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AASHTO ERM
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AASHTO ERM 1st Edition, January 1, 2016 Guide for Enterprise Risk Management
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Description / Abstract:
Introduction—About This Guide
This guide for state departments of transportation (DOTs) provides a comprehensive framework to identify and manage risk. It will help state DOTs plan, staff, implement, and evaluate consistent and effective enterprise risk management efforts. It demonstrates the benefit and strategic value of enterprise risk management to executive and senior staff while building on the findings of previous research and international scan findings. The guide defines risk management, explains its components, and illustrates how it can improve performance, credibility, and transparency.
For U.S. transportation agencies, risk management generally has been confined to managing risks to construction project cost, scope, and schedule. The expansion of interest in enterprise risk management reflects a growing recognition that risk management can play an important, broader role. It can help organizations manage risks to all objectives, not just those related to project schedules and scopes.
Risk management is the natural complement to performance and asset management. Performance management leads agencies to set goals and direct resources to achieve them. However, all goals include uncertainties and risks. Risk management helps identify, measure, manage, and mitigate those risks. It provides a realistic assessment of the uncertainties or impediments surrounding an organization’s objectives and a systems approach to addressing them. As agencies move into the performance era inaugurated by the Moving Ahead for Progress in the 21st Century Act (MAP-21), they will find enterprise risk management to be a complementary framework to help them achieve their performance objectives.
Risk management also helps make difficult investment tradeoffs. By casting decisions in terms of risk, agencies can clarify and explain investment priorities.
Even if not spurred by MAP-21, U.S. transportation agencies are well served by enterprise risk management. Applying risk management to transportation agencies transfers a sound management practice from the corporate world to the public sector. In the corporate world, risk management is viewed as a basic competency. It recognizes that in a complex environment, achievement of organizational goals depends on managing many internal and external risks. Failure to measure, manage, and mitigate these risks increases the likelihood of failure. If risks and uncertainties are inevitable, failing to consider them is irresponsible
This guide helps an agency create an enterprise risk management program. It defines enterprise risk management as a comprehensive approach to addressing risks at all levels of the organization. Because an agency’s strategic objectives depend on achieving goals and targets at every level, enterprise risk management drills down to the program, project, and activity levels. It illustrates the integration of risk management into an agency’s key programs by explaining how it can be applied not only to strategic objectives, but also to the following:
• Transportation asset management
• Highway safety
• External threats, such as climate change
• Financial forecasting
• Information or decision risks
• Program and project risks related to costs, scopes, and schedule
• Traditional business operation risks, such as theft and workforce injuries.
This guide for state departments of transportation (DOTs) provides a comprehensive framework to identify and manage risk. It will help state DOTs plan, staff, implement, and evaluate consistent and effective enterprise risk management efforts. It demonstrates the benefit and strategic value of enterprise risk management to executive and senior staff while building on the findings of previous research and international scan findings. The guide defines risk management, explains its components, and illustrates how it can improve performance, credibility, and transparency.
For U.S. transportation agencies, risk management generally has been confined to managing risks to construction project cost, scope, and schedule. The expansion of interest in enterprise risk management reflects a growing recognition that risk management can play an important, broader role. It can help organizations manage risks to all objectives, not just those related to project schedules and scopes.
Risk management is the natural complement to performance and asset management. Performance management leads agencies to set goals and direct resources to achieve them. However, all goals include uncertainties and risks. Risk management helps identify, measure, manage, and mitigate those risks. It provides a realistic assessment of the uncertainties or impediments surrounding an organization’s objectives and a systems approach to addressing them. As agencies move into the performance era inaugurated by the Moving Ahead for Progress in the 21st Century Act (MAP-21), they will find enterprise risk management to be a complementary framework to help them achieve their performance objectives.
Risk management also helps make difficult investment tradeoffs. By casting decisions in terms of risk, agencies can clarify and explain investment priorities.
Even if not spurred by MAP-21, U.S. transportation agencies are well served by enterprise risk management. Applying risk management to transportation agencies transfers a sound management practice from the corporate world to the public sector. In the corporate world, risk management is viewed as a basic competency. It recognizes that in a complex environment, achievement of organizational goals depends on managing many internal and external risks. Failure to measure, manage, and mitigate these risks increases the likelihood of failure. If risks and uncertainties are inevitable, failing to consider them is irresponsible
This guide helps an agency create an enterprise risk management program. It defines enterprise risk management as a comprehensive approach to addressing risks at all levels of the organization. Because an agency’s strategic objectives depend on achieving goals and targets at every level, enterprise risk management drills down to the program, project, and activity levels. It illustrates the integration of risk management into an agency’s key programs by explaining how it can be applied not only to strategic objectives, but also to the following:
• Transportation asset management
• Highway safety
• External threats, such as climate change
• Financial forecasting
• Information or decision risks
• Program and project risks related to costs, scopes, and schedule
• Traditional business operation risks, such as theft and workforce injuries.