AUGUST 2012

Risk-Based Asset Management:

Examining Risk-based Approaches to 

Transportation Asset Management

RepoRt 2: Managing asset risks at Multiple 

levels in a transportation agency
-

Notice 

this document is disseminated under the sponsorship of the u.s. 

Department of transportation in the interest of information 

exchange. the u.s. government assumes no liability for the use 

of the information contained in this document. 

the u.s. government does not endorse products or manufactur 

ers. trademarks or manufacturers’ names appear in this report 

only because they are considered essential to the objective of 

the document. 

Quality Assurance Statement 

the Federal Highway administration (FHWa) provides highquality information to serve government, industry, and the public 

in a manner that promotes public understanding. standards and 

policies are used to ensure and maximize the quality, objectivity, 

utility, and integrity of its information. FHWa periodically reviews 

quality issues and adjusts its programs and processes to ensure 

continuous quality improvement. 

NoTe from The DirecTor 

the Federal Highway administration (FHWa) continuously 

seeks innovative ways to improve the management of the 

nation’s highway infrastructure. the office of asset Management offers this series of reports on risk management as 

another means by which transportation agencies can better 

understand and manage their highway assets. 

the use of risk management among u.s. transportation 

agencies largely is limited to managing risk at the project 

level generally focused during construction. risk management at the project level helps to identify threats and opportunities to projects’ cost, scope and schedule. However, we 

at the FHWa along with our partners at state and local 

transportation agencies recognize the growing need for a 

better understanding of risk management at program and 

organizational levels. 

today, the leading international transportation, banking and 

insurance organizations have explored the benefits of risk 

management at the program and enterprise level and use it 

as a tool to protect their investments. Based on those practices, the office of asset Management is offering this series 

of reports on how risk management can be scaled up to 

asset management programs, and to the entire enterprise 

of a transportation agency. 

it’s important for highway agency officials to consider 

incorporating risk management in the decision-making 

process for several reasons. First, they have seen the benefits of risk management at the project level. second, they 

have heard from their international colleagues that risk 

management can pay dividends when used at the broader 

program and enterprise level, particularly when agencies 

don’t have enough funding to address their priorities. 

third, managing risk is an integral step in following a 
 ii Risk-Based Transportation Asset Management 

comprehensive asset management framework as described 

in the AASHTO Asset Management Guide—A Focus on 

Implementation. Finally, the u.s. congress has proposed 

that states develop “risk-based transportation asset 

management plans.” these factors convinced the office 

of asset Management to offer this series of reports. 

We believe you will find these reports helpful as you develop 

your asset management program and make investment 

decisions. this series of reports will help the transportation 

agencies to meet the increasingly complex challenges 

involved in making decisions and communicating them 

effectively to the public. 

sincerely, 

Butch Wlaschin 

Director of the Office of Asset Management

Risk-Based Transportation Asset Management iii
 

contents 

Introduction .......................................... 1
 

the Mandate for Risk Management..................... 2
 

Approaches to Risk Management ...................... 3
 

international approaches to risk Management ........ 6
 

Definitions ........................................ 6
 

Multi-tier risk Management in international
 

agencies ....................................... 9
 

current state of implementation of risk Management
 

in u.s. transportation agencies ...................... 11
 

Minnesota Dot.................................. 13
 

Washington Dot ................................ 15
 

utah Dot....................................... 16
 

other Dots ..................................... 17
 

Multi Level Risk Management .......................... 17
 

risk Management at the agency level................ 17
 

some specific examples of agency risk............ 19
 

risk Management at the program level .............. 27
 

transportation asset Management and
 

application of program risk Management ......... 29
 

risk Management of Bridge programs ............ 33
 

program level governance risks ................. 36
 

program level Forecasting risks ................. 38
 

Data access risks to programs ................... 38
 

skilled personnel risk ........................... 39
 

Minnesota Dot: trail Blazing in implementation of
 

Holistic risk Management ....................... 40
 

risk Management at project level................... 46
 

ohio Dot...................................... 47
 

risks at asset category and individual
 

asset levels ...................................... 49
 

individual asset risks ............................ 51
 

operational risks ................................. 52
 

Conclusions ........................................ 53
 
 iv Risk-Based Transportation Asset Management 1 

Background 

as risk-based transportation asset management becomes 

mandatory in the united states, agencies will need to 

understand how managing risks can help them improve 

decision making in asset management programs. this 

second of five reports in the series examines risk-based 

approaches to managing assets. it provides us and international examples of managing risks to assets at multiple 

levels in a transportation agency 

Risk-Based Asset Management 

introduction 

this is the second in a series of five reports discussing risk 

management and its application to transportation asset 

Management (taM) in the united states. report 1, titled 

“overview of risk Management”, defines risk and provides an 

overview of risk management as applied to managing transportation assets. this second report discusses some of the 

frameworks implemented in the u.s. and in other countries 

to enhance and assist transportation agency decision makers 

in the management of risks at different levels. 

globally, transportation agencies are attempting to address 

very similar kinds of risks. these include risks to transportation assets, public safety, and those associated with failure 

to accomplish important goals, such as achieving lowest 

possible lifecycle costs, meeting infrastructure targets, 

and protecting the environment. 

risks to transportation assets can be triggered by multiple 

sources and circumstances and affect different transportation agencies differently. Fortunately, the application of risk 

management is not about “one-size fits all”. risks can be 

considered at the organizational, program, project, asset 

category and individual asset levels. Multiple approaches 

and models for addressing risks to assets at these different 

levels have been used worldwide. 

it has been amply noted that u.s. transportation agencies 

have relatively mature and formal strategies and procedures 

for implementing project level risk management, whereas 

their implementations of risk management at asset class, 

program, or agency level are relatively informal. Hence this 

report focuses more on the latter and less on project level 

or individual asset risk level management.
 2 Risk-Based Asset Management 3 

the Mandate for risk Management 

the need for formal risk-based asset management is 

a reality in the united states. the language in the new 

transportation Bill, Moving ahead for progress for the 

21st century act (Map 21) reads as follows: 

“IN GENERAL—A State shall develop a risk-based asset 

management plan for the National Highway System to 

improve or preserve the condition of the assets and the 

performance of the system.” 

Map 21 will require u.s. transportation agencies to integrate 

risk management into their asset management plans. in new 

Zealand, transportation agencies are mandated by law to 

implement and report on risks and management of risks to 

assets. in new Zealand and australia, the intent of risk-based 

asset management is to systematically apply management 

policies, procedures and practices seamlessly to manage 

risks from multiple sources across the organizational hierarchy. it includes the management of risks both across and 

along asset hierarchies to effectively manage potential 

threats and opportunities. implementations in both countries 

illustrate how risk-based asset management can be integrated into u.s. transportation agency practices. 

u.s. transportation agencies have for decades applied risk
 

management strategies at the project level.
 

application of risk management at multiple levels will mean 

extending the principles and tactics used at the project level 

to broad programs such as asset management, maintenance, 

data collection or measuring asset performance. 

Risk-Based Asset Management 

approaches to risk Management 

the intent of risk management is to make more informed 

and better decisions to address existing or potential risks to 

agency objectives while understanding the likely outcomes 

and results of the actions. risk management is not a onetime activity. it is an ongoing, continuous process of 

monitoring and managing all kinds of risks. 

risk management is a required governance activity in 

Queensland, australia. the Queensland, australia, Department of transit and Main roads (tMr) states in its risk 

Framework that, “Risk management contributes to good 

corporate governance. It provides reasonable assurance to 

executive management that organisational objectives will be 

achieved within a tolerable degree of risk. It also provides 

for the identification of factors that may impact on the 

Department of Transport and Main Roads (TMR) ability to 

deliver its services and promote opportunities through a 

process of risk identification, analysis, evaluation, effective 

treatment and review.”[i] 

like tMr, the new Zealand highway agency also has a risk 

management framework. the agency does proactive risk 

management and defines risk management as “the cultures, 

processes and structures that are directed towards the effective management of potential opportunities and threats”.

[ii] 

in new Zealand, the transportation agency manages risks 

at three levels. these are the 1) strategic, 2) portfolio and 

network and 3) at the project and operational levels. the 

tMr in australia manages risks at six levels. these are the 

1) strategic, 2) portfolio, 3) divisional, 4) program, 5) projects 

and 6) operational levels. 
 4 Risk-Based Asset Management 5 

the project Management institute (pMi) provides approaches 

to the management of portfolio and project management 

risks. these have been an integral part of the development, 

delivery and management of information technology and 

software solutions for decades. these practices and management strategies are now evolving and slowly becoming part 

of a transportation agency’s management practices. some 

logical tiers or levels at which risks can be managed are: 

1. at the agency 

2. at the program level 

3. at the corridor level 

4. at the project level 

5. at the asset class level 

6. at the individual asset level. 

an agency may choose to manage risks at only a subset of 

the six suggested levels. 

a u.s. international scan team sponsored by the Federal 

Highway administration (FHWa) summarized best practices 

in risk management in australia, new Zealand, netherlands, 

germany, scotland and england. the scan findings were 

summarized in a 2012 trB annual conference paper that 

recommended the following steps to deploy enterprise 

risk management: 

◗◗◗Formalizing risk management approaches; 

◗◗◗embedding risk management in existing business 

processes; 

Risk-Based Asset Management 

◗◗◗using risk management to build trust with transportation stakeholders; 

◗◗◗Defining leadership and organizational responsibilities 

for risk management; 

◗◗◗identifying risk owners; 

◗◗◗supporting risk allocation strategies, and; 

◗◗◗reexamining existing policies, processes and standards 

through a rigorous risk management analysis. 

