Exposure Write bullets about key developments and changes in the portfolio and
risk areas.
Insert Pie chart to show internal ratings for borrowers

Insert map with shading for exposure areas
Ratings Participant ID Rating Weights*
Policy Metrics
Write or show how you are attaining your program's policy goals
12
Please see OMB Circular A-129 Appendix D for many examples of dashboards that include risk analysis.
https://www.whitehouse.gov/sites/default/files/omb/assets/a129/rev_2013/pdf/a-129.pdf
99
100
2. Monitoring
a. Risk Monitoring and Governance for Communicating Risk (Example)

The Initiative Management Team (IMT) serves the function of initiating, facilitating, monitoring, and
evaluating the performance of projects across an organization. In the context of risk treatments, each
treatment selected for implementation is treated as a project. The project is assigned to an individual
who takes the lead on its implementation and is held accountable for its success (i.e., Treatment
Manager). The project lead
can access the IMT for
administrative support and
the IMT should periodically
contact the project lead for
updates and progress
reports. If over the course of
the project there is an issue
identified by the IMT in the
management of the project,
the IMT should work with
the project lead to identify
recommended actions to get
the project on track.
The IMT would serve as a
centralized and consolidated
point of contact for all
project progress and
delivery performance.
Leadership would engage
with the IMT to identify
project leads, track project
progress, and review
implementation
effectiveness. This model facilitates efficient flow of information and removes the burden on leadership
to collect information from individual project managers, instead providing a single source of data.
Through the IMT, leadership can track the progress of treatment implementation and develop corrective
action plans if necessary.
The IMT would consist of the Chief Risk Officer, Performance Management Office representatives, and
administrative staff. The IMT Roles and Communication Figure shows how the IMT interacts with other
participants in the ERM process.
101
b. Risk Monitoring Treatment Template (Example)
Risk Title: Risk Manager:
Treatment Plan Summary:
Treatment Plan Status: Risk

Trend:
Estimated Actual
Task Action Completion Completion
No: Task Description Owner Resulting L,C
Date Date
Contingency Plan: Trigger:
Treatment Alternatives Considered
102
F. Glossary
Term Definition
A-123 Refers to OMB Circular No. A-123, which defines management's
responsibility for enterprise risk management and internal control in Federal
agencies.
Acceptance Risk response where no action is taken to respond to the risk based on the
insignificance of the risk; or the risk is knowingly assumed to seize an
opportunity.
Aggregate Risk The total or cumulative amount of exposure associated with a specified risk.
Aggregate risk is comprised of two components: significance and likelihood,
and does not include the effect of risk strategies, controls or other measures
in place to designed to mitigate the effect or reduce exposure to the
specified risk.
Application Controls Programmed procedures in application software, and related manual

procedures, designed to help ensure the completeness and accuracy of
information processing.
Avoidance Risk response where action is taken to stop the operational process, or the
part of the operational process causing the risk.
Capital General term which refers to financial assets, the financial value of assets
such as cash, or other financial resources available for use by an organization.
Compliance Risk Risk of failing to comply with applicable laws and regulations and the risk of
failing to detect and report activities that are not compliant with statutory,
regulatory, or organizational requirements. Compliance risk can be caused
by a lack of awareness or ignorance of the pertinence of applicable statutes
and regulations to operations and practices.
Computer Controls Controls performed by a computer, i.e., controls programmed into computer
software, and controls over the automated processing of information,
consisting of general controls and applications controls.
Control Activities The policies and procedures that help ensure management directives are
effectively carried out. They help ensure that necessary actions are taken to
address risks to achievement of the entity's objectives. Control activities
occur throughout the organization, at all levels and in all functions. They
include a range of activities as diverse as approvals, authorizations,
verifications, reconciliations, reviews of operating performance, security of
assets, and segregation of duties.
Control Self-Assessment A process through which internal control effectiveness is examined and
assessed. The objective is to provide reasonable assurance that all business
objectives will be met.
Controls Policies or procedures that are part of a system of internal control.
103
Term Definition
Corporate Governance The set of processes, customs, policies, laws and regulations affecting the
way an organization is directed, administered, or controlled.
COSO Committee of Sponsoring Organizations of the Treadway Commission
(COSO). COSO was formed in 1985 to sponsor the National Commission on
Fraudulent Financial Reporting. COSO was jointly sponsored by five
organizations: the American Accounting Association, American Institute of
CPA’s, Financial Executives International, Institute of Internal Auditing and
the Institute of Management Accounting. In 1992, COSO issued a landmark
report on internal control: Internal Control—Integrated Framework, which
provides for establishing internal control systems and evaluating their
effectiveness. In September 2004, COSO released Enterprise Risk
Management - Integrated Framework, which provides guidance and
standards for implementing ERM.
Cost/Benefit Analysis A technique designed to determine the feasibility of a project or plan by

