Managing Risk and Performance: A Guide for Government Decision Makers

Chapter 1

Managing Risk of Federal Agencies and Their Programs through Enterprise Risk Management

Thomas H. Stanton

Fellow, Center for Advanced Governmental Studies, Johns Hopkins University

Risk Management as an Essential Part of Federal Management

The world manifests increasing complexity, and this in turn has increased vulnerabilities for the people of the United States and our government. High-impact events, once thought to occur only rarely, happen with increasing frequency. In the early 2000s alone, costly events included the terrorist attack of September 11, 2001, Hurricane Katrina, the BP Gulf oil spill, and the near meltdown of the financial system, to name some of the larger ones. Chronic costly events include medical errors in U.S. hospitals and periodic outbreaks of food-borne illness such as salmonella and E. coli. Other high-impact risks that materialize from time to time include cyberattacks to bring down systems or steal critical information, and a variety of other homeland security events.

Government plays a role in all of these, either in trying to prevent risk from materializing or in trying to respond effectively. Sometimes there are concatenations of risks, such as when the financial crisis results in a massive increase in workload for the unprepared Federal Housing Administration (FHA) or when a crisis expands from the mortgage market to the larger financial system or when an agency's uncontrolled spending on conferences leads to reputational harm.

Many agencies ...