Figure 1, shows how the trB paper represents enterprise 

risk Management as addressing risks at the agency, program 

and project levels. 

AgeNCy 

pRogRAM 

pRojeCt 

reSpoNSibiliTy: executives 

Type: risks that impact achievement of agency goals 

and objectives and involve multiple functions 

STrATeGieS: Manage risks in a way that optimizes the 

success of the organization rather than the success of 

a single business unit or project. 

reSpoNSibiliTy: program managers 

Type: risks that are common to clusters of projects, 

programs, or entire business units 

STrATeGieS: set program contingency funds; allocate 

resources to projects consistently to optimize the 

outcomes of the program as opposed to solely projects. 

reSpoNSibiliTy: project managers 

Type: risks that are specific to individual projects 

STrATeGieS: use advanced analysis techniques, contingency planning, and consistent risk mitigation strategies 

with the perspective that risks are managed in projects. 

Figure 1. Levels of Enterprise Risk Management (Agency, 

Program and Projects). source: trB paper 
 6 Risk-Based Asset Management 7 

this second report in the series will examine international 

examples of risk management and then cite some 

developing u.s. practices. 

International Approaches to Risk Management 

transportation departments in australia and new Zealand 

provide mature examples of risk-based asset management 

plans. the Queensland, australia, guide notes that, “Risk 

Management is not a ‘one-size-fits-all’ approach and neither 

is it simply about compliance. Good risk management is 

sensitive to business needs, operating environment and 

internal capacity.”[iii] 

the australian government has formalized risk management 

and has created committees to support and report on the 

progress and maturity of risk management activities in 

various government agencies. 

For example, the government has an audit and risk 

committee, which is one of four governance committees 

that provide support to the tMr Board in Queensland. 

the responsibilities of the committee include assisting 

the Director general responsible for the performance 

of transportation and infrastructure in his oversight 

of “the process relating to internal risk management 

and control systems”.[iv] 

the 2010-2012 annual Queensland tMr report lists, “review 

of the progress reports on the risk management framework, 

policy and guidelines, risk registers (strategic and divisional), 

risk management activities and risk management maturity” 

as one of the activities of the committee. 

Risk-Based Asset Management 

DeFINItIoNS 

across countries and industries, the terms used to 

define risk vary. the following descriptions define 

the terms used to refer to the various kinds of risk 

in this report 

eNTerpriSe riSk 

this report uses the term enterprise risk to refer to all 

levels of risk being managed by a state department 

of transportation. 

AGeNcy riSk 

this report refers to agency risk as the highest level 

of risk within an organization that affects a Dot’s 

ability to accomplish its mission and achieve its 

strategic goals and objectives. 

proGrAm riSk 

program risks are ones that could affect the achievement of program objectives. programs generally are 

defined as collections of related projects or on-going 

efforts to ensure achievement of specific organizational objectives 

projecT riSk 

project risks are those that effect the successful 

accomplishment of project objectives. 

the victorian government in australia has its own process to 

manage risks in agencies within its jurisdiction and defines 

the following as the 11 principles of risk management:[v] 
 8 Risk-Based Asset Management 9 

1. risk management creates and protects value; 

2. is an integral part of the agency’s processes; 

3. is part of decision making; 

4. explicitly addresses uncertainty; 

5. is systematic, structured and timely; 

6. is based on best available information; 

7. is tailored; 

8. takes human and cultural factors into account; 

9. is transparent and inclusive; 

10. is dynamic, iterative and responsive to change, and; 

11. Facilitates continual improvement of the agency. 

as discussed earlier in this report, the tMr, australia manages risks at six levels and the new Zealand transportation 

agency manages risks at three levels. irrespective of the 

levels of application of risk management, the intent is similar 

in both countries. the intent of application as stated in the 

new Zealand transport agency asset Management plan is 

to “manage the state highway risks relating to both asset 

improvement and asset management”.[vi] 

review of practices in both countries shows that risk-based 

asset management is best achieved when there is alignment 

in the management of risks associated with assets from the 

topmost to the lowest level of an organization. risks at the 

Risk-Based Asset Management 

corporate level cascade down to the project level and to 

individual assets. similarly, risks at the project and asset level 

eventually bubble up and impact the agency’s strategic 

objectives if they become widespread. 

the 2011 transportation agency enterprise risk Management 

international scan report identified the following as areas 

that were given consideration by other countries in their 

risk–based decisions:[vii] 

◗◗◗asset management 

◗◗◗Bridge inspection 

◗◗◗cost and schedule control 

◗◗◗performance measures 

◗◗◗program investment decisions 

◗◗◗program and project delivery methods 

◗◗◗reliability centered maintenance 

◗◗◗tunnel safety and general safety planning. 

as u.s agencies formalize risk-based asset management, 

these components could be considered for inclusion in 

the risk analysis checklist. 

Multi-Tier Risk Management in International Agencies 

risk management has long been a primary factor in all tiers 

of private industry decision making. continuous evaluation 

of financial and business risks and implementation of actions 

to eliminate or minimize “threat risks” and capitalize on 
 10 Risk-Based Asset Management 11 

“opportunity risks” is routine in private industry. the breadth 

of risk responsibilities and the levels of risk management 

vary across industries and across countries. 

case studies and best practices in new Zealand indicate that 

risk management is integrated into the asset Management 

plans and is an important input to decision-making. the 

expectation is that “the results of the risk analysis should 

permeate, or at least flavour, other sections of the Asset 

Management Plan. For example, the ‘Life cycle’ section, 

‘Levels of service’ section, and especially the Improvement 

Plan’ should all reflect how the risks to various assets and 

services are to be addressed. Risk management is increasingly seen by councils as an integral input into Asset Management Planning. Councils should not let risk management 

alone drive asset-related decisions, but use it to assist in 

making sound, defensible decisions”.[viii] 

the new Zealand, state Highway asset Management plan 

(nZ, sHaMp) covers all infrastructure assets that form 

the road network. the 2010 sHaMp has a section entirely 

devoted to managing risks. an internal study report of the 

risk-based asset management practices in new Zealand 

recommended that risk management be integrated in to 

every section of the sHaMp. 

in the 2010 sHaMp, Strategic Risk Management addresses 

risks due to lack of funding or deferred funding, and risks 

due to unanticipated occurrences of natural events, e.g., 

flood, earthquake, bush fire, avalanche, earthquake. the 

second level of Portfolio and Network Level Risk Management addresses risks with catastrophic failures of a network 

structure, damage to an asset, premature deterioration or 

obsolescence of an asset, risk of pollution, and other risks 

to performance or condition of assets on the state highway. 

it addresses many aspects that would be considered in the 

Risk-Based Asset Management 

risk management of corridors. the third level of risk 

management occurs at the Project and Operational Level, 

and addresses risks such as project schedule slippage, 

suboptimal material or design or construction practices, 

risk of failure to gain property access for projects, and risk 

of poor contract execution. 

the risk Management Framework of tMr, Queensland, 

australia divides risks into Strategic, Portfolio, Divisional, 

Program, Projects and Operational level risks. these six 

levels of risk are central to its framework. the framework 

reflects the importance of managing risks and links them to 

the corporate vision, mission, objectives and values. its risk 

reporting process also shows that the accomplishment of the 

government priorities and corporate objectives are tied to 

various other factors such as, strategic positioning, adaptive 

capabilities, application of information technology and 

decision making. the framework demonstrates that tMr’s 

ability to plan and manage future risks and opportunities is 

closely linked to the success and failure of its assets and 

strategic objectives. 

Current State of Implementation of Risk 

Management in U.S. transportation Agencies 

Figure 2 (see next page), shows the results of a national 

cooperative Highway research program (ncHrp) survey 

of state transportation agencies about implementation 

of risk management practices in the u.s. according to the 

report, “ixthe survey results showed that of the 43 respondents, only 13 have formalized agency level risk management and fewer had risk management at the agency, 

program and project level.” [ix] 

u.s. transportation agency personnel work on very complex 

projects and coordinate a myriad of complex tasks and 
Figure 2. The dark color shows U.S. transportation agencies 

that have formal risk management. 

12 Risk-Based Asset Management Risk-Based Asset Management 13 

Following the august 2007 collapse of the interstate 35 

bridge in Minneapolis, Minnesota, public and congressional 

focus on risk management of critical transportation assets 

reached a new high. this led to a renewed focus and review 

of risks to transportation assets by Dots. MnDot, the 

Washington state Dot (WsDot) and utah Dot (uDot) 

are examples of agencies that have offices that focus on 

certain aspects of risk management. 

