Issue 15 AFERM Updates 1st Quarter, 2015...... ERM has now become a priority for OMB and GAO. ... 2015 November 3rd through 4th at George ... await OMB’s guidance on ERM as a part

Thought Leadership for the Federal Enterprise Risk Management Communitywww.aferm.org

Thought Leadership for the Federal Enterprise Risk Management Community

AFERM UpdatesAssociation for Federal Enterprise Risk Management

Issue 151st Quarter, 2015

In This Issue

A Note from the AFERM President

AFERM’s ERM Training Program

Quarterly AFERM Luncheon

AFERM 2015 Summit

AFERM ERM Award Program

AFERM ERM Survey

Thought Leadership

Request for Your Success Stories

Welcome New and Renewed Members

AFERM Membership Benefits

2015 AFERM Officers and Committees

Corporate Sponsors

AFERM Newsletter

In this first edition of the 2015 AFERM Newsletter, the dates have

been set for the 2015 Annual AFERM Summit, the ERM Training

Program initiative is underway, new Thought Leadership on

Federal ERM is shared, and the results and report for AFERM’s

first annual ERM survey are close to publication.

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A Note from the AFERM PresidentWhat Happens to ERM When Leadership Changes?

By Thomas H. Stanton

As the Administration comes into its final years many arethinking about transition of Agency leadership and whatwill happen with ERM. Some leaders come into officeknowing about ERM and its value. New heads ofTreasury’s Office of Financial Stability, which wasresponsible for administering hundreds of billions of dollarsof Troubled Asset Relief Program (TARP) funds, and at theOffice of Federal Student Aid and the Defense LogisticsAgency insisted on the establishment of strong ERMprograms at their organizations. These Agency headsused their influence to integrate risk management with

Agency processes such as budget and strategic planning.

Such support from the top can be essential for ERM to be effective. Agency heads havethe authority to bring senior managers to the table as a management team, encourageconversations that surface risks and prioritization of identified risks, and ensure thatfeedback about potential risks is actually heard and taken into account in majordecisions. Yet, even when one Agency head builds sound ERM processes, he or shemay be succeeded by a new leader who lacks a sense of priority for ERM. The newhead may not want to try to force ERM onto resistant heads of business units, or simplymay have other priorities.

Vulnerabilities created under one leader may emerge to cause harm only after asuccessor takes office. That means it is in the self-interest of any incoming Agencyhead, as a part of due diligence, promptly to review the Agency’s vulnerabilities and thequality of the processes that the Agency has in place to identify major risks. Otherwise,as has happened at too many Agencies, the new leader’s tenure itself could be on theline if something unexpected blows up.

Even if new Agency leadership chooses to shift to a new set of priorities, delivering onthem still entails risks. While those risks may be different from the set of risksassociated with the prior leadership’s objectives, the need for and value of effectiveERM is just as great. Moreover, whether an incoming Agency head places a priority onit, ERM has now become a priority for OMB and GAO. The Agency is well advised toact proactively by building its own ERM capabilities and thereby forestalling adversereviews from oversight bodies and even the Agency’s own inspector general. Here toothe Agency head may find his or her personal reputation at stake.


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For Agencies under budget pressure, ERM plays a particularly important role in helpingto manage a program of cost reduction. It can help an Agency head to focus cost-cutting on lower priority activities while protecting the basic capacity of the Agency tocarry out its mission without a costly failure such as has occurred many times whenAgencies cut their budgets in unwise places.

It is important to suggest these benefits to an incoming Agency head. ERM’s value isgreater than merely helping to ward off a crisis; perhaps most importantly, it can helpimprove the flow of information and improve decision-making and performance so that anew leader can accomplish the significant goals that attracted him or her to publicservice in the first place.


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Advancing ERM through Education

The Training Team, led by Laurie Champion of AON Risk Solutions with FolakeFadayomi of Deloitte, is coordinating AFERM’s ERM Training Program. The computer-based courses under development by AFERM's corporate sponsors will be madeavailable to our members via the AFERM website. The content for each course hasbeen categorized as foundational, intermediate, and advanced based on the technicalcompetency associated with each course. The training curriculum is comprised of thecourses listed in the following table.

