Risk Management forPractitioners
The 29th Japan Road Congress –Risk Management Symposium
Tokyo, Japan
2 November 2011

Connie Yew
Federal Highway Administration
U.S. Department of Transportation

1

Topics• Why Risk Management?
• Risk Management Framework• Example of Risk Management Application• Information on Designing for Disasters2

Why Risk Management?
 Aging Infrastructure Congestion Inadequate Funding Accountability for Useof Federal Funds

Source: FHWA

3

AgingInfrastructure

Source: AASHTO

Source: AASHTO

Congested Highways

6Source: AASHTO

Source: AASHTO

Stewardship & Oversight atFederal LevelStewardship: funds spent well
- Efficient & Effective Management of Fund

Oversight: funds spent correctly- Consistent with Laws, Regulations & Policies

Traditional Focus:– Process Management– Project Management

New Focus:– Risk-based Program Management– Performance Management

Risk Management Framework
Info
Monitor,Evaluate, Gathering
AdjustIncorporate
in Plan

Identify

Analyze

RespondPrioritize

8Document

InfoGathering
Identify

What is Risk?
• Future event• May or may not occur• Direct impact to project / program• Positive or Negative(Opportunity or Threat events)
9Risk StatementRisk statements should identify:• A specific and definable event (What if?)
• Likelihood that event will occur (How likely?)• The impact if it does occur (Then what?)10

Risk Identification

Unknowns

Knowns11

Tools & Techniques• Brainstorming• SWOT Analysis• Delphi Technique• Expert Interviews• Checklists• Assumption Analysis• Crawford Slip
12

Risk Analysis

Analyze

Prioritize

Document

Qualitative: Assesses risk likelihood andimpact using a scale of high, medium, and low
Quantitative: Analyzes risk likelihood andimpact numerically using specific numbers(likelihood, cost, time)13

Cardinal Risk Rating Matrix
Likelihood.9.7.5
.3
.1

.05
.04
.03
.02
.01

.09
.07
.05
.03
.01

.18
.14
.10
.06
.02

.36
.28
.20
.12
.04

.72
.56
.40
.24
.08

.05

.1

.2

.4

.8

Impact14

Ordinal Risk Rating Matrix
Likeli
hood

VH M
M
H
M L
L VL
VL VL

M
M
M
LVLH
M
M
M
L

VH UA
H VH
H
H
M H
M M

VL

LM

H

Impact15VH

Risk Prioritization• Never enough time, money, resource• Focus on the most important risks

Greatest Threat
Greatest Opportunity

16

Risk Response

Incorporatein Plan
RespondThreat Responses

Opportunity Responses

AvoidExploit

Transfer

Share

Mitigate

Enhance

AcceptAccept17

Response Comparison Chart
Risks
Responses

A12
3
45+BC

DE
Total++++++++

18-1
1
321

Risk Mapping• Correlates likelihood and impact into one overall
presentation tool
• Visually displays all types of risks and theirassociated risk level for each program or project• Makes outliers easily identifiable by aggregating
all risks in one place

19

Risk Map Example
Risk EHighMedium
Low

Risk H

Risk A
Risk D

Risk C

Risk G

Risk B

Likelihood

Very High

Risk F

Risk I
ImpactLow

Medium20HighVeryHighPurpose of Risk
Monitoring

Monitor,Evaluate,Adjust

Determine whether:• Responses implemented as planned• Response actions effective• New responses should be developed• Project assumptions are still valid• Likelihood and/or impact have changed• A risk trigger has occurred• Proper policies and procedures followed21Risk Map with Response
Strategy Effectiveness
Very HighHigh
MediumLow

Likelihood

Risk E

Risk H

Risk H

Risk A
Risk D

Risk B

Risk A

Risk D

Risk C

Risk G

Risk E
Risk B
Risk C

Risk I

Risk G
Risk I

Risk F
ImpactRisk F
EliminatedLow

MediumHigh
22

VeryHigh

Risk Management Application
Categories of Risk
10 Program Areas:
1. Finance
2. Environment
3. Planning
4. Right of Way
5. Safety

6. Design
7. Construction
8. System Preservation
9. Operations
10. Civil Rights
23

Risk Map24

Risk Management Plan
1. Local Agency Oversight
2. PS&E Quality
3. Contract Administration
4. Quality Assurance
5. DBE Program
6. Eligibility/Improper Payments
7. Achievement of Program Goals
8. Indian Reservation Roads
Program25

National Building Museum

Designing forDisaster
Partnering to mitigate
the impact of Natural
Disasters

Source:http://www.nationalbuildingmuseum.net/pdf/
NBM%20ICBE%20White%20Paper%20No
v%202010.pdf

26

National Building Museum

Designing for Disaster
Key Recommendations for:- U.S. Congress- Federal Agencies- State and Local Governments- Private Sector

3 Themes:- Raising Awareness- Linking Resources- Planning and Building for Resiliency
27

National Building Museum

Designing forDisaster
Exhibition – opening infall of 2012

Source:http://www.nationalbuildingmuseu
m.net/pdf/Designing%20for%20Di
saster%20110910.pdf

28

National Building Museum

Designing for Disaster
Highlights of Exhibition:• Discuss disaster mitigation• Showcase innovative research, materials and technologies• How to work with natural systems and environment• Present wide range of viable responses• Explore solutions for natural disasters including,earthquakes, hurricanes, tsunamis, wildfires, tornados,
flooding, subsidence
29

Risk Management Planning
Decide how to approach and plan risk management
activities:• Methodology• Roles & responsibilities• Budget• Timeframe• Scoring & interpretation• Thresholds• Report format• Tracking

30Conclusions• Risk management is thesystematic identification,assessment, planning andmanagement• Communication is key• Be prepared to defend youractions• You must plan for risk
management…hope is NOT
a plan31

THE END
Arigatou Gozaimasu!
32