Minnesota DOT 

MnDot is pursuing formal risk management that addresses 

multiple levels of risks to transportation assets. agency 

executives echoed the agency perspective that, “Integrated 

risk management is a continuous, proactive, and systematic 

process to understand, manage, and communicate risk from 

an organization-wide perspective. It is about making strategic decisions that contribute to the achievement of an 

organization’s overall corporate objectives”. 

MnDot has routinely being implementing risk management 

at the project level and is in the process of extending the 

implementation to other levels similar to those implemented 

activities and intuitively manage risks in their day-to-day by tMr, australia. MnDot’s office of risk Management has 

work. However, per the survey, few apply formal risk conducted many workshops to train and assist agency permanagement at levels other than at the project level. sonnel with developing and implementing risk management 

at the agency (organization), program and operational levels. 

organizations such as the american association of state 

Highway transportation officials (aasHto) have produced MnDot uses risk management in decision making on topics 

several reports to assist states in implementing risk manage- ranging from organizational design to project elements. 

ment at different levels. steps detailed in the aasHto report tim Henkel, assistant commissioner MnDot, when discusstitled, “Allocation in Highway Construction Management Risk ing the Dot’s risk management journey reiterated that 

Manual” indicates that efforts are already under way to assist “Enterprise Risk Management helps the Department identify 

state and local transportation agencies in applying risk potential future events and enables agency managers to 

management to programs such as inspection and innovative evaluate the probability and magnitude of future events that 

contracting. pose a risk to availability of financial resources, the quality 
 14 Risk-Based Asset Management 15 

of life of Minnesotans, and the trust and confidence the 

public has in MnDOT”. 

Figure 3. Components of Minnesota DOT Enterprise Risk 

Management. source: Minnesota Dot 

enterprise Risk 

Management 

organizational 

Risk 

Management 

programmatic 

Risk 

Management 

project Risk 

Management 

operations 

Risk 

Management 

Quality of life 

indicators market research 

Figure 3, shows a graphical representation of MnDot’s 

enterprise risk Management approach. it shows that enterprise or overall risk management in MnDot addresses risk at 

the organizational, program, project and operational levels. 

the MnDot risk management process includes the following: 

◗◗◗identification of risks to Mission; 

◗◗◗analysis of probability and impact of risks; 

◗◗◗performance targets and Financial information; 

◗◗◗identification of customers/stakeholders; 

◗◗◗Development of risk strategy (Budget); 

◗◗◗analysis of risk Mitigation effectiveness; 

Risk-Based Asset Management 

◗◗◗performance and Financial information analysis; 

◗◗◗re-alignment, and; 

◗◗◗cost effectiveness and strategy adoption. 

according to MnDot, enterprise risk manage ment should 

do the following: 

◗◗◗support organizational vision; 

◗◗◗improve internal communication; 

◗◗◗Maximize capital investment; 

◗◗◗Maximize operational investment; 

◗◗◗optimize organizational resources; 

◗◗◗optimize size of the organization, and; 

◗◗◗provide for nimble responsiveness. 

philip Barnes, MnDot assistant Director coordinating the 

risk management effort for the Dot, shared the agency’s 

perspective that for MnDot, “Risk Management (RM) is a 

systematic approach to setting the best course of action 

under uncertainty by identifying, assessing, understanding, 

acting on, and communicating risk issues”. 

Washington DOT 

the state of Washington has an office that focuses on 

enterprise risk management. though the state focuses on 

a narrow aspect of risk management (relating to liability 

arising from accidents on state roadways alleged to have 

been caused by negligent design, signage or failure by the 

state to properly maintain the highway), it has catalyzed 
 

 16 Risk-Based Asset Management 17 

state agencies on the steps involved in risk management. 

this can be seen in WsDot’s implementation of risk management at multiple levels including risks due to climate change 

and safety. 

While the primary focus of the risk management office of 

the WsDot is on audit and financial risks due to lawsuits, 

it assists other agency business units that are developing 

formal risk management procedures. WsDot has implemented some form of risk management at the corridor level 

to mitigate and minimize the risk of closure of the critical i-5 

and i-90 corridors due to flooding and avalanches. paula 

Hammond, secretary of the WsDot, in a 2011 report for 

FHWa discussing vulnerabilities to climate change, noted 

that,” WSDOT has a responsibility to look ahead and ensure 

we protect our infrastructure and prepare for potential risks. 

Our transportation structures are critical to keep people and 

goods moving and the economy growing.” [x] the report 

discussed how the agency has been addressing infrastructure risks by building and maintaining highways and bridges 

to last for decades. to address climate change issues, the 

agency has also been planning and retrofitting bridges 

against earthquakes and is in the process of updating 

design and other policies to protect the transportation 

infrastructure from climate change impacts. 

Utah DOT 

the mission of uDot’s risk management office is on “looking 

after the safety of our employees, contractor employees, and 

the public at large. This is done through loss report analysis, 

managing all of the Government Record Access Management 

requests to UDOT, procurement of insurance for UDOT, 

management of the Owner Controlled Insurance Program, 

and the emergency management program for UDOT”. 

However, uDot manages risks to its transportation assets at 

multiple tiers, though these implementations are not formally 

Risk-Based Asset Management 

documented or managed by its office of risk management. 

risk management is implemented at the project, district 

and division levels. For example, the agency’s program and 

funding prioritization includes risk analysis and tradeoffs 

across its programs. 

Other DOTs 

currently, several other Dots have efforts under way to 

develop procedures and formal documentation to train 

and empower their dispersed transportation agency staff 

to proactively manage the threats to the transportation 

assets and operations. the north carolina Dot (ncDot) 

has implemented risk management that addresses risks 

to organizational objectives, asset conditions, achieving 

performance targets and complying with environmental 

regulations. 

Multi level risk Management 

Risk Management at the Agency Level 

corporate, agency or organizational risks (used interchangeably in this series of five reports) can occur due to uncertainties that can affect the achievement of the agency’s strategic 

objectives. these include internal and external risks due to 

factors such as the economy, business environment, community issues, financial environment, natural disasters, climate 

change and other environmental issues. the agency level 

risks for Dots affect the successful achievement of strategic 

transportation objectives.1 these also include risks to agency 

resources or risks to the achievement of important public 

1

some authors refer to these types of risk as strategic risks, or 

enterprise risks while others consider enterprise risk management as 

the management of the risks at all tiers. Because risk management is still 

evolving in the transportation sector, definitions vary among authors. 
 18 Risk-Based Asset Management 19 

policies. though agency level risk management is about 

implementing planned actions to take advantage of opportunities and proactively address threats, often risks cannot be 

completely eliminated and trade-offs have to be made while 

ensuring that risks do not exceed the agency’s acceptable 

tolerance limits. 

agency risks are generally stratified based on their severity, 

likelihood and potential consequences; sphere of impact or 

influence; period of impact; and effect on the agency’s ability 

to accomplish its strategic objectives. some examples of 

risks at the agency level are: 

a. local or global price volatility that affects the planning 

or delivering of products and services by Dots; 

b. physical loss of major assets; 

c. Failure to meet public safety objectives; 

d. Failure to meet the operational expectations of the 

public for activities such as, snow clearance, opening 

roads after avalanches, floods and other disasters 

and disruptions; 

e. overall financial risk caused by rising costs and
 

declining asset investment revenue;
 

f. lack of direction due to leadership or political changes; 

g. loss of institutional knowledge due to personnel 

turnovers, technology changes or delay in training; 

h. lack of business intelligence and decision support 

information because of poor data systems or poor 

data management, and; 

Risk-Based Asset Management 

i. negative media coverage, loss of credibility for 

failing to comply with regulations, failure to deliver 

projects or meet other asset condition and performance goals. 

Documenting and formalizing risk management at the 

agency level helps provide the strategic vision necessary 

for agency-wide consistent and sustainable risk-based 

asset management. this formal approach is helpful in the 

continuation of strategic agency objectives during periods 

of change in senior leadership. it also facilitates cross 

collaboration and alignment across organizational silos 

in the treatment of risks. additionally, it helps dispersed 

staff understand what is expected of them and what 

actions need to be performed to mitigate these high level 

risks. as opposed to muddling through challenges, agencyrisk management provides guidance, tools and strategies 

that help to anticipate these challenges and proactively 

address them. For example, it provides the necessary tools 

and strategies to anticipate and address negative media 

coverage of the agency, its management of asset conditions 

or performance, staff layoffs, financial risks and other such 

agency level risks that affect the management of transportation assets. transportation agencies that have formal 

agency level risk management are better equipped to 

anticipate, prepare for and address these challenges and 

therefore are better able to minimize the impact to the 

agency’s mission and credibility. 

Some Specific Examples of Agency Risk 

Price Volatility 

an example of external risk to an agency can be seen in 

the impact of the volatility of construction costs from 2003 

to 2009 shown by FHWa in Figure 4 (see next page). 
 