AFERM ERM Courses Authors

Foundational Courses

Overview of Risk Management in the Federal Government AFERM

ERM Governance Deloitte

Establishing lines of authority and accountability between ERM and Agencycomponents

GrantThornton

Intermediate CoursesIntegrating ERM into Mission, Strategy and Planning Activities DeloitteDeveloping a Practical and Informative Risk Identification and AssessmentProcess

EY

Dealing with Emerging Risk, Long-tail risk and mitigation effectiveness KPMG

Advanced CoursesConsolidating Agency-wide risk profiles into a portfolio-level view PwC

Defining Risk Appetite and Risk Tolerance MetricStream

Exposure Analysis and Risk Quantification RPM3

ERM Case Study AFERM

AFERM’s ERM Training Program


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Lessons from an Active Federal ERM Program: TSA CRO Ken Fletcher Addressesthe AFERM Quarterly Luncheon

At our quarterly AFERM luncheon, we were honored to hear Mr. Ken Fletcher, ChiefRisk Officer of the Transportation Security Administration (TSA), speak about TSA’sERM program. Mr. Fletcher is responsible for developing and driving the long-rangestrategic vision and objectives for TSA with respect to risk-based security and riskmanagement activities, and implementing enterprise risk management across all areasof the Agency. Since joining TSA in January 2003, Mr. Fletcher has held a variety offield and headquarters positions, including Deputy Assistant Administrator for the Officeof Risk-Based Security, Senior Advisor to the Administrator, Deputy Federal SecurityDirector at Chicago O’Hare International Airport, Assistant Federal Security Director forScreening at Baltimore-Washington International Thurgood Marshall Airport and Chiefof Staff for the Office of Training and Quality Performance. Before joining the TSA, heworked for five years at Motorola as a senior production supervisor, quality managerand senior program manager for new product introduction. Mr. Fletcher is a veteran,having served in the U.S. Navy for 23 years before retiring in 1997.

AFERM held its most recent quarterly luncheon on April 29th, 2015, with a presentationon ERM by Ken Fletcher, Chief Risk Officer of the Transportation SecurityAdministration (TSA). TSA began exploring ERM in the fall of 2013, and establishedthe CRO function in March 2014. Mr. Fletcher talked about how, unlike other agencies’ERM programs that have evolved out of the internal control or financial managementfunctions, TSA’s program built on its distinctive core security mission perspective. Mr.Fletcher noted that TSA chose to take the time to establish structural components of theERM program first, rather than rushing to implement pilot programs or achieve “quickwins.” Building the necessary infrastructure first can provide the basis for a long-lasting,sustainable program.

Mr. Fletcher highlighted some key items for consideration when implementing an ERMprogram, including: 1) taking the appropriate amount of time to implement an effectiveprogram, balanced with a sense of urgency; 2) being ready to make the tough choicesto align resources and budget to enterprise risks and mitigation strategies, 3)recognizing that it will take significant time to be able to gauge progress and success; 4)understanding that risk decisions should not be made in a vacuum, and that it isimportant to engage different stakeholders in making decisions with broaderimplications, particularly when decisions have implications for the American public; and5) being sensitive that political or public support can evaporate quickly, and that risk-based decision making does not guarantee public support. Mr. Fletcher’s presentationwas impressive for its frank recognition both of significant challenges and of the factthat, with care and persistence, these can be overcome.

Quarterly AFERM Luncheon


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AFERM asked Mr. Fletcher whether he might share with it TSA’s ERM CapabilityMaturity Model and ERM Policy Manual. Mr. Fletcher agreed, warning only that one sizedoes not fit all, and that each agency needs to adapt such tools to its particular needsand culture. AFERM plans to post these on the www.AFERM.org website. The audiencewas impressed with Mr. Fletcher’s insights and grateful that he was so willing to sharethem with the Federal ERM community.

Thank you to Thomas Holland of PwC for coordinating another informative AFERMevent!


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November 3rd through 4th at George Mason University

The annual AFERM Summit will take place November 3rd and 4th again at GeorgeMason University. This year’s theme is “Expectations • Results • Momentum: ERM.”

The Summit is the pinnacle event of the year for AFERM and the Federal ERMcommunity. It draws marquee speakers in ERM to lead engaging, educational, andinnovative discussions, providing participants knowledge and practical tools to advancetheir professional development and promote ERM across the Federal Government.

This year is particularly exciting for ERM practitioners in the Federal Government as weawait OMB’s guidance on ERM as a part of its Circular A-123 revision. Integration ofERM into the performance framework and clarification of ERM linkages to internalcontrols will most definitely be a topic of the Summit panels and workshops amongother themes.

