Issue 18 AFERM Updates Updates Association for ... (OMB) release of updated A-123 guidance that will...

Thought Leadership for the Federal Enterprise Risk Management Community www.aferm.org

Thought Leadership for the Federal Enterprise Risk Management Community

AFERM Updates Association for Federal Enterprise Risk Management

Issue 18 4th Quarter, 2015

In This Issue A Note from the AFERM President

AFERM Awards Program

AFERM 2015 Summit

Quarterly AFERM Luncheon

Thought Leadership

AFERM ERM Training

Request for Your Success Stories

AFERM Membership Benefits

2015 AFERM Officers and Committees

Corporate Sponsors

Highlights In this fourth quarter edition of the 2015 AFERM Newsletter, we recount the organization’s achievements in 2015, thank former AFERM president Tom Stanton for his dedication to AFERM, welcome new president W. Todd Grams, and look forward to continuing to advance ERM in the Federal sector in the new year.

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http://www.aferm.org/


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A Note from the AFERM President The Year Ahead for Federal ERM By W. Todd Grams

Let me begin by wishing all of our AFERM members a Happy New Year! I truly believe we are at the beginning of what could very well be the most impactful year ever for ERM in the Federal Government.

Why do I believe that? Well, there are three reasons: First, the Office of Management and Budget’s (OMB) release of updated A-123 guidance that will increase interest in and

action toward implementing ERM; second, opportunities for AFERM to leverage potential relationships with other leading organizations dedicated to advancing ERM; and third, the development of new strategies that will further drive us to achievement of our AFERM objectives.

Since the mid-1990s, ERM had evolved in the Federal Government on an agency-by-agency, ad hoc basis without any central guidance. In 2014, OMB issued the first-ever Government-wide ERM guidance in OMB Circular A-11, Preparation, Submission, and Execution of the Budget. A-11 describes the benefits of ERM and encourages agencies to practice ERM.

In 2015, OMB issued revised drafts of Circular A-123 guidance, Management’s Responsibility for Enterprise Risk Management and Internal Control. As we are going to press with this President’s letter, the updated A-123 is still in the clearance process and the final version has not been released by OMB. It is anticipated OMB will require Agencies to develop risk profiles and risk governance in 2016, and in 2017 and beyond, work to more fully implement ERM as a management program. OMB is also expected to provide guidance on ERM integration with internal controls.

While ERM has grown organically over the last decade in the Federal Government, the velocity of acceptance has been relatively slow. With OMB issuing guidance and setting specific expectations with regards to risk management, we are hopeful that even greater attention will be paid to ERM - in terms of learning about what it is and, understanding how it can help Agencies achieve their missions, and taking action to put ERM programs in place.



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With OMB’s push for greater action on ERM across the Federal Government, this is a perfect time for AFERM to leverage potential relationships with other organizations dedicated to advancing ERM. This is an approach I emphasized at our annual Summit in November. By leveraging these relationships we can accomplish much more than we could on our own.

I am confident that we can find, develop, and sustain collaborative relationships that will help us drive our strategies and achieve our objectives, benefiting all of our AFERM members. We will seek to leverage our relationships with other professional ERM and risk management associations and organizations in the areas of training, education, professional standards, networking, and certification.

As we leverage these relationships it is imperative we direct this collaboration and our energies to those strategies that will most effectively assist us in achieving our Association’s objectives. The beginning of a new year is a great time to remind ourselves that our AFERM objectives are to:

• Contribute to the advancement of ERM and risk management principles and standards;

• Promote appropriate utilization of risk management methods and techniques; • Encourage and provide educational events for the interchange of ideas among risk

managers; • Provide networking opportunities that bring together professional risk managers; • Promote the observance of professional standards and ethics in the accomplishment

of ERM activities; and • Recognize the unique skills and knowledge required of professionals who specialize in

government enterprise risk management by sponsoring a professional certification program.

In January and February the AFERM Board will evolve our strategy for 2016 and beyond to help steer our actions and resources in achieving our objectives. I’ll keep you updated on these developments, and I encourage you to support our efforts by volunteering and getting involved in AFERM activities.

This New Year holds a great deal of promise for those of us who believe in the practice of ERM in the Federal Government and the benefits that it can bring to Departments and Agencies. We are looking forward to a positive and productive 2016 in our AFERM community.



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Recognizing excellence in the ERM profession In 2015, AFERM established the ERM Awards Program to honor Federal professionals making a lasting impact on Federal organizations in the advancement of ERM. At the AFERM Summit in November, the following ERM professionals were recognized for 2015:

• Dr. Nancy A. Potok, Deputy Director and Chief Operating Officer, U.S. Bureau of the Census – Enterprise Risk Management Leader of the Year

• Cynthia J. Vitters, Director, Risk Analysis & Reporting, U.S. Department of Education, Federal Student Aid - Enterprise Risk Management Hall of Fame

The “Leader” award recognizes accomplishments as recently as within 2015, and the “Hall of Fame” award reflects accomplishments over the course of the awardee’s career. AFERM determined the 2015 awardees based on nominations submitted by AFERM members. Nomination forms are available via the AFERM website at www.aferm.org. Nominations for 2016 may be submitted any time via email to [email protected]. Congratulations to the inaugural AFERM ERM Awards winners!