 20 Risk-Based Asset Management 21 

Figure 4. Volatility of Construction Costs. source FHWa 

the increase of national Highway construction cost index 

(nHcci) from early 2004 to end 2006 eroded the purchasing power of Dots resulting in cancellations or delays to 

projects and causing major problems for Dot programs. the 

subsequent fluctuations in the nHcci from 2007 to 2009 

also caused uncertainties and difficulties in forecasting and 

planning of funds for Dot programs. 

these price variations generally were attributable to global 

energy prices, primarily petroleum. rising fuel prices spurred 

by a strong global economy, particularly in asia, raised 

petroleum prices. that in turn increased the cost of diesel 

which is an essential commodity for all heavy highway 

construction, from the quarrying of aggregates, to excavation, to the delivery of materials to a construction site 

the price sensitivity of the international markets illustrates 

that global events pose risks to the ability of u.s. transportation agencies in achieving their asset management objectives. in the above example, although prices relatively stabilized after June 2009, the past volatility raises the question 

of what may happen in five to 10 years when the global 

economy eventually emerges from the current recession. 

Risk-Based Asset Management 

Political Risk 

Decisions made by political leadership at the national or 

state level can impose risks at various levels to an agency. 

continuity of Agency leadership 

an important agency risk is the fact that senior state transportation agency executives are often hired and fired at the 

will of the governor. state political leadership change often 

translates into changes in senior leadership in state transportation agencies, causing disruption in continuity of important 

agency initiatives. some Dots have detailed and formal 

succession planning to manage such agency risks. such 

formal agency level risk management provides much needed 

direction and enables the agency to continue meeting its 

strategic objectives and delivering important transportation 

services during such times of change. 

federal funding for Agencies 

another important example of a risk to Dots is the uncertainty associated with passage of the national transportation 

bill and amounts that states could expect each year from 

the federal government. the safe, accountable, Flexible, 

efficient transportation equity act: a legacy for users 

(saFetea-lu), expired on september 30, 2009.[xi] the bill 

was extended eight times till March 2012. the uncertainty 

and the short term extensions that occurred since the initial 

expiration of the bill till the passing of the bill in July 2012 

made forecasting and planning of asset management activities extremely difficult for Dots. these uncertainties not only 

posed many risks to the Dots’ ability to plan for the rehabilitation of degraded assets, but also to long-term planning of 

preservation and maintenance activities necessary to halt 

the degradation of assets in good condition. 
 22 Risk-Based Asset Management 23 

Figure 5. Net volumes taxed by year. source FHWa 

Tax Revenue Risk 

Figure 5 shows the fluctuation in the net gallons taxed 

between 1961 and 2010, an indicator of net revenues available to transportation agencies.[xii] the uncertainty and 

fluctuation in the expected revenues pose risks to long term 

transportation planning that is necessary for sustaining the 

performance and condition of transportation assets. 

Aging Infrastructure Risk 

Discussions with Dots and FHWa show that both at the 

federal and the state level, the concerns about aging infrastructure and other transportation asset risks have been at 

the forefront of executive thinking and decisions. one of the 

top priorities for u.s. transportation agencies across the 

nation is addressing the aging infrastructure of bridges that 

are in use beyond their expected life and expensive to replace. 

Figure 6, shows that approximately 400,000 bridges are 

less than 50 years of age while half as many (205,000) 

are 50 years or older. this aging infrastructure requires 

Risk-Based Asset Management 

maintenance, rehabilitation and costly replacements. the 

lack of long-term predictable and sustainable transportation 

funding to address these aging assets presents many risks 

to asset management targets nationwide. 

Figure 6. The Number of Bridges by Age. source: FHWa 

Climate Change Risk 

one complex agency risk that Dots face is the impact of 

climate change on transportation infrastructure. Discussing 

the situation, a 2012 report titled, “climate change impact 

assessment for surface transportation in the pacific northwest and alaska”[xiii] explains that many transportation 

practices and procedures were developed without full consideration for the impact of climate change on the transportation infrastructure. it notes that floods, high intensity 

precipitation and climate change events can cause unpredictable failure of roads and bridges. the report states that 

“DOTs could experience hundreds of millions of dollars in 
 24 Risk-Based Asset Management 25 

infrastructure damage that potentially could be avoided 

with more robust data collection, planning and design tools/ 

methods for managing risks”. the report identifies critical 

infrastructure vulnerable to climate change impact and 

potential impact of climate change on the regional transportation systems. it urges Dots to use high-resolution climate 

change models, geographical information systems and 

transportation asset Management (taM) to incorporate 

climate change into current and long-term planning processes. there are many uncertainties associated with the inputs, 

assumptions and with predicting the occurrence of these 

events. the report says that the data and refined models 

will improve the understanding of these risks and enrich the 

decision-making process. the risk of climate change permeates multiple levels in an agency and agencies develop 

detailed agency and program level mitigation strategies 

to address them. 

at the agency level addressing such risks often involves 

working closely with multiple agencies or organizations. 

an example is the intergovernmental and interagency 

coordination of strategies and approaches necessary 

between state, federal and local transportation agencies 

and other organizations when addressing emergencies such 

as wildfires, floods, tornadoes and hurricanes. Dots have 

the responsibility of maintaining the critical roadway assets 

essential for transportation and for evacuation during these 

emergencies. over the last decade both public and private 

organizations have been collaborating to proactively 

manage such risks effectively. 

Natural Disaster Risk 

two examples of Dots that have agency-level risk management plans to address natural disasters are the Florida Dot 

(FDot) and WsDot. in 2010, FDot working with several 

regional and state agencies developed a multi-agency risk 

Risk-Based Asset Management 

mitigation plan to address risks due to tropical storms, 

hurricanes, coastal and inland flooding and other natural 

disasters and land use issues. 

During floods in 2007, section of i-5 were completely 

flooded and had to be closed to traffic. in response, WsDot 

closely monitored the risks and allowed select vehicles to 

deliver emergency and perishable goods. the agency 

developed and implemented a detailed risk mitigation 

plan and also conducted outreach to educate the public 

and the trucking community on the strategies that will 

be implemented during similar future events. [xiv] 

the fifth report in the series will go into greater details of risk 

mitigation to address natural disasters so this report will not 

elaborate on risk mitigation of natural disasters. 

FHWA Corporate Risk Management 

nationally, FHWa has been addressing risk management at 

multiple levels for many years. the FHWa 2010 corporate 

risk assessment identified the need for consistency between 

the headquarters and divisions, the use of more analysis and 

information in decision making, and the need to tie the risk 

management process to the strategic planning process.[xv] 

the corporate risk assessment report identified seven areas 

of “threat risks” and four areas of “opportunity risks”. the 

corporate risks detailed in the report were intended to 

drive collective thinking and risk management by senior 

managers. the threat risks included the following: 

◗◗◗risks due to infrastructure failure; 

◗◗◗internal FHWa capacity failure (lack of succession planning and skilled people, knowledge and systems), and; 

◗◗◗lack of data integration and security that could
 

compromise decisions.
 
 26 Risk-Based Asset Management 27 

the opportunity risks detailed in the FHWa report included: 

◗◗◗addressing mobility and freight; 

◗◗◗continuing to address safety and decreasing deaths 

and injuries on national roads; 

◗◗◗deploying innovations and accelerating technology to 

continue to shorten project delivery periods, and; 

◗◗◗increasing transparency and fiscal accountability
 

in investment decisions affecting condition and
 

performance of the transportation system.
 

the report discusses the impact of the threats and opportunities but did not provide specific guidance on “how to 

address” each of the identified risks. it also provided templates to enable each FHWa division to identify risks and 

forward to the corporate risk assessment team as input to 

the overall agency risk assessment. 

Risks from Loss of Institutional Knowledge 

Federal, state and local transportation agencies have been 

losing institutional knowledge due to personnel retirements 

coupled with the inability to hire new staff. in addition, the 

recent economic downturn (since 2008) has led to states 

having to lay off personnel and delay training and implementation of newer technologies. these agency risks result in 

below optimum management, monitoring and treatment of 

assets that can result in asset failures, poor asset conditions 

and performance. 

the 2010 FHWa corporate risk assessment report notes 

that the “A major concern is the austere fiscal environment 

and resulting loss of personnel by State Highway and TransRisk-Based Asset Management 

portation Agencies.” the report stated that not maintaining 

sufficient organizational capacity (people, knowledge and 

system) will affect the future delivery of the transportation 

program. agencies like ncDot are developing data warehouses, virtual libraries and document management systems 

to capture the existing institutional knowledge and mitigate 

such risks. they are also implementing training and mentoring programs to document the business intelligence and 

facilitate knowledge transfer to address the risk of such 

loss of institutional knowledge. 

Information Risk 

an often ignored agency level risk is in the area of information needed for decision making. antiquated data systems, 

lack of system integration and insufficient resources to 

upgrade or integrate data systems can result in inconsistent 

information that can hamper effective decision making. Data 

inconsistency because of poor data and poor integration 

between different data systems is a risk for decision makers. 

to help Dots address such risks, FHWa included funding for 

development of management systems and data collection 

to its asset management strategy. 