quantifying its costs and benefits.
Credit Program Risk The potential that a borrower or financial counterparty will fail to meet its
obligations in accordance with their terms. If the credit exists in the form of
a direct loan or loan guarantee, credit risk is the risk that the borrower will
not fully repay the debt and interest on time.
Cyber Information Security Risk that could expose the agency to exploitation of vulnerabilities to
Risk compromise the confidentiality, integrity, or availability of the information
being processed, stored, or transmitted by its information systems.
Enterprise Risk Management An effective agency-wide approach to addressing the full spectrum of the
(ERM) organization’s significant risks by considering the combined array of risks as
an interrelated portfolio, rather than addressing risks only within silos. ERM
provides an enterprise-wide, strategically-aligned portfolio view of
organizational challenges that provides improved insight about how to more
effectively prioritize and manage risks to mission delivery.
Entity An organization established for a particular purpose (e.g. a corporation,

government body, academic institution, etc.) Synonyms include organization
and enterprise.
Event An incident or occurrence, from sources internal or external to an entity that
affects achievement of objectives.
Financial Risk Risk that could result in a negative impact to the agency (waste or loss of
funds/assets).
Financial Risk Management The practice of creating value in an organization by using financial
instruments or models to manage exposure to risk.
Fraud Dishonesty in the form of an intentional deception or a willful
misrepresentation of a material fact.
104
Term Definition
General Controls Policies and procedures that help ensure the continued, proper operation of
computer information systems. They include controls over information
technology (IT), IT infrastructure, security management, and software
acquisition, development and maintenance.
Government Performance Requires that agencies revise strategic plans every four years, and assess
and Results Act progress toward strategic objectives annually.
Modernization Act (GPRAMA)
Impact The effect of an event on strategic goals and objectives. Impact can be
positive or negative related to the organization’s objectives.
Inherent Risk The exposure arising from a specific risk before any action has been taken to
manage it beyond normal operations. Inherent risk is often referred to as
“the risk of doing business”.
Integrity The quality or state of being of sound moral principle, honest and sincere.
The desire to do the right thing, to profess and live up to a set of values and
expectations.
Interest Rate Risk The risk associated with fluctuations in interest rates and the impact on
investments, loans or business activities.
Internal Control A process, affected by an organization's management or other personnel,
designed to provide reasonable assurance regarding the achievement of
objectives.
Internal Control Environment The control environment sets the tone of an organization, influencing the
control consciousness of its people. It is the foundation for all other
components of internal control, providing discipline and structure. Control
environment factors include the integrity, ethical values and competence of
the entity's people; management's philosophy and operating style; the way
management assigns authority and responsibility, and organizes and
develops its people; and the attention and direction provided by the board of
directors.
IT Controls Refers to the broad category of information technology controls including
computer, application, and general controls.
Key Performance Indicator Key Performance Indicators (KPIs) are financial and nonfinancial metrics used
to monitor changes in business performance in relation to specific business
objectives (e.g. volumes of business, revenue etc.).
Key Risk Indicator Key Risk Indicators (KRI's) relate to a specific risk and demonstrate a change
in the likelihood or impact of the risk event occurring.
Legal Risk Risk associated with legal or regulatory actions and agency’s capacity to
consummate important transactions, enforce contractual agreements, or
meet compliance and ethical requirements.
Legislative Risk Risk that legislation could significantly alter the mission (funding, customer
base, level of resources, services, and products) of the agency.
105
Term Definition
Likelihood The probability that a given event will occur.
Liquidity Risk Risk that an organization will not have sufficient funds available to settle one
or more financial obligations for full value when they become due (even if
the organization may be able to settle that obligation at some unspecified
time in the future).
Management Controls The organization, policies, and procedures used by agencies to reasonably
ensure that (i) programs achieve their intended results; (ii) resources are
used consistent with agency mission; (iii) programs and resources are
protected from waste, fraud, and mismanagement; (iv) laws and regulations
