Organizational resiliency is just as a priority in the U.S. public sector as in other industries. While key U.S. Federal policies, revised in 2016, established mandatory actions to guide cabinet-levelagencies toward resiliency, the threat of emerging risk still requires vigilant leadership.
OMB Circular A123 (Management’s Responsibility for Enterprise Risk Management (ERM) and Internal Control) strategically outlines several mandatory requirements that federal agencies must meet to ensure a path towards resiliency:
· Creating an initial risk profile
· Establishing a governance structure, and
· Defining a risk appetite
A risk profile provides a comprehensive analysis of the risk government entities face in achieving their strategic objectives. It reflects a fraction of the many risks across an agency of most significance to leaders. A governance structure helps entities manage risk facilitated by high-level leaders within the organization. The risk appetite is the broad-based amount of risk an organization is willing to accept to pursue its mission and vision.
Meeting each requirement forces agencies to take a close, hard look at their internal operations, accountability systems, and culture to support mission success during times of volatility, uncertainty, complexity, and ambiguity - a VUCA world.
Yet, compared to other retail, health, finance, or technology entities, U.S. public sector agencies are not known for being the most agile. Government systems are complex and unwieldy when coupled with diverse missions, goals, and objectives. But notable intentions for becoming more resilient are not without effort.
A recent survey of U.S. federal government agencies found that ERM continues to exhibit performance levels reflective of an emerging capability. Having a well-defined risk appetite is one of the most impactful improvements their organizations could make in preparing for anticipated risks. In terms of investments in ERM, federal agencies are dedicating more significant funding to ERM activities, with respondents reporting annual budgets greater than $1M -- doubling from the previous year.
Like many industries, the pandemic had a profound impact on government operations and course-corrected any previous lack of initiative regarding risk prevention within organizations. Nearly 6 out of 10 survey respondents noted that the COVID-19 pandemic had caused their organizations to include emerging risks on their enterprise risk profiles in 2021. That is a big win for the public sector.
These findings indicate the measurable improvement the federal public sector is undertaking to become more resilient and responsive to the needs of its’ citizens and stakeholders.
However, culture and leadership-related challenges continue to be the most prominent barriers facing organizations despite the progress. To be fully resilient, agencies must address rigid cultural resistance to change and acquire continuous Executive level buy-in.
Eventhough resiliency or being resilient can mean different things to many leaders, a common understanding is the capacity to recover quickly from difficulties. As we have observed during the pandemic, resilient organizations can reset, rebrand, and relaunch without pause. Without this attribute, it becomes more difficult to succeed and thrive during the most challenging times.
- OMB Circular A123, U.S. Office of Management and Budget
- Guidehouse Federal Survey Results 2021
Copyright 2022 Strategic Leadership Advisors LLC
About the Author
Karen Hardy, Ed.D, RIMS-CRMP, is a public sector risk management expert. She is the CEO of Strategic Leadership Advisors LLC. Dr. Hardy is the author of the best-selling textbook Enterprise Risk Management: A Guide for Government Professionals. She advises national and multinational organizations on Enterprise Risk Management strategies. You can listen to more commentary on risk management at https://www.FlipThisRiskPodcast.com