Risk Management at the program Level 

a program, as defined by tMr, Queensland, refers to “a 

group of related projects or activities managed in a coordinated way to obtain benefits and controls not available from 

managing them individually”.[xvi] the pMi definition of program risk as “an event, or series of events or conditions that, 

if they occur, may affect the success criteria of the program” 

is very pertinent to transportation agencies. 

as explained by pMi and used in Dots, “Programs are 

the primary method of delivering projects, therefore 
 28 Risk-Based Asset Management 29 

considerable amount of program risk management is 

focused at the project level.” [xvii] often Dot performance 

and accomplishments are summarized at the program level. 

program risks are primarily the bubbling up of risks from the 

projects and asset categories that make up the program or 

the cascading down of agency risks. For example, an agency 

risk of increases in material prices will impact all the projects. 

By anticipating these risks, the agency can make informed 

decisions and plan to mitigate the impact at the program 

level thus minimizing the impact that could cascade to the 

project level. it can also help an agency to prioritize, make 

trade-offs across programs, and identify projects within 

programs that need immediate action or those where 

the risks can be tolerated and hence delayed. 

in new Zealand, total asset Management planning is 

an integral part of the government’s strategic management 

framework. [xviii] the new Zealand taM Manual requires that 

risk management be done at all stages of the asset life cycle, 

whenever a significant decision has to be taken. it requires 

that “risk Management be formally applied and documented 

during (the) total asset Management process when developing and evaluating programs and projects.” 

state transportation agencies in the united states manage 

164,000 miles[xix] of the national Highway system and 

approximately [xx]48.1 percent of the over 600,000 bridges. 

proactively managing the transportation infrastructure 

is a complex and often onerous task. program level risk 

management highlights some of these challenges that 

agencies deal with every day. 

Risk-Based Asset Management 

Transportation Asset Management and Application of 

Program Risk Management 

application of program risk management is often closely tied 

to the agencies’ approach to asset management. agencies 

differ in the experience and expertise to risk-based asset 

management. some examples of programmatic risks to 

pavements that agencies are facing include: 

◗◗◗inadequate budgets; 

◗◗◗poor construction and testing procedures; 

◗◗◗improper treatment selection; 

◗◗◗lack of training of pavement management, construction 

and inspection personnel; 

◗◗◗inaccurate or incomplete pavement condition data, and; 

◗◗◗inaccurate pavement condition forecasts. 

the ncHrp report 523 notes that from the 1960s through the 

1970s, during the decade of the expansion of the interstates, 

state transportation agencies had programs focused around 

construction. By the 1980s the focus changed to pavement 

preservation and preventive maintenance. the report states 

that the “analysis of data shows that available funds were 

allocated to treating pavements on a “worst-first” basis. This 

resulted in a decline in the total number of miles that could 

be treated because of a decline in the overall condition of the 

pavement network”. this is not to say that agencies have not 

implemented preventive maintenance. agencies that have 

implemented specific preventive maintenance programs to 

address risks due to pavement failures and poor pavement 

conditions have seen good long term results. 
 30 Risk-Based Asset Management 31 

one strategy that the FDot has effectively implemented to 

proactively manage risk to assets is by proactive preservation and maintenance of transportation assets. as shown in 

Figure 7, the FDot approach resulted in consistent good 

condition of infrastructure assets. 

Figure 7. FDOT Bridges, Pavements and Roadway Assets 

meeting performance goals. 

taM programs are generally intended to achieve major 

organizational goals. they tend to be complex, their success 

is reliant on many functions, and they tend to cut across 

organizational silos. as such, taM programs can be at 

risk because of multiple factors including program type, 

environmental factors, and program complexity. Management of asset risks at the program level takes into account 

the impact of other programs and risks due to changes to 

resource allocation and competition for limited resources, 

changes to the program’s priority in relation to other 

programs, organizational strategy issues and the political 

environment. examples include: 

◗◗◗lack of internal support or authority for taM at the 

program level; 

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◗◗◗lack of staff or resources for complex taM tasks; 

◗◗◗lack of sufficient internal infrastructure such as data 

systems and asset inventories, and; 

◗◗◗overall lack of adequate funds for asset programs. 

lack of necessary resources to address infrastructure program needs is a common concern for most Dots and several 

have found innovative ways to address these challenges. 

Illinois DOT 

Working with FHWa and the agency leadership, the illinois 

Dot has implemented a method to manage and focus on 

high-risk bridges. this program allows the Dot to inspect a 

large number of bridges that meet a list of criteria for bridges at “no” risk at 48-month intervals instead of at 24-month 

intervals. this in turn allows the agency to reassign and 

allocate more resources to focus on inspection of the high 

risk bridges. 

Washington DOT 

another example of risk management in addressing the lack 

of resources in the bridge inspection program can be seen 

in a set of practices implemented by the WsDot Bridge 

preservation office to manage risks to bridges. the Dot has 

practices similar to those used by illinois for “no” risk bridges. 

the agency applies specific criteria for inspection of bridges 

and bridge components that allows it to move resources 

from inspecting structures at “no” risk to others at differing 

levels of higher risk based on a range of condition ratings. 

the agency’s risk management strategy also includes the 

requirement for the inspection team leader training to be 

taken every three years. the team leaders also have to be 

licensed professional engineers in the state of Washington. 
 32 Risk-Based Asset Management 33 

UDOT 

the utah Dot that operates a mature, sophisticated asset 

management program had to make tradeoffs based on 

its risk tolerance when addressing management of assets 

across its Bridge and pavement preservation programs. 

Figure 8. Bridges rated in fair condition remain because of 

Preservation and bridges rated in good condition are 

increasing due to new construction. source uDot 

Figure 8 shows the utah Bridges in fair condition remaining 

unchanged due to preservation efforts and those in good 

condition increasing after 2007 due to new construction. 

While Figure 9 shows the impact of some tradeoffs the 

agency had to make to accommodate the funding limitations 

that affected the lower-volume level 2 pavements. it shows 

that the agency was unable to preserve and improve all asset 

classes and had to take declining conditions on its rural level 

2 pavements to preserve its existing bridges and higher 

priority pavements and continue construction of new bridges. 

Risk-Based Asset Management 

Level 2 System Ride Quality—forecasted with 10 million/year (2,735 miles) 

Figure 9. Based on funding projects Level 2 Pavement 

conditions continue a downward trend. 

Risk Management of Bridge Programs 

a major program risk that transportation agencies face is 

due to the large number of aging bridges and risk of bridge 

failures. Most Dots have Bridge program Managers responsible for the monitoring, inspection and maintenance of 

bridges. they also prioritize bridge projects based on the 

overall health of the bridge. some of the reasons identified 

for the bridge risks that agencies face are: 

◗◗◗large numbers of aging bridges are still in use; 

◗◗◗lack of close correlation between funding and
 

performance of bridges;
 

◗◗◗lack of funding as well as the lack of a focused
 

and a sustainable bridge program, and;
 

◗◗◗increased costs to sustain the bridge inventory
 

in good condition.
 
 34 Risk-Based Asset Management 35 

the ncHrp 397 report notes that “The collapse of the I-35 W 

Bridge in Minneapolis in August 2007 catalyzed a number of 

more far-reaching national level influences on future directions in bridge program management.”[xxi] the report states 

that the bridge collapse led to a review of decision making 

and identification of program level risk management strategies in the Highway Bridge program (HBp). this included: 

◗◗◗updates to the Federal Highway Bridge program 

decision making and how the national Bridge inspection 

standards sufficiency and deficiency ratings are applied 

as program criteria; 

◗◗◗a comprehensive review of national Bridge inspection 

standards and oversight of structurally deficient bridges; 

◗◗◗FHWa oversight of the national Highway system
 

bridges nationwide, and;
 

◗◗◗state Dots having some more flexibility in use of federal 

bridge funds to correct structural deficiencies. 

addressing the same risks, the u.s. government accountability office (gao) report on the Federal Highway Bridge 

program, a program that provides funding to states to 

improve the condition of their highway bridges, recommended that “ways to align HBP funding more closely 

with performance be done to support a more focused and 

sustainable bridge program”. some of the strategies that 

agencies are considering in addressing risk management 

of bridge program are: 

◗◗◗ensuring that good bridge inspection data is used in 

decision making. For example, ncDot has quality 

checks on the bridge inspection data that it uses as 

input for decision making. 

Risk-Based Asset Management 

◗◗◗Formal risk management is becoming an integral part of 

managing bridge assets. 

◗◗◗since bridges are complex structures with multiple 

components and failure of nonredundant components 

can have significant negative implications, agencies are 

moving towards using management systems and higher 

computing power to analyze, compare and contrast the 

large numbers of bridges and bridge components to 

assist with decisions on prioritization and trade-offs. 

several Dots are developing trade-off analysis tools 

to assist them in making trade-off decisions. 

◗◗◗agencies are linking bridge program funding decisions 

to the types and number of deficient bridges and 

replacement, rehabilitation and maintenance priorities. 

◗◗◗agencies are linking prioritization to acceptable levels 

of bridge program risks. 

◗◗◗Bridge inspections are being linked to risk factors. 

