Managing Risk and Performance: A Guide for Government Decision Makers

Preface

This is a book for decision makers in government who seek to carry out their agencies' missions without getting blindsided by unexpected failures. The book shares experiences of federal government officials and others about how to set up a sound risk management program, how to manage it, and how to use it to support agency missions and programs.

The core lesson of this book is that effective risk management is an essential part of increasing the performance of a government agency or program. In other words, like brakes on a car that permit drivers to drive at a good speed, risk management allows managers to propel their agencies forward in ways that would be unwise or even disastrous if no one knew where the potential obstacles lay.

The question then becomes how to build risk management into agency decision making so that it enhances rather than retards performance. Here lessons of the financial crisis are directly relevant. A study of a dozen large financial firms found eight that failed and four that successfully navigated the crisis. There was a critical management difference between these firms: Successful firms built a process of constructive dialogue between their risk officers and parts of the company that wanted to do deals. This helped inform decision makers about when to stop buying subprime mortgages or making other loans in an overheated market. The failed firms, by contrast, either lacked or disregarded information about the risks of plunging ahead as the better-managed ...