To make your experience and learning most meaningful, the organizing committeewould like to hear from you on the topics you would want to be covered and who in yourmind is the most appropriate speaker for a topic. Also, if you have ideas on the format ofbreak-out sessions or any other areas that could enhance your Summit experience,please email 2015 Summit Planning Committee chair Daniella Datskovska [email protected] or one of the committee members.

Committee Member Agency/Company

Daniella Datskovska (Chair) EYBill Hughes Morgan FranklinBobbi Jo Pankaj Grant ThorntonBrack Boone Federal Retirement Thrift Investment BoardDeb Swedberg AccentureDiane Rogler Department of Health and Human ServicesGoli Trump SourceAmericaHilary Cronin Department of EducationJamal Bouaichi Department of Housing and Urban DevelopmentJane Roberts U.S. Marine Corp.Laurie Champion Aon Risk SolutionsMaritza Zeiberg National Institutes of HealthOrtiz Guadalupe Internal Revenue ServicePankaj Bhasin DeloittePaul Troni Department of Housing and Urban DevelopmentShelly Turner PwCTeresa Rojas Social Security AdministrationWilliam Billiard U.S. Air Force

AFERM 2015 Summit


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Recognizing Excellence in Federal ERM

AFERM is establishing an ERM Award Program to recognize the achievements ofFederal professionals who demonstrate standards of excellence and make outstandingachievements in the ERM discipline and encourage and inspire other professionals torecognize their potential and elevate their ERM discipline.

Based on nominations of Federal ERM professionals submitted by third parties, eachyear AFERM will select one awardee for three award:

ERM Hall of Fame ERM Leader of the Year ERM Professional of the Year

The ERM Hall of Fame award will be presented each year to the top nominatedFederal practitioner who has made a lasting impact on his/her organization(s) andextraordinary contributions throughout his/her career to advance the ERM disciplinewithin the Federal sector, including the following:

Leadership Lasting impact on a Federal organization(s) Extraordinary contributions to advancing ERM Innovation

The ERM Leader of the Year award recognizes one nomined Federal practitionereach year who has demonstrated outstanding and sustained leadership and madeexceptional contributions to advancing ERM in the Federal sector, including:

Leadership Achievement Innovation Volunteerism

The ERM Professional of the Year award will be presented each year to onenominated Federal practitioner who has demonstrated exceptional initiative,volunteerism, professional development, achievement, and leadership potential earlyin his/her career, including:

Leadership potential Achievement Volunteerism Initiative Professional development

AFERM ERM Award Program


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Nominations for the ERM awards must be made by a third party, and the eligible

candidates must be Federal professionals. Nominations will be made via one-to-two

page essays highlighting the candidates’ achievements and contributions in regards

to Federal ERM and submitted no later than July 31st. Later this spring, AFERM wil

release additional details about the ERM Award Program with instructions for

submitting nominations.

First Annual Survey Report to be Published in May

With nearly 30 participants from the Federal Government, we are pleased to announcethe first annual AFERM ERM Survey Report is nearly ready for release! Co-sponsoredwith PwC, it captures feedback from Federal risk management practitioners throughtheir responses to the questionnaire and a number of in-person interviews.

Some key takeaways from the Survey include the following:

Effective risk management is a necessity and ERM is widely recognized as agrowing best practice in the Federal Government

The amount of resources deployed in support of ERM will increase in both thenear-term and the foreseeable future

Successful implementation and maturation of an ERM program in the Federalspace requires the support and commitment of Agency leadership

Thank you to PwC for helping lead the ERM Survey!

AFERM ERM Survey


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Evolving Federal ERM

The last year has seen critical milestones in the advancement of Federal ERM:

The Office for Management and Budget (OMB) updated OMB Circular A-11Section 270.24 which describes the attributes of effective ERM

The Government Accountability Office (GAO) updated the “Green Book”Standards for Internal Control in the Federal Government, which sets thestandards as of FY2016 for an effective internal control system for FederalAgencies

OMB announced it is updating the OMB Circular A-123 - Management'sResponsibility for Internal Control, which will likely include guidance on ERM.It is expected the circular will be released in FY2015 and be effective alongwith the Green Book at the beginning of FY 2016

The Committee of Sponsoring Organizations of the Treadway Commission(COSO) launched an online survey for its current project to review and updatethe 2004 ERM – Integrated Framework (Framework). The survey seeks inputand feedback from interested parties and is designed to capture views andinsights regarding the current Framework and suggestions for improvements

Last month, COSO announced the names of its 26-member Advisory Groupfor ERM-Integrated Framework update, including two Federal officials, KarenHardy, Department of Commerce Deputy Director for Risk Management,and as an Observer, Harrison Greene, Federal Deposit InsuranceCorporation Assistant Chief Accountant.