For example, some Dots (Michigan Dot, illinois Dot, 

and Washington Dot) inspect high risk bridges more 

frequently and more thoroughly than required by 

federal law. 

an example of proactive program level risk management for 

bridges is reflected in the Florida Dot operating policy to 

“Program for construction, all structurally deficient bridges 

and bridges posted for weight restriction within 6 years of 

deficiency identification”. the policy also requires that all 

other bridges “which require structural repairs but which 

are more cost effective to replace” are to be replaced within 

9 years of deficiency identification. another proactive risk 

management of the program is evidenced in the Florida 

Dot’s funding prioritization that requires that first priority 
 36 Risk-Based Asset Management 37 

on Bridges off the State Highway System and off the Federal 

Aid Highways be given for the bridge inspection program [xxii] .

some agencies such as virginia Dot, caltrans and oregon 

Dot have program level risk management strategies and 

tools that enable agencywide monitoring of seismic activity 

and strain in load or fatigue, scours of bridges and bridges 

experiencing relative rapid settlement due to mine subsidence and other reasons. an example of tapping technology 

to track bridges at high risk is done by the idaho Dot using 

its “Bridge Watch” system. the Dot uses hydrologic gauges 

in streams and advanced weather prediction to identify 

storms that could create scour risks. While bridges with 

good waterway adequacy and channel protection or low 

traffic and shorter detour lengths are considered low risk, 

bridges over water with unknown foundations are considered high risk and are tracked closely. the system tracks 

high risk assets and alerts agency personnel enhancing 

the coordination across the agency and facilitating 

agency-wide consistent response to high risks. 

Program Level Governance Risks 

another program risk that agencies have to consider is that 

caused by governance issues. in many state transportation 

agencies, program management is centralized, program 

policies, standards and procedures are developed centrally, 

and guidance for application to all projects within the 

program is provided to the districts. Managing risks at the 

program level facilitates the consistent application, implementation and management of policies, funding mechanisms 

and procedures to all projects in the program. 

For example, well documented best practices for pavement 

preservation recommend strategies that consider the pavement type and functional class in the decisions regarding the 

application of treatments. it also recommends specific times 

Risk-Based Asset Management 

in the life of the pavement when treatments should be 

applied to get the longest useful life with the lowest-possible 

life-cycle cost. this can be seen in Figure 10 which shows 

uDot’s approach to extending pavement life through 

systematic preservation and timely pavement treatments. 

Figure 10. UDOT’s Approach to Extending Pavement Life 

through Timely Preservation and Treatments. source uDot 

By applying the pertinent strategies consistently across all 

pavements, an agency can effectively and efficiently manage 

the risk of pavement failures. However, if decentralization 

and/or delegation of responsibility lead to different agency 

districts or regions applying pavement treatments at points 

in the life of the pavement that differ from those recommended, then managing risk of pavement failures becomes 

more complex. other risks factors to consider are 1) the lack 

of clear governance as to who is responsible for managing 

the assets, and 2) the lacks of coordination between units as 
 38 Risk-Based Asset Management 39 

to who will deliver the program, e.g., monitor, treat and 

manage the assets. 

Program Level Forecasting Risks 

another program level risk that agencies are grappling with 

is the inability to do reasonably accurate forecasting. understanding the past, current and future condition, performance 

and overall health of transportation assets is important to 

forecasting potential risks. the ncHrp 397 peer exchange 

report on data and information noted that “although usefulness of forecasting became clear, the reluctance of decision 

makers to rely on models was a contradictory theme, motivated by concerns about model complexity and obscurity 

and risk of forecasting errors”. a survey of state Dots shows 

that pontis, the aasHto Bridge Management software, is 

primarily used by states as an inventory system and not for 

forecasting scenarios or projecting bridge related risks. 

a 2011 FHWa survey showed that more than 70% of state 

Dots did not use any form of Bridge Management systems 

to track performance or predict future bridge conditions. 

they attributed these shortcomings to 1) lack of staff; 2) lack 

of dedicated funding; 3) lack of training; and 4) lack of upper 

management support. to address some of these issues, 

FHWa has identified assisting states with training, providing 

dedicated funding, and initiating discussions with DOT upper 

management as focus areas to mitigate some of the program 

risk to bridges. aasHto is also trying to assist states by 

updating pontis to make it more convenient for states 

to do bridge related risk analysis. 

Data Access Risks to Programs 

agencies are facing program risks due to lack of easy access 

to reasonably priced, good quality data: a critical input to 

transparency in decision making that is being demanded of 

transportation executive by congress and the public. on the 

Risk-Based Asset Management 

issue of data, the office of inspector general in its findings 

of FHWa’s implementation of risk based bridge inspection, 

noted that the, “lack of detailed bridge data limited 

[xxiii] efforts to identify bridge safety risks”.

Data program risks have been discussed by Dots since the 

early 1990s. a 2010 FHWa report titled, “Data integration 

challenges” details the need for data integration and the 

benefits of integrated decision-making—how it supports core 

taM needs. the report also identified the many challenges to 

data integration faced by transportation agencies. informed 

taM decisions rely on data and though state and federal 

transportation agencies understand the importance of data 

and the risk to data programs, with critical infrastructure 

needs competing for limited resources, addressing data 

program risks continue to be a lower priority for Dots. since 

risks about data, data collection, business intelligence and 

information have been discussed at length in other publications, this report will not go into more detail, but note 

that these issues pose risks to decision making and can 

be systematically addressed at the data program level. 

Skilled Personnel Risk 

an important risk that is becoming a necessity in transportation agencies is the lack of skilled personnel to conduct risk 

analysis. transportation agencies will need to understand the 

application of risk management at multiple levels. this will 

require agencies to develop the additional skills needed to 

successfully extend risk management routinely used by 

agencies at the project level to the program and enterprise 

level. the techniques and practices of risk management— 

risk identification, assessment and analysis, mitigation and 

planning, and monitoring and updating used in project level 

risk management are applicable to managing the risks at the 

program level, corporate level, as well to other levels in an 
 

 40 Risk-Based Asset Management 

agency. thus, with the availability of necessary skilled 

professionals, successfully applying risk management 

to the program level is an accomplishable task. 

Minnesota DOT: Trail Blazing in Implementation of 

Holistic Risk Management 

in recognition of the significant strides made by MnDot in 

implementing a formal risk management program, this report 

discusses some of highlights of the MnDot implementation 

to provide an appreciation to other Dots interested in 

understanding the approach. the information presented will 

enable these peers to selectively follow-up on specific areas 

that may be of interest to their own Dot risk management 

implementation efforts. 

Minnesota Dot is one of the agencies in the process of 

implementing a holistic approach to asset based risk 

management. Figure 3 represents the different levels at 

which the agency is implementing risk management. 

to ensure agency-wide consistency in understanding and 

identifying different types of risks and in implementing 

risk-based asset management, the Dot’s 

risk Management office has developed detailed definitions 

of risks, identified and documented five levels of risk impacts 

(shown in the text Box 1) and four levels of risk response 

strategies. 

in 2010, the Dot conducted a series of risk assessment 

and strategic recommendation (rasr) Workshops. the 

outcome is a statewide perspective of risk and strategy for 

five major programs that included Regional and Community 

Investment priorities, Mobility, Bridge Preservation, Pavement Preservation, and Safety. the workshops also resulted 

in the creation of plans to manage likely and impactful 

Risk-Based Asset Management 41 

1. Little noticeable impacts on the system 

a. system works in almost similar fashion 

b. little or no public pressure 

c. public mostly unaware 

2. Some noticeable impacts on the system 

a. system has some noticeable difference in 

performance although localized 

b. general complaints exist 

c. public beginning to become aware (mostly accepts) 

3. Noticeable impacts on the system performance 

a. system is impacted and portions of system 

performance is poor 

b. problems becoming more widespread 

c. complaints are slightly more than localized 

and some intense 

d. public aware of the problem, especially involved 

stakeholders and questions capabilities 

4. Somewhat large impacts to overall system performance 

a. system is impacted and large portions of the system 

is performing poor 

b. complaints are regional throughout the District and 

becoming intense 

c. public is well aware and are concerned about problem 

and/or of financial stewardship 

5. Catastrophic impact to the overall system performance 

a. system is largely impacted and overall in poor 

condition and not performing 

b. complaints are widespread, intense and common 

c. public has lost most trust and confidence in MnDot— 

upset and questions intent, integrity, performance 

priority setting, and capability of the Department. 

d. MnDot will see re-organization or changes, and 

costly to recover from 

text Box 1. 

the Minnesota Dot risk impact is categorized into five levels 

as follows: 
 42 Risk-Based Asset Management 43 

program risks. these plans were then used by each district 

to identify risks, develop risk tolerance levels and risk 

management strategies. 

Figure 11, shows the Minnesota Dot’s approach to risk-based 

performance planning for management of assets. the figure 

shows that as the investments decrease the performance of 

the asset drop and the risks increase. the risk-based planning considers the likelihood of event occurrence, the impact 

of risk on assets and the impact to the agency’s ability to 

meet different levels of asset performance. 

Figure 11. Risk based performance planning showing increasing risk and cost to users, and lower condition of highway 

asset as investment levels decrease. 