are followed; and (v) reliable and timely information is obtained, maintained,
reported and used for decision making.
Management Fraud The intentional misrepresentation of corporate or unit performance levels
perpetrated by employees serving in management roles who seek to benefit
from such frauds in terms of promotions, bonuses or other economic
incentives, and status symbols.
Manual Controls Refers to controls performed manually, not by computer or some other
automated means.
Objective Setting One of the eight components of ERM. Objective setting involves establishing
desired objectives (goals) to complete within a specified period of time.
Objective setting occurs at all levels of an organization. Objectives set at the
strategic level, help establish a basis for operations, reporting and
compliance. Objective setting is a precondition to other ERM components
including event identification, risk assessment and risk response.
Occupational Fraud The use of one’s occupation for personal enrichment through the deliberate
misuse or misapplication of the employing organization’s resources or assets.
Operational Risk The risk of direct or indirect loss arising from inadequate or failed internal
processes, people and systems, or external events. It can cause financial loss,
reputational loss, loss of competitive position or regulatory sanctions.
Opportunity A favorable or positive event. In context of risk management, it refers to the
possibility that an event will occur and positively affect the achievement of
objectives.
Political Risk Risk that may arise due to actions taken by Congress, the Executive Branch or
other key policy makers that could potentially impact business operations,
the achievement of the agency's strategic and tactical objectives, or existing
statutory and regulatory authorities. Examples include debt ceiling impasses,
government closures, etc.
Probability A quantitative measure indicating the possibility that a given event will occur.
Probability is usually indicated in terms of a percentage, frequency of
occurrence, or other numerical metric.
Reduction Risk response where action is taken to reduce the likelihood or impact of the
risk.
106
Term Definition
Regulatory Risk The risk of problems arising from new or existing regulations. Such problems
may include: changes in laws or regulations having significant impact on the
organization, an inability for an organization to establish the right policies
and procedures to be in compliance with regulations, or an increase in the
cost and complexity to ensure compliance with new and existing regulations.
Reporting Risk The risk associated with the accuracy and timeliness of information needed
within the organization to support decision making and performance
evaluation, as well as, outside the organization to meet standards,
regulations, and stakeholder expectations. This is a subset of operational risk.
Reputational Risk Risk that a failure to manage risk, external events, and external media or to
fail to fulfill the agency’s role (whether such failure is accurate or perceived)
could diminish the stature, credibility or effectiveness of the agency.
Reputational risk can arise either from actions taken by the agency or third
party partners including service providers and agents. Reputational Risk can
also arise from negative events in one of the other risk categories such as
Legal and Compliance risks.
Residual Risk The amount of risk left over after action has been taken to manage it, (such
as establishing internal controls).
Review (Verification and The process by which assessment of risks is evaluated by senior
Validation) management.
Risk The effect of uncertainty on achievement of objectives. An effect is a
deviation from the desired outcome – which may present positive or
negative results.
Risk Action Plan (RAP) A set of actions designed to mitigate or exploit identified risks. The plan may
include intended outcomes and timetables and any other follow-up work
necessary.
Risk Appetite The articulation of the amount of risk (on a broad/macro level) an
organization is willing to accept in pursuit of strategic objectives and value to
the enterprise.
Risk Assessment The identification and analysis of risks to the achievement of business
objectives. It forms a basis for determining how risks should be managed.
Risk assessment involves evaluating the significance and likelihood of a risk,
as well as any controls or other measures that mitigate or eliminate that risk.
Risk Assessment Score A weighting of a potential outcome (positive/negative) multiplied by
probability of its occurrence and used to prioritize choices.
Risk Impact A measurement of the effect that could result from the occurrence of a
particular identified risk.
Risk Management A coordinated activity to direct and control challenges or threats to achieving
an organization’s goals and objectives.
107
Term Definition
Risk Mitigation Strategy for managing risk that seeks to lower or reduce the significance
and/or likelihood of a given risk.
Risk Profile A prioritized inventory of an organization’s most significant risks.