AFERM ERM Awards Program



mailto:[email protected]


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Expectations * Results * Momentum: ERM This year marked the 8th Annual AFERM Summit. The two-day event held on November 3rd and 4th at George Mason University School of Business Education was sold out at 275 registrants. Former AFERM president Tom Stanton presided over the 2015 Summit, and on the second day passed the torch to incumbent president Todd Grams. This year’s Summit Planning Committee was chaired by Daniella Datskovska of EY. Members of the

Committee include Bill Billiard, Brack Boone, Jamal Bouaichi, Laurie Champion, Guadalupe Ortiz, Bobbi-Jo Pankaj, Jane Roberts, Deb Swedberg, Paul Troni, and Goli Trump. Plenary speakers include the following:

• The Honorable John Koskinen, Commissioner, Internal Revenue Service • The Honorable David Mader, Controller, Office of Management and Budget • Dr. Nancy Potok, Deputy Director and Chief Operating Officer, U.S. Census

Bureau • Chris Mihm, Managing Director, Strategic

Issues, Government Accountability Office • Robert Hirth, Jr., Chair, Committee of

Sponsoring Organizations of the Treadway Commission (COSO)

• Admiral Thad Allen, United States Coast Guard (Ret.)

We thank Ms. Datskovska, the Summit Planning Committee members, and the 36 plenary speakers, session presenters, and panelists for their participation in this year’s Summit and for their dedication to advancing ERM in the Federal sector. These volunteers made possible our most successful Summit yet.

AFERM 2015 Summit



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Summit presentations are available via the AFERM website at https://www.aferm.org/resources/. Also, Summit attendees are eligible for up to 12 NASBA approved continuing professional education (CPE) credit hours and should have received an email from George Mason University with a certificate of completion based on submitting their paperwork at the conclusion of ay two of the Summit.


https://www.aferm.org/resources/


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Stephen A. Quick, Chief Risk Officer, Federal Deposit Insurance Corporation (FDIC) Featured Speaker at the January 14th Luncheon AFERM held a luncheon on January 14th, 2016 at Clyde's of Gallery Place in Washington, DC, with a presentation on ERM by Stephen Quick, the Chief Risk Officer (CRO) for the Federal Deposit Insurance Corporation (FDIC). The luncheon provided great networking and an informative presentation for the 63 federal risk professionals and others in attendance.

Mr. Quick joined the FDIC in August of 2011 as the Corporation’s first Chief Risk Officer. In this role, he assists the Board and senior management in identifying risks facing the Corporation and in establishing, prioritizing, and communicating the Corporation's risk management objectives and direction. From 1993 to 2011, he performed similar roles for the Inter-American Development Bank, first as Manager for Strategic Planning and Budget and later as the first Director of the Bank’s independent Office of Evaluation and Oversight. Prior to joining the IADB, he worked on Capitol Hill as Executive Director of the Joint Economic Committee and as Chief Economist for both House and Senate Committees dealing with banking and economic policy issues. He holds a PhD from Stanford University and has taught at Stanford and American Universities and at Holy Cross College.

In his presentation, Mr. Quick talked about the current environment for ERM in the federal government, which includes both increasing interest as well as continuously evolving and expanding types of risks that agencies face. Mr. Quick gave background on risk management and ERM at the FDIC and provided an overview of some of the challenges encountered in establishing an ERM program. He also talked about the importance of ERM for an organization like the FDIC whose reputation is so important to our nation, as the public’s confidence in the banking system is contingent upon its trust and confidence in the FDIC’s ability to carry out its mission.

Mr. Quick talked about some of the benefits that ERM can bring an agency, including better communication across silos, increased transparency and prioritization of risks and improved strategic planning. He also talked about the need to gradually build trust throughout the organization and how to get employees to be more willing and comfortable to work with the ERM program and communicate about risks they identify. This included reinforcing that the ERM program’s role is not to second-guess management decisions, but to help improve the quality of the decisions. Mr. Quick also shared examples of the types of enterprise risks he sees at FDIC.

Quarterly AFERM Luncheon



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Thank you to Stephen Quick for his informative presentation!

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Please be on the lookout for an invite to our next luncheon to be scheduled for March 2016. The AFERM luncheons are coordinated by Thomas Holland of PwC at [email protected].




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OMB Circular A-123 and the Ongoing Push for Risk-based Management of Federal Agencies Harold Barnshaw, AFERM Secretary

The upcoming release of the revised OMB Circular A-123 marks the latest and most significant step towards shifting federal agencies to a risk-based operating model. The Circular will link internal controls to risk management and require agencies to implement enterprise risk management (ERM). While we will have to wait for the release of the final version of the guidance to be certain, it appears that the OMB reworked this Circular in a manner that will allow agencies to shape their ERM programs to their particular environments.