Risk-Based Asset Management 

MnDOT Program Level Risks and Mitigation Strategies 

Figure 12, shows the average risks to various MnDot 

programs. it shows risk to the bridge program dropping to 

the second lowest as a result of the agency’s intense focus 

on the bridge program since 2007. However the risk to the 

principal pavements has risen to the highest. to address 

these high pavement risks, the Dot developed a detailed 

plan to move resources systematically for a fixed period 

of time from low risk programs to the higher risk principal 

pavements. thus working with the limited funds available, 

the agency is proactively addressing the risk to the 

principal pavement program. 

the Dot has also proactively engaged its agency personnel 

in identifying risks and in developing and implementing risk 

mitigation strategies when necessary. in determining program level risks, MnDot districts are requested to look at 

Figure 12. MnDOT Program Risk Management. source: MnDot 
 

 44 Risk-Based Asset Management 45 

the probability that an event will 1) occur in the next 

10 years, 2) is currently occurring, 3) if the occurrence is 

every day and 4) if there is some certainty that the event 

will occur at all. this information is used to estimate the 

likelihood of the risk occurring. 

the Figure 13 shows the graphical representation of the 

risk analysis that considered the risk probability and 

impacts to major programs in one of Minnesota Dot’s 

districts. a similar exercise is conducted in all eight 

districts and the metro region. 

Figure 13. An example of a MnDOT District Risk Profile. 

the agency has identified four risk response strategies 

(rrs) for risk mitigation. these are shown in text Box 2. 

using the detailed and summarized agency-wide risk analysis and the rrs strategies, the agency is able to develop 

detailed risk mitigation to address the identified risks and 

is better prepared to direct resources to the districts and 

Risk-Based Asset Management 

programs where risk mitigation is necessary. Minnesota Dot 

notes that programs tend to have different levels of risk 

tolerance. risk treatments and risk responses are tailored 

to address these different levels of risk tolerances. 

MnDot Definition of Risk tolerance 

are the specific risk levels beyond which the Dot will
 

not knowingly go over under any circumstances?
 

published widely, risk tolerances establish absolute
 

limits of acceptable risk and risky behaviors.
 

the Minnesota Dot identifies the following four 

Risk Response Strategies (RRS) 

1. Avoidance: remove the opportunity for the risk event 

to happen. this is normally the strategy of last resort. 

For example, avoiding a high risk right-of-way option 

when developing a roadway. 

2. transfer: transferring the consequences of a risk 

event to someone or something else. For example, 

having contractors take liability insurance for 

design-build-financing projects 

3. Mitigate: taking a series of actions to lessen the 

impact or likelihood of occurrence of the risk event. 

investing in proactive pavement preservation and 

maintenance to ensure that the pavement does 

not degrade to a point of requiring complete 

rehabilitation. 

4. Acceptance: accepting the risk. this is normally done 

for risks that are acceptable or whose impacts are 

understood and can be tolerated. an example is when 

resource constraints necessitate the less frequent 

clearing of snow on lower volume roads. 

text Box 2. 
 46 Risk-Based Asset Management 47 

By engaging agency personnel and establishing a formal 

process of identification, assessment, analysis, prioritization 

and risk management, Minnesota Dot is steadily gaining 

agency-wide buy-in while ensuring some agency-wide 

consistency in program level risk management. a formal 

process helps the agency understand the options available, 

the impact of its decisions and the appropriate trade-offs 

that can be made at the program level. it also helps the 

agency proactively communicate decisions and consequences to the stakeholders, the employees and the public. 

Risk Management at project Level 

the tMr risk Management Framework states that, “Project 

risks should be considered at the commencement of every 

project by identifying risks that may impact the outcome. 

The object of risk management is to keep the project’s 

exposure to an acceptable level.”[xxiv] 

in the united states, because the public relates to and 

understands projects more easily, projects have received 

more public attention and scrutiny. this has led to more 

formalized management of projects resulting in mature 

project risk management practices in Dots. as a result, 

addressing project level risks is routine to Dots. the most 

common risks to projects that Dots have been addressing are 

associated with scope, schedule, quality and budget creep. 

Because project-level risk has been documented thoroughly 

in other reports, this report will address how project risks 

can rise to the level of a program risk. this occurs when a 

group of very important projects that collectively achieve a 

major department objective are threatened by cost, scope or 

schedule risks that threaten the entire program of projects. 

Management of the entire program can reduce risks to the 

program overall and to the individual projects within it. 

Risk-Based Asset Management 

Ohio DOT 

the ohio Dot in 2005 developed a project risk management 

and monitoring system called Jobs & progress performance 

Management system (JppMs) that tracked risks to high 

profile projects due to cost, schedule and scope changes. 

the agency had a detailed project Development process that 

included milestone activities. For each project, the “expected” cost, schedule and scope were compared to “approved” 

baselines and color coded red, yellow, green and no color, 

respectively, based on levels of risk ranging from high, 

medium, low, to no risk. the color coding highlighted the 

risk and triggered communication at the project level. this 

triggered close monitoring of risks at the project level. unaddressed risks got escalated to the district and senior leadership as expected risk tolerance limits were exceeded. the 

escalation continued from the project manager to the district 

deputy director to the assistant Directors responsible for 

project development and delivery. 

the ownership and responsibility for risk management 

escalated up the agency hierarchy and depending on 

the level of risk tolerance exceeded, action was taken by 

different levels of agency personnel. 

Figure 14 (see next page) shows the risk due to cost at the 

project level for 69 scheduled items and 185 scope and 

factors for a project. these risks were further summarized 

to show the risk at the district and the state level as shown 

in the Figure 15 (see page 49). 

the risks at the project level were summarized to the district 

level. these in turn were summarized to show the project 

risk at the state level. Figure 15 shows the risk summarized at 

the district and state levels. the risk management included 

reports and alerts at the project, district and the agency leadership levels to trigger risk mitigation beyond an acceptable 

level of tolerance. 
 48 Risk-Based Asset Management 49 

Figure 14. Risks to Projects due to Cost as shown in JPPMS. 

source: oDot 

other examples of road project risks that Dots address on a 

routine basis include: 

◗◗◗Delay in getting necessary project right-of-way access; 

◗◗◗not getting timely environmental clearance; 

◗◗◗Material price increases leading to cancellation of 

scheduled projects; 

◗◗◗issues with integration of new projects with existing 

assets, and; 

◗◗◗issues due to suboptimal design. 

Risk-Based Asset Management 

Figure 15. Summary of Project Risk at the District and State 

levels as shown in JPPMS. source: oDot 

Risks at Asset Category and Individual 

Asset Levels 

Besides addressing risks at the agency, program and project 

levels, agencies also can address risks at the asset category, 

the individual asset and at the operational levels. the risks 

at the asset category level are risks to the entire category 

of assets such as to the category of roadway assets that 

include pavement markings, signs, culverts, guardrails and 

other roadway assets. Majority of the risks associated with 

high profile and priority assets such as bridges and pavements get addressed at the program level. However specific 

bridges that are at high risk because of specific criteria such 

as age, traffic volume, location and structural or other deficiencies that may not get addressed at the program level 

may get addressed at the asset category level as well. 
 50 Risk-Based Asset Management 51 

similarly, specific pavement sections of the road network at 

risk of failure due to structural issues or traffic loading may 

get addressed at the pavement asset category level. risks 

to roadway assets such as guardrail, pavement markings and 

signage are more often addressed by agencies at the asset 

category level. 

For example, utah Dot has a systematic approach to analyzing the condition, risk level and performance of its high 

priority roadway assets. steps in the agency’s management 

of each of these roadway assets include: 

◗◗◗periodic, systematic and consistent collection of asset 

performance and condition data; 

◗◗◗establishing a range for acceptable performance 

and condition for each category of asset. this range 

is also an indication of risk acceptance or risk tolerance 

for that category of asset. For example, acceptable 

range of retroreflectivity in pavement markings 

indicates the expected performance as well as the 

level of risk that the agency will tolerate for pavement 

markings; 

◗◗◗analyzing the performance and condition data; 

◗◗◗Developing and implementing a routine maintenance 

plan to keep all the assets within the acceptable risk 

tolerance; 

◗◗◗Developing an action plan to address the condition 

and performance of assets that are beyond the risk 

tolerance established by the agency, and; 

◗◗◗assigning the responsibility and ownership of implementing maintenance and replacement strategies for 

Risk-Based Asset Management 

the assets not meeting the agency’s risk tolerance 

criteria to agency maintenance personnel. 

