1. Enterprise Risk Management (ERM) Minnesota Department of Transportation Enterprise Risk Management (ERM) Minnesota Department of Transportation TRB International Partnership Day Transportation: Putting Innovation and People to Work January 26, 2012

2. DOT has formal, published risk management policies and procedures at the program or project level  35 of the 43 state DOTs (81 percent)  17 (39 percent ) have formalized ERM programs. How confident are state DOTs at applying appropriate risk management strategies at the various levels of the enterprise:  none felt that their agency was always successful,  twenty-six respondents (62 percent) felt that they frequently apply the appropriate strategies,  nine (21 percent) felt that they seldom applied the appropriate strategy, and  eight (19 percent) felt that they never apply the appropriate strategies. State DOT State-Of-The-Practice Source: NCHRP Report 20-24(74) Executive Strategies for Risk Management by State Departments of Transportation (2011)

3. Relationship of Risk Management to Transportation Business Objectives Source: NCHRP Report 20-24(74) Executive Strategies for Risk Management by State Departments of Transportation (2011)

4. MnDOT Strategic Vision Global leader in transportation committed to upholding public needs and collaboration with internal and external partners to create a safe, efficient and sustainable transportation system for the future.

5. MNDOT defines risk as the effects of uncertainty on objectives; or anything that could be an obstacle to achieving goals and objectives. Enterprise Risk Management (ERM) is an analytic and management process that ensures a focus on identifying, assessing, and responding to the inherent uncertainties of managing an organization and its assets.

6. Enterprise Risk Management Organizational Risk Management Programmatic Risk Management Project Risk Management Operations Risk Management WorkforceProducts and Services Quality of Life Indicators Performance Measures Market Research

7. –Risk Assessment –Market Research –Performance Management –Quality of Life Enterprise Risk Management Results in Integrated:

8. Each Organizational Unit’s Mission Manages Broader Risk(s) to MnDOT’s Strategic Vision Focus is on strategic objectives and corresponding areas of highest enterprise risk and benefit Assessing tasks, human resource levels, structure, or any risks to organizational unit performance objectives Organizational Congruency Risk Management

9. Balanced program risk assessment Assessment of broad system and quality of life risks Linkage of risks to performance measures (risk tolerance levels) at district and state levels Program investment levels mitigate risks Rate of recovery approach (e.g., Better Roads) Assessment of State Transportation Improvement Program and 10-year outlook Performance-based Program RM

11. Identify and manage risk of each transportation project Respond to risk levels to develop each project –Business Case –Scope –Delivery Method Leads to oversight levels and management plans Adjust design and performance Adjust resources Project Risk Management

12. Assessing risks to current Operations budgets Multiple levels and core services, such as snow and ice control Highway Systems Operations Plan (HSOP) –Challenged proposed funding levels for needs –Resulted in $189 million in proposed cuts –Recommended acceptance of more risk –Prioritized budget risks and will help future evaluations for budget cut and increase scenarios –The #1 investment priority need with current budget is to increase funding level for road salt due to price increases Operations Risk Management

13. Establish Risk Management Working Group –“Leadership Development” candidates –Business Unit Management liaisons from each Division –Internal and External Consultants (staff augmentation and subject matter experts) Project Next Steps

14. Integrate ERM with: –Existing Risk Management Practices Organization, Program, Project and Operations –Market Research and Quality of Life Data –Performance Management –MnDOT’s system for setting annual goals with employees (Performance Management & Appraisal) Next Steps, continued

15. Future Phases of Action Plans; Communications –Identify gaps and opportunities based on risk –Prioritize greatest risks to the strategic vision & communicate –Produce and implement action plans (e.g. business plans) to mitigate enterprise risk and close gaps outside of accepted “risk appetite” with target time-frames –Assess adequacy and effectiveness of existing risk reporting –Develop process for periodic reporting of emerging risks –Assess progress and benefits of ERM initiative against objectives and communicate to target audiences –Continue organization-wide communication process with links to performance appraisal to build risk management culture –Assess on-going resource needs post project completion Next Steps, continued

16. Discussion and Questions

17. Thank You! Jean Wallace, Director, Policy Analysis Research & Innovation Jean.Wallace@state.mn.us Eric Davis, ERM Project Manager Eric.Davis@state.mn.us