COSO emphasized its process is inclusive and that staff have indicated a specialinterest in hearing if and how the COSO Framework may take account of specialcircumstances of ERM in the Federal context. COSO will post its exposure draft andrevised versions of the Framework. All public comment letters will remain available tothe public at www.coco.org until the final documents are issued; and comments may besubmitted at www.coso.org/ermupdate.html via email [email protected],

or you may go through an Advisory Group member to make your views know. Also,Karen Hardy will reach out to the Federal ERM community.

Lastly, AFERM is creating an “ERM Thought Leadership” page on our website to helpkeep our members updated on events impacting Federal ERM, and we will post ideason how organizations can help evolve Federal ERM. We invite you to send yourthoughts and recommendations to Deb Swedberg of Accenture [email protected] and Tom Stanton at [email protected].

Thought Leadership


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Communicating the Value of ERM

We’d like to hear from you on your experiences in leading or supporting risk

management efforts, please send a short description to the AFERM Communications

team. We hope to accumulate a series of vignettes that will support continued interest

in the benefits of ERM throughout the Federal Government.

Please send your success stories to the AFERM Communications Team at

[email protected].

Welcome to AFERM

New Member Agency/Company

Alex Sponko PwCAlexandra Ritchie Department of the Interior, Bureau of Ocean Energy ManagementCaitlin McGurn PwCDaniel Daly Federal Communications Commission, Office of Managing DirectorDebra Williams Department of Justice, Office of Justice ProgramsDeon Minnaar KPMGJennifer Melchoir PwCJohn Siegwarth KPMGJon Stehle MITREKathryn GillisKim Nesbitt MITRELori GiblinMartin LeePatricia SolerRichard Javier PwCRobert Eckels RPM3 SolutionsThomas Brandt Internal Revenue ServiceTim Cornello KPMGVance Stewart Department of the Army

Request for Your Success Stories

Welcome New and Renewed Members!


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Membership Provides Access to Valuable Resources

AFERM is dedicated to the advancement of Federal ERM. We serve our members

through a forum for discussion of subject matter relevant to the Federal risk

management profession, sponsoring educational and training programs, encouraging

professional development, influencing risk management policies and practices, and

serving as an advocate for the profession. We serve Federal Government officials and

the public through sponsoring efforts to ensure full and fair accountability for

management of risk in achieving organizational objectives. The benefits of AFERM

membership include the following:

Education, training, and knowledge

Insights on emerging trends, tools, and techniques

Career advancement and networking opportunities

Direct access to risk management professionals in the public and private sectors

Annual Federal ERM Summit for advancing industry best practices

AFERM Membership Benefits


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Leadership of AFERM

OfficersPresident, Tom StantonPast President, Al RunnelsPresident-Elect,Todd GramsTreasurer, Nadine CiprianiSecretary, Harold BarnshawVP at Large, Deb SwedbergVP at Large, Laurie ChampionVP at Large, Catherine ChatfieldVP at Large, Frank Vetrano

Corporate Advisory GroupMarc Greathouse, DeloitteBrian Wodarski, PwCBetsy Eger, KPMGKathryn Falconi, MorganFranklinDenise Lippuner, Grant ThorntonNicholas Tharakan, MetricStreamKorina Park, ProtivitiShawn O'Rourke, ProConcepts

AuditEd Hau, ChairHarold Barnshaw

Bylaws, Polices and ProceduresFredrick Nunley, ChairLon Cross

CommunicationsShelly Turner, ChairPankaj BhasinAnna CalcagnoKorina ParkEllen Kleiman-ReddenRaji Sarma

Finance/BudgetNadine Cipriani, Chair

Long Range/Strategic PlanningVance Stewart, Chair

MembershipYehuda Schmidt, ChairTerry BoydCalandra DixonDavid EmanuelGilda KolesnikovaKameron Turner

ProgramsDaniella Datskovska, Co-ChairThomas Holland, Co-ChairBrian BarnierFolake FadayomiJanelle PannellAndy Tiedeman

2015 AFERM Officers and Committees


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Thank you for your support!

Corporate Sponsors

Documents

Issue 15 AFERM Updates 1st Quarter, 2015...... ERM has now become a priority for OMB and GAO. ... 2015 November 3rd through 4th at George ... await OMB’s guidance on ERM as a part