Individual Asset Risks 

these are risks to specific assets such as risk to a specific 

bridge or to a specific section of a pavement. the focus on 

individual assets often occurs when the asset exceeds the 

limit of risk tolerance expected of it. though the mitigation 

treatment for the individual assets may differ, the steps to 

manage these risks are similar to those at the asset category 

level. often policy decisions that affect all assets in that 

category are made at the program level. these are then 

customized for individual assets as necessary. the size of 

these individual assets that are receiving the treatment often 

dictates whether or not the implementation effort will be 

tracked as a project. 

in some Dots, districts analyze the pavement condition and 

performance data and identify specific pavement segments 

that may need treatment such as crack sealing or thin overlays. Based on the analysis, treatment plans are developed 

to address specific issues identified for the segments. For 

example, specific drainage structures may need lined, 

cleaned or other maintenance work done. 

the approach to risk management of individual assets is 

similar to risk management of projects. similar to projects 

with high risks, assets at high risk often have detailed risk 

management plans that closely monitor the level of risk and 

proactively manage the risk. Management of risks at the 

individual asset level may include criteria for performance. 

For example, in the case of risk of an older, structurally 

deficient bridge, the strategy may involve proactive maintenance to keep the bridge condition within an acceptable 

risk tolerance level and when the cost of the maintenance 

exceeds acceptable amounts and the risk of failure exceeds 
 52 Risk-Based Asset Management 53 

acceptable limits, the risk management strategy may dictate 

that the bridge be replaced. 

as discussed earlier, risks at each of the levels discussed 

can escalate up or trickle down to other levels. risks at an 

agency level can cascade down resulting in risks at the asset 

category and individual asset level and vice-versa. Formal 

risk mitigation should trigger actions at other appropriate 

levels to contain the impact of these risks to other levels. 

operational Risks 

the other category of risk that Dots face is operational risk. 

operational risks often occur due to breakdown or lack of 

systems, procedures, processes or technology and lack of 

acceptance of changes that affect normal business operation. 

this includes: 

a. Burdensome processes that are ignored or are not 

fully implemented; 

b. new or untrained staff; 

c. informal operational procedures; 

d. incomplete, inaccurate or poor data and data systems; 

e. inaccurate or incomplete asset performance and
 

condition information or assessment, and;
 

f.	 inaccurate forecasting models and lack of necessary 

business intelligence. 

this report is specifically focused on risks to assets and 

hence will not discuss operational risk in more detail. 

Risk-Based Asset Management 

conclusions 

effective and sustainable management of assets inherently 

includes the proactive management of risks to the asset. 

it assumes that management strategies and techniques are 

being applied to eliminate, avoid and where avoidance is not 

possible, minimize risks to the performance, condition and 

longevity of assets. this approach is common in private 

industry and is also a requirement for transportation 

agencies in australia and new Zealand. 

risk management, like asset Management, can cascade 

through the different levels of an organization’s hierarchy 

from the agency level to individual assets. as in asset management, risk management steps at each level help to identify, 

plan, analyze, assess, monitor, manage and mitigate risks and 

continuously improve upon the success of the past efforts. 

transportation agencies manage complex dispersed infrastructure assets and capital facilities that are integral and 

important to the day-to-day functioning of commerce and 

the travelling public. Failure of these assets that impact the 

safety or cause major disruption is not an acceptable option. 

to extend the cost effective productive life and safe use of 

transportation assets, risk management can be institutionalized through policies, assigned responsibilities, documented 

processes and training at the agency, program, project, and 

asset level. risks at all levels can be well coordinated and 

clearly communicated. appropriate triggers, escalation 

processes and action plans can be put in place. 

the united states now has a Federal requirement to 

implement risk-based asset management. even without 

this requirement, the benefits of risk management are 

becoming increasingly apparent to u.s. transportation 

agency executives. 
 54 Risk-Based Asset Management 55 

as demonstrated internationally, risk management can 

add an important new dimension to asset management 

by helping agencies anticipate and mitigate risks and 

capitalize upon opportunities. 

a new Zealand study of risk Management Best practices, 

noted that the benefit of risk Management Frameworks 

(rMF) is that they capture the knowledge about risks 

“that existed in the heads of experienced staff”[xxv] but were 

not formally documented. they trigger the planning and 

documentation of addressing the risks through formal risk 

plans. these plans also made it easier to communicate the 

agency’s risk management approach to the public. 

Formal risk management and governance may necessitate 

the additional development or acquisition of new tools and 

training of agency personnel. it may also catalyze the development of new models of management where agency staff 

assume ownership and take responsibility for managing risks. 

an agile workforce with risk leadership skills may result in 

new and innovative approaches to risk management. this 

may result in improved taM processes, increasing the cost 

effective useful and sustainable life of transportation assets 

risk management can improve the decision-making 

process for: 

a. setting strategic direction; 

b. Developing and evaluating programs; 

c. Developing projects; 

d. Managing transportation assets; 

e.	 entering contracts with the private sector, and; 

Risk-Based Asset Management 

f.	 conducting the operational and administrative 

activities necessary to holistically and efficiently 

manage a transportation agency and deliver a costeffective, sustainable transportation network to the 

current and future stakeholders and users. 

as explained by experts in the field of “innovation adoption”, 

peer testimony is one of the factors that catalyze the adoption of innovations. this report has provided multiple examples of the application of risk-based asset management by 

international and u.s. transportation agencies to facilitate 

the adoption of these innovations that address common 

risk-threats to assets in Dots. the expectation is that as 

Dots read the report and the examples discussed, they will 

be able to relate the challenges they face to those discussed 

in the report and be comfortable in adopting strategies that 

apply to their agency situations. 

the rigorous process of risk identification, assessment, 

analysis, mitigation, allocation, monitoring, and updating 

allows for a more transparent and informed allocation of 

risks at the project, asset category, program and agencywide level. risk management can serve as an important 

adjunct to asset management that aligns the agency’s 

efforts to the risks that create the greatest opportunities 

and threats. 
 56 Risk-Based Asset Management 57 

eNDNoteS 

i.	 risk Management Framework, transport and Main roads, 

Queensland government. 2011, page 5. 

ii.	 risk Management process Manual, 2004, assurance and 

compliance Manager, transit new Zealand. 

iii.	 Queensland government, guide to risk Management. 

iv.	 Department of transport and Main roads annual report 

2010-2012 volume 1 of 2, page 142. 

v.	 the secretary Department of treasury and Finance,
 

victorian government risk Management Framework,
 

March 2011, Melbourne, australia, page 29.
 

vi.	 new Zealand transport agency, state Highway asset
 

Management plan 2012-2015.
 

vii.	 curtis, D’angelo, Hallowell, Henkel, and Molenaar, 

“transportation agency enterprise risk Management”, 

aug 1, 2011. page 12. 

viii.	 case studies and best-practices guideline for risk
 

management on road-networks, september 2010,
 

new Zealand Best practices study.
 

ix.	 ncHrp 20-24 (74) aasHto, executive strategies for 

risk Management by state Departments of transportation. 

x.	 By WsDot for FHWa, climate impacts vulnerability
 

assessment, 2011.
 

xi.	 surface transportation reauthorization legislation in the 

112th congress, by congressional research service, dated 

Dec 14, 2011. 

xii.	 http://www.fhwa.dot.gov/policyinformation/statistics/2010/ 

mf202.cfm. 

xiii.	 Mote, idekar, Figliozzi, lee and Macarthur, climate change 

impact assessment for surface transportation in the pacific 

northwest and alaska. 

xiv.	 storm-related closures of i-5 and i-90: Freight
 

transportation economic impact assessment report,
 

Winter 2007-2008.
 

Risk-Based Asset Management 

xv.	 Federal Highway administration risk Management, 

corporate risk assessment, December, 2010. pages 4-10. 

xvi.	 Queensland, transport and Main roads, program risk 

Management practice guide. 

xvii. pMi, program risk Management. 

xviii. total asset Management Manual, nsW government asset 

Management commitee. 

xix.	 FHWa, our nation’s Highways: 2011. 

xx.	 FHWa, 2010 status of the nation’s Highways, Bridges, and 

transit: conditions & performance. 

xxi.	 ncHrp synthesis 397-Bridge Management systems for 

transportation agency Decision Making. 

xxii.	 september 20, 2007, Florida Dot policy on Bridge 

replacement and rehabilitation Funds. 

xxiii. national Bridge inspection program: assessment of FHWa’s 

implementation of Data-driven, risk-based oversight, 

Federal Highway administration, report number: 

MH-2009-013, Date issued: January 12, 2009. 

xxiv. risk Management Framework, Queensland government 

transport and Main roads, page 11. 

xxv.	 Hill, et al, case studies and Best practices guidelines for 

risk Management on road-networks, september 2010.
 58 Risk-Based Asset Management 

Additional information is available from the following: 

Nastaran Saadatmand 

asset Management program Manager 

office of asset Management 

Federal Highway administration 

1200 new Jersey avenue, se 

Washington, Dc, 20590 

(202) 366-1337 

nastaran.saadatmand@dot.gov 

or 

Stephen Gaj 

leader, system Management & Monitoring team 

office of asset Management 

Federal Highway administration 

1200 new Jersey avenue, se 

Washington, Dc 20590 

(202) 366-1336 

stephen.gaj@dot.gov 

prepared by: 

shobna varma 

StarIsis Corporation 

in association with: 

gordon proctor 

Gordon Proctor & Associates, Inc. 
office of asset Management 

Federal Highway administration 

1200 new Jersey avenue, se 

Washington, Dc 20590 

FHWA-HIF-12-050