Risk Response Management's strategy for managing (or responding to) a given risk. Risk
response strategies include: avoidance, sharing, reduction, transfer and
acceptance.
Risk Strategy Synonymous with risk response. The strategy for managing (or responding
to) a given risk. Risk response strategies include: avoidance, sharing,
reduction, transfer and acceptance.
Risk Tolerance The acceptable level of variance in performance relative to the achievement
of objectives.
Sharing Risk response where action is taken to transfer or share risks across the
organization or with external parties, such as insuring against losses.
Significance Magnitude or potential impact of a specified risk.
Strategic Risk Risk that would prevent an area from accomplishing its objectives (meeting
the mission).
Technology Risk The broad risk associated with computers, e-commerce, and on-line
technology. Examples of technology risks include: network/server failures,
obsolescence, lack of IT resources and skills, loss/theft of client/customer
data, inadequate system security, viruses, denial of service, systems
availability, and integration issues.
Uncertainty The inability to know in advance the exact likelihood or impact of future
events.
Value at Risk (VaR) Measure of how the market value of an asset or of a portfolio of assets is
likely to decrease over a certain time period under usual conditions. It is
typically used by security houses or investment banks to measure the market
risk of their asset portfolios (market value at risk), but is actually a very broad
concept that has broad application.
108
G. References and Resources
Title/Description Source
"How-To" Tutorial http://business.gmu.edu/images/contentattachments/
Coordinating ERM FERM2015_BringingERMtotheSystem_1.pdf
Implementation Planning in a
Federated Agency
AFERM Training https://www.aferm.org/
Committee of Sponsoring http://www.coso.org/
Organizations of the Treadway
Commission (COSO)
GAO Fraud Book http://www.gao.gov/products/GAO-15-593SP
Green Book http://www.gao.gov/greenbook/overview
North Carolina State University https://erm.ncsu.edu/az/erm/i/chan/library/2015-erm-
Thought Paper "Reporting Key Risk reporting-key-risk-information-to-board-directors.pdf
Information to the Board of
Directors"
RIMS https://www.rims.org/Pages/Default.aspx
RMA Risk Appraisal Workbook http://www.rmahq.org/enterprise-risk-management-
workbooks/
UK Orange Book https://www.gov.uk/government/uploads/system/uplo
ads/attachment_data/file/220647/orange_book.pdf
H. Agency Acknowledgements
The Chief Financial Officers Council and Performance Improvement Council would like to thank the
following individuals for their contributions to the Playbook:
Steering Committee
Name Agency
Carol Bales Office of Management and Budget (OMB)
Mark Bussow OMB
Lilly Gilmour General Services Administration (GSA)
Gary Grippo U.S. Department of the Treasury (Treasury)
Karen Hardy Department of Commerce (Commerce)
Jeff Johnson Department of Health and Human Services (HHS)
Justin Johnson Office of Personnel Management (OPM)
Christine Jones HHS
Dan Kaneshiro OMB
Regina Kearney OMB
Michael Landry OMB
Adam Lipton OMB
Ken Phelan Treasury
Mary Reding GSA
Dana Roberts GSA
David Rowe OMB
Curtina Smith OMB
Cynthia Vitters Department of Education (Education)
Mike Wetklow National Science Foundation (NSF)
Working Group
Name Agency
John Ascienzo U.S. International Trade Commission (USITC)
Jessie Bailey OMB
Eduardo Barcelo HHS
Cory Baumhardt Department of Transportation
Anju Bhargava Social Security Administration
Greg Blaszko OPM
Amy Borgstrom Corporation for National and Community Service
Jamal Bouaichi U.S. Department of Housing and Urban Development (HUD)
Name Agency
Susan Bowers National Nuclear Security Administration
Vicky Cabrera Treasury
Catherine Chatfield HHS
David Coontz National Archives and Records Administration
Hilary Cronin Education
Kelly Cummins Department of Energy (Energy)
Mark Daley Commerce
Lisa Davis HHS
Carolyn Dempster Education
Rodney Dixon HHS
Tonya Dunham Consumer Financial Protection Bureau (CFPB)
Claude Etienne U.S. Securities Exchange Commission
Carol Eyerman NSF
Andrea Fisher - Colwill Treasury
Daniel Fodera Federal Highway Administration
Cassandra Freeman HHS
Silvia Galluch USITC
Melissa Giambi Education
Lori Giblin Corporation for National and Community Service
Zoya Kaplan Department of Labor
Cheh Kim Federal Deposit Insurance Corporation (FDIC)
Christopher Landers Energy
Jacob Lee Bureau of Safety and Environmental Enforcement
Francisco Lepe HHS
Linda Linkins USITC
Javier Lopez HHS
Sarah Lyberg HUD
Lisa Maguire HUD
Colleen McLoughlin Treasury
Thomas Moschetto OPM
Ralph Newsome Energy
Sabrina Nolasco CFPB
Frances Nwachuku Energy
Jill Oliver FDIC
John Rich GSA
Neil Ryder Department of Justice (Justice)
Katy Sartorius Energy
111
Name Agency
Jason Stayanovich HUD
Meredith Stein National Institutes of Health
Katherine Tkac Smithsonian
Karen Weber Treasury
Douglas Webster U.S. Agency for International Development
Debra Williams Justice
Diana Woodfolk HHS
Katie Wurtz-Brodfuehrer Federal Trade Commission
Montrice Yakimov Bureau of the Fiscal Service
Andy Zino Smithsonian
112

