Enterprise risk and opportunity management : concepts and step-by-step examples for pioneering scientific and technical organizations

316 Pages·2017·17.56 MB·English

by  Benjamin

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Table of Contents
Cover
Title Page
Copyright
Figures
Tables
Preface
Introduction
Chapter 1: An EROM Primer for Organizations Concerned with Technical Research,
Integration, and Operations (TRIO Enterprises)
1.1 EROM Scope and Objectives for TRIO Enterprises
1.2 EROM Definitions and Technical Attributes for TRIO Enterprises
Notes
References
Chapter 2: Coordination of EROM with Organizational Management Activities
2.1 The Executive, Programmatic, and Institutional/Technical Management Functions
and Their Interfaces
2.2 EROM-Relevant Management Activities
2.3 Coordination of EROM with Management Activities
2.4 Communication across Extended Partnerships
2.5 Contribution of EROM to Compliance with Federal Regulations and Directives
Notes
References
Chapter 3: Overview of EROM Process and Analysis Approach
3.1 Organizational Objectives Hierarchies
3.2 Populating the Organizational Objectives Hierarchies with Risk and Opportunity
Information
3.3 Establishing Risk Tolerances and Opportunity Appetites
3.4 Identifying Risk and Opportunity Scenarios and Leading Indicators
3.5 Specifying Leading Indicator Trigger Values and Evaluating Cumulative Risks and
Opportunities
3.6 Identifying and Evaluating Risk Mitigation, Opportunity Exploitation, and Internal
Control Options
Notes
References
Chapter 4: The Development and Utilization of EROM Templates for Performance
Evaluation and Strategic Planning
4.1 Overview
4.2 Demonstration Example: The NASA Next-Generation Space Telescope as of 2014
4.3 Example Objectives Hierarchies
4.4 Risks, Opportunities, and Leading Indicators
4.5 Example Templates for Risk and Opportunity Identification and Evaluation
4.6 Example Templates for Risk and Opportunity Roll-Up
4.7 Example Templates for the Identification of Risk and Opportunity Drivers,
Responses, and Internal Controls
4.8 Upward Propagation of Templates for Full-Scope EROM Applications
4.9 Application of the Templates to Organizational Planning and the Selection from
among Alternative Candidate Portfolios
Notes
References
Chapter 5: Management and Implementation of EROM at the Institutional/Technical Level
(Technical Centers or Directorates)
5.1 EROM from a Technical Center's Perspective
5.2 Extended Enterprises and the Technical Center's Extended Organization
5.3 EROM-Informed Budgeting of Resources across a Technical Center's Extended
Organization
References
Chapter 6: Special Considerations for EROM Practice and Analysis at Commercial TRIO
Enterprises
6.1 Overview
6.2 Risk and Opportunity Scenarios and Leading Indicators
6.3 Controllable Drivers, Mitigations, Actions, and Internal Controls
Chapter 7: Examples of the Use of EROM Results for Informing Risk Acceptance
Decisions
7.1 Overview
7.2 Example 1: DoD Ground-Based Midcourse Missile Defense in the 2002 Time
Frame
7.3 Example 2: NASA Commercial Crew Transportation System as of 2015
7.4 Implication for TRIO Enterprises and Government Authorities
References
Chapter 8: Independent Appraisal of EROM Processes and Results to Assure the
Adequacy of Internal Controls and Inform Risk Acceptance Decisions
8.1 Background
8.2 Queries for an Independent Appraisal of EROM in the Contexts of Internal Control
and Risk Acceptance
References
Chapter 9: Brief Overview of the Potential Integration of EROM with Other Strategic
Assessment Activities
9.1 Technical Capability Assessment (TCA)
9.2 Strategic Annual Review (SAR)
9.3 Portfolio Performance Review (PPR)
References
Chapter 10: An Integrated Framework for Hierarchical Internal Controls
10.1 Internal Control Principles and the Integration of Internal Control, Risk
Management, and Governance
10.2 Methodological Basis
10.3 Examples
10.4 Incorporation of Internal Control Principles into the Control Loop Approach
10.5 Summary of Observations
Note
References
Appendix A: Acronyms
Appendix B: Definitions
About the Companion Website
About the Author
Index
End User License Agreement
List of Illustrations
Chapter 1: An EROM Primer for Organizations Concerned with Technical Research,
Integration, and Operations (TRIO Enterprises)
Figure 1.1 Decision making is a balance between risk and opportunity
Figure 1.2 Risk tolerance relative to diverse goals and objectives
Figure 1.3 The elements of RIDM and CRM applied to the TRIO enterprise's
management activities at various levels
Chapter 2: Coordination of EROM with Organizational Management Activities
Figure 2.1 The three levels of management within a typical enterprise
Figure 2.2 The principal activities and transfer of information within and between
levels of management
Figure 2.3 Activities within the executive level and transfer of information from/to
external and internal sources
Figure 2.4 Activities within a program directorate (programmatic level) and transfer of
information from/to external and internal sources