The updated A-123 will build on the OMB’s introduction of ERM to the federal government in Section 270 of Circular A-11. This Circular defined ERM. Circular A-123 will provide agencies with more information on how to create an ERM framework. Agencies should expect new requirements that specify development and maintenance of an agency risk registry, and the establishment of risk management councils to oversee how agencies address their most important risks. Over the next few years, agencies will have the chance to refine their risk registries. The OMB will expect risk profile information to inform the agency strategic plans for the 2019 President’s Budget.

The A-123 Circular will likely have limited ERM implementation guidance. For more comprehensive direction, agencies will have to wait for the OMB to develop an ERM playbook or to provide hands-on guidance in the upcoming revision to Appendix A, Internal Control over Financial Reporting. The OMB is expected to broaden the scope of Appendix A to cover the end-to-end enterprise rather than the current focus on financial reporting.

How the OMB will set the appropriate level of transparency for agency risk information remains an open question. Is agency risk information confidential? Would an agency risk registry be fair game for Freedom of Information Act requests? Would an agency Inspector General have full and automatic access to this information? Would external auditors have the right to request risk registry information as part of an audit? The OMB attorneys will have to work this out and clearly define the rules of the relationship between agencies and their oversight bodies to help ensure communications across an agency and the success of ERM.

Thought Leadership



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Finally, it is notable that the OMB is not adding a risk management reporting requirement to the annual assurance statement required by the Federal Managers’ Financial Integrity Act. As in past years, the statement will remain focused on internal controls and agencies will not have to make any summary conclusions about the effectiveness of their risk management programs.

________________________________ We invite you to send your thought leadership recommendations to Deb Swedberg of Accenture at [email protected] and Todd Grams at [email protected] for inclusion on AFERM “ERM Thought Leadership” web page. Thought leadership and white papers help keep our members updated on events impacting Federal ERM, and we post ideas on how organizations can help evolve Federal ERM.





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Advancing ERM through education

AFERM’s ERM training program was established in 2015. The first of two roll-outs of computer-based training content was released to AFERM members in November 2015, and the second part will be released in the first quarter of calendar year 2016. To date, 64 trainings have been completed and passed and 44 are in progress. Following is the list of courses which are available to members at https://aferm699.mindflash.com.

AFERM ERM Courses Authors Release Dates

Foundational Courses

Overview of Risk Management in the Federal Government AFERM November 2015

ERM Governance Deloitte November 2015 Establishing lines of authority and accountability between ERM and Agency components

GrantThornton November 2015

Intermediate Courses Integrating ERM into Mission, Strategy and Planning Activities Deloitte Q1 2016 Developing a Practical and Informative Risk Identification and Assessment Process

EY November 2015

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

KPMG Q1 2016

Advanced Courses Consolidating Agency-wide risk profiles into a portfolio-level view PwC November 2015 Defining Risk Appetite and Risk Tolerance MetricStream Q1 2016 Exposure Analysis and Risk Quantification RPM3 Q1 2016 ERM Case Study AFERM Q1 2016

Thank you to our corporate sponsors for developing the courses!

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The AFERM ERM training initiative is led by Laurie Champion of AON Risk Solutions and Folake Fadayomi of Deloitte. The Training Team may be contacted at [email protected].

AFERM’s ERM Training Program


https://aferm699.mindflash.com/


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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].

Request for Your Success Stories




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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

The chair of the AFERM Membership Committee is Yehuda Schmidt of Cotton & Company at [email protected].

AFERM Membership Benefits




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Leadership of AFERM Officers

President, Todd Grams Past President, Tom Stanton President-Elect, Sallyanne Harper Treasurer, Tim Hanlon Secretary, Harold Barnshaw VP at Large, Deb Swedberg VP at Large, Laurie Champion VP at Large, Catherine Chatfield VP at Large, Frank Vetrano

Corporate Advisory Group

Michael Lumb, Accenture Marc Greathouse, Deloitte Brian Wodarski, PwC Betsy Eger, KPMG Isabelle Dikland, MorganFranklin Denise Lippuner, Grant Thornton Nicholas Tharakan, MetricStream Korina Park, Protiviti Shawn O'Rourke, ProConcepts

Audit

Ed Hau, Chair Harold Barnshaw

Bylaws, Policies and Procedures

Fredrick Nunley, Chair Lon Cross

Communications Shelly Turner, Chair P.K. Bhasin Anna Calcagno Korina Park Ellen Kleiman-Redden Raji Sarma

Finance/Budget

Nadine Cipriani, Chair Long Range/Strategic Planning

Vance Stewart, Chair Membership

Yehuda Schmidt, Chair Terry Boyd Calandra Dixon David Emanuel Gilda Kolesnikova Kameron Turner

Programs

Daniella Datskovska, Co-Chair Thomas Holland, Co-Chair Brian Barnier Folake Fadayomi Janelle Pannell Andy Tiedeman

2016 AFERM Officers and Committees



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Issue 18 AFERM Updates Updates Association for ... (OMB) release of updated A-123 guidance that will...

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