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Playbook:

Enterprise Risk Management

Developed and issued in collaboration with Federal Government organizations

DATE: July 29, 2016

cc: Dave Mader, Controller of the United States of America

The material in this document is intended to be:

A. Using This Playbook

B. What is Risk Management? What is ERM? Why Do Government

C. Integrating ERM into Government Management Practices

Enterprise Risk Management:

Figure 1: The ERM Policy Framework

 Cross Agency Priority Goals

 Operational Control Objectives

B. Internal Controls and Risk Management

Table 1: Comparison between Traditional Risk Management and ERM

Traditional Risk Management ERM

C. Common Risk Categories

D. Principles of Enterprise Risk Management

1. Governance Framework is Important: ERM is built around a purposeful governance

2. Managing Risk is Everyone’s Responsibility: Risk management enables understanding and

9. Planning Fosters a Culture of Resilience: Risk management needs to be forward looking,

E. Maturity of ERM Implementation

III. ERM Model

5. Respond To 3. Analyze and

A. Step One: Establish Context

5. Respond To 3. Analyze and

ability of an agency to achieve its stated mission and program

B. Step Two: Identify Risks

management is documented. The identification of risk may be an 5. Respond To 3. Analyze and

1. Develop meaningful risk categories: When defining or categorizing risks, agencies

C. Step Three: Analyze and Evaluate

5. Respond To 3. Analyze and

borrowers who may be too risky to obtain private sector credit

D. Step Four: Develop Alternatives

5. Respond To 3. Analyze and

the reputational or political capital at stake. Also evaluate control

E. Step Five: Respond to Risks

5. Respond To 3. Analyze and

are prioritized and risk responses are determined, milestones for

F. Step Six: Monitor and Review

necessary) risk information documented within the enterprise- 6. Monitor and

risk responses and mitigations are managing risks as intended. 5. Respond To

This review should occur semi-annually at a minimum. As part of 4. Develop

G. Step Seven: Continuous Risk Identification and Assessment

as risk profiles and statements of risk appetite need to be Communicate

regularly reviewed and evaluated to determine whether the 5. Respond To

agency’s implemented risk management strategies are achieving 4. Develop

the stated goals and objectives, whether the identified risks

VI. The Risk Appetite Statement

B. Relationship Between Risk Appetite and Strategic Objectives

C. Considerations When Developing Risk Appetite

VII. Developing a Risk Profile

A. Steps to Creating a Risk Profile

Step One: Identification of Objectives

A-123 Objective Corresponding Risk Category

Step Two: Identification of Risk

 Agency Reports and Self-Assessments

The risk officer can conduct interviews and facilitate

Step Three: Inherent Risk Assessment

Table 3: Example of a Risk Impact Rating Scale