Figure 2.5 Activities within a technical center (institutional/technical level) and
transfer of information from/to external and internal sources
Figure 2.6 Interfaces between EROM activities and management activities in the
development of an organizational plan
Figure 2.7 Interfaces between EROM activities and management activities in the
evaluation of performance relative to the organizational plan
Figure 2.8 The relationship between governance, enterprise risk management, and
internal controls according to the new OMB Circular A-123
Chapter 3: Overview of EROM Process and Analysis Approach
Figure 3.1 Types of objectives developed at the executive level
Figure 3.2 Types of objectives developed at the programmatic level
Figure 3.3 Types of objectives developed at the institutional/technical level
Figure 3.4 Conceptualization of an enterprise-wide objectives hierarchy
Figure 3.5 Associating risk and opportunity information with objectives in the
organizational objectives hierarchy
Figure 3.6 Risk and opportunity response and watch boundaries
Figure 3.7 Example taxonomy for enterprise risks and opportunities
Figure 3.8 Risk and opportunity leading indicator triggers
Figure 3.9 Hypothetical results showing how the elimination of a risk driver affects
cumulative risk and the elimination of an opportunity driver affects cumulative
opportunity
Figure 3.10 Iterative process for identifying and evaluating a risk response, opportunity
action, and internal control plan that balances cumulative risk, cumulative opportunity,
and cost
Chapter 4: The Development and Utilization of EROM Templates for Performance
Evaluation and Strategic Planning
Figure 4.1 Executive-level objectives for the example demonstration
Figure 4.2 Programmatic-level objectives for the example demonstration
Figure 4.3 Center-level objectives for the example demonstration
Figure 4.4 Integrated objectives hierarchy showing primary interfaces between
objectives
Figure 4.5 Individual risks and associated leading indicators for executive-level
objectives
Figure 4.6 Individual risks and associated leading indicators for program-level
objectives
Figure 4.7 Individual risks and associated leading indicators for center-level
objectives
Figure 4.8 Individual opportunities, introduced risks, and associated leading indicators
for executive-level objectives
Figure 4.9 Secondary objective interfaces for the example demonstration
Figure 4.10 Schematic of roll-up method alternative 1 for Objective E (>10) #1
Figure 4.11 Schematic of roll-up method alternative 2 for Objective E (>10) #1
Figure 4.12 Schematic of risk roll-up for Objective P (1) #11 in the example
demonstration
Figure 4.13 Illustration of risk and opportunity scenario drivers and their time-frame
criticalities
Figure 4.14 Illustration of risk and opportunity constituent drivers and their time-frame
criticalities
Figure 4.15 Schematic showing the upward propagation of templates for full-scope
EROM applications
Chapter 5: Management and Implementation of EROM at the Institutional/Technical Level
(Technical Centers or Directorates)
Figure 5.1 The extended organization for a NASA center
Figure 5.2 NASA example of how each center takes risk and opportunity inputs from a
variety of entities and supports multiple strategic objectives of the agency
Figure 5.3 A representative EROM organizational chart for a technical center that
manages extended enterprises
Figure 5.4 The success of a technical center's inherited strategic objectives is
dependent on the “right-sizing” of the resources available to the center (NASA
example)
Figure 5.5 Outline of the steps in the iterative process for optimizing asset distributions
based on costs and current and projected values of leading indicators
Figure 5.6 Illustration of iterative process for optimizing asset distributions based on
costs and current and projected values of leading indicators
Chapter 6: Special Considerations for EROM Practice and Analysis at Commercial TRIO
Enterprises
Figure 6.1 Integration of qualitative and quantitative modeling to evaluate the
likelihood of success of a commercial TRIO enterprise
Figure 6.2 Example enterprise risk taxonomy for a commercial TRIO enterprise
Figure 6.3 Example opportunity taxonomy for a commercial TRIO enterprise
Figure 6.4 Example risk scenario statement and scenario event diagram for a risk in the
taxonomic category “Competition from other companies”
Figure 6.5 Example risk scenario statement and scenario event diagram for a risk in the
taxonomic category “Customer satisfaction”
Figure 6.6 Example risk scenario statement and scenario event diagram for a risk in the
taxonomic category “Leadership mortality and succession issues”
Figure 6.7 Example risk scenario statement and scenario event diagram for a risk in the
taxonomic category “Accident causing human deaths”
Figure 6.8 Example risk scenario statement and scenario event diagram for a risk in the
taxonomic category “Changes in foreign exchange rates and interest rates”
Figure 6.9 Example risk scenario statement and scenario event diagram for a risk in the
taxonomic category “Labor strikes”
Figure 6.10 Example risk scenario statement and scenario event diagram for a risk in
the taxonomic category “Exploitation of new technology”
Figure 6.11 Example risk scenario statement and scenario event diagram for a risk in
the taxonomic category “Act of terror”
Figure 6.12 Example risk and opportunity matrix for quantitative financial objectives
Figure 6.13 Example risk scenario statement, scenario event diagram, and scenario
matrix for a risk in the taxonomic category “Competition from other companies”
Figure 6.14 Example risk scenario statement, scenario event diagram, and scenario
matrix for a risk in the taxonomic category “Exploitation of new technology”
Chapter 7: Examples of the Use of EROM Results for Informing Risk Acceptance
Decisions
Figure 7.1 Objectives and hypothetical cumulative risk parity table for GMD example
Figure 7.2 Risks and leading indicators for GMD example (2002 time frame)
Figure 7.3 Hypothetical composite leading indicator parity table for GMD example
Figure 7.4 Objectives and hypothetical cumulative risk parity table for CCTS example
Chapter 9: Brief Overview of the Potential Integration of EROM with Other Strategic
Assessment Activities
Figure 9.1 Relationship between the TCA process and the EROM objectives interface
and influence template
Figure 9.2 Relationship between the EROM risk-and-opportunity-based asset
optimization process and the TCA asset right-sizing objective
Figure 9.3 Relationship between the EROM risk and opportunity identification and
leading indicator evaluation templates and the SAR process
Figure 9.4 Relationship between the EROM risk and opportunity roll-up templates and
the SAR process
Chapter 10: An Integrated Framework for Hierarchical Internal Controls
Figure 10.1 Conceptualization of the relationship between governance, risk
management, and internal controls: strategic planning
Figure 10.2 Conceptualization of the relationship between governance, risk
management, and internal controls: organizational performance evaluation
Figure 10.3 Simplified schematic of the interfaces between organizational management
functions and organizational management levels
Figure 10.4 Standard control loop form
Figure 10.5 Example simple control loop for a mechanical system
Figure 10.6 Example form of a hierarchical system of internal control loops
Figure 10.7 Example primary control loop for the objective of improving risk
management and system safety methodology and practice within the enterprise
Figure 10.8 Process diagram for the selected control activity: “Develop and update
risk management and system safety policies, procedures, standards, and guides”
Figure 10.9 Secondary control loop for the selected control activity: “Develop and
update risk management and system safety policies, procedures, standards, and guides”
Figure 10.10 Process diagram and tertiary control loop for the selected control
activity: “Develop and update RM and SS policies, procedures, standards, and guides”
Figure 10.11 Example primary control loop for CCP's objective of achieving
acceptable safety within schedule and budget using the RBA process and shared
assurance model
Figure 10.12 Example generic primary control loop for achievement of internal control
principles
Figure 10.13 Example primary control loop for demonstration of a commitment to
integrity and ethical values
List of Tables
Chapter 2: Coordination of EROM with Organizational Management Activities
Table 2.1 Typical Executive, Program Directorate, and Technical Directorate
Managerial Roles and Responsibilities (Adapted from NASA 2014a, Table D-1)
Table 2.2 Executive, Program Directorate, and Technical Directorate Standards of
Support to Be Provided by EROM Consistent with Roles and Responsibilities Outlined
Previously
Table 2.3 Example Risk Profile from the New OMB-Circular A-123
Chapter 3: Overview of EROM Process and Analysis Approach
Table 3.1 Typical Risk and Opportunity Scenario Types and Associated Leading
Indicators
Table 3.2 Published Guidelines for Roughly Estimating the Ratio of the System Failure
Probability from UU Risks to the System Failure Probability from Known Risks at
Time of Initial Operation (Benjamin et al. 2015)
Table 3.3 Example Likelihood Scale for a Risk or Opportunity Relative to a Critical
Organizational Objective
Table 3.4 Example Impact Scale for a Risk or Opportunity Relative to a Critical
Organizational Objective
Chapter 4: The Development and Utilization of EROM Templates for Performance
Evaluation and Strategic Planning
Table 4.1 A View of the Form of the Outcome for Cumulative Risks and Opportunities
Table 4.2 Risk and Opportunity Identification Template
Table 4.3 Leading Indicator Evaluation Template
Table 4.4 Example Entries for Leading Indicator Evaluation Template for Objective
P(1) #11: Deliver the Cryocooler Subsystem
Table 4.5 Objectives Interface and Influence Template
Table 4.6 Known Risk Roll-Up Template
Table 4.7 Example Entries for Known Risk Roll-Up Template for Objective P(1) #11: