HomeMy WebLinkAbout04.b. Receive Annual Update of the Strategic Risk Inventory and Enterprise Risk Management (ERM) ProgramPage 1 of 5
Item 4.b.
F--1-448�411C-S0
April 25, 2023
TO: FINANCE COMMITTEE
FROM: SHARI DEUTSCH, RISK MANAGEMENT ADMINISTRATOR
PHILIPLEIBER, DIRECTOR OF FINANCE AND ADMINISTRATION
REVIEWED BY: ROGER S. BAILEY, GENERAL MANAGER
SUBJECT: RECEIVE ANNUAL UPDATE OF THE STRATEGIC RISK INVENTORYAND
ENTERPRISE RISK MANAGEMENT (ERM) PROGRAM
Background on Enterprise Risk Management
Organizations have traditionally managed risks in a distributed way, with a variety of internal functions that
identify and manage risks. Prior to ERM, these efforts were not typically centrally coordinated or reported
on. A central goal of ERM is improving this capability and coordination, while providing summary level
reporting to provide a unified picture of risk for stakeholders and improving an organization's ability to
manage these risks effectively. The Central San Strategic Risk Inventory is used for two purposes:
As an input to the internal auditor's annual work plan. The Strategic Risk Inventory has
informed the risk assessment process which leads to selection of internal audit focus areas for the
year.
2. For monitoring, control, and reporting on risks. The ERM Team meets twice per year to
discuss progress on mitigating the risks identified in the Strategic Risk Inventory. Updates to the
Strategic Risk Inventory are reported to the Administration Committee and Board semiannually.
The attached presentation constitutes the annual update on the Strategic Risk Inventory, and highlights
changes in risk rankings as well as new risks identified (if any).
Strategic Plan Tie -In
GOAL FIVE: Safety and Security
Strategy 1 - Reduce and eliminate risks of injury or illness
ATTACHMENTS:
1. Presentation
April 25, 2023 Special FINANCE Committee Meeting Agenda Packet - Page 152 of 160
Page 2 of 5
4/25/2023
Strategic Risk
Inventory and
Enterprise Risk
Management
Winter 2023 Updatez1z
1
i........
Shari Deutsch J
Risk Management Administrator
1
2
April 25, 2023 Special FINANCE Committee Meeting Agenda Packet - Page 153 of 160 1
Page 3 of 5
ERM Program
Strategic Risk Inventory
Created in 2018-19
Presented to Board in January 2020
Reviewed by ERM Team biannually
ERM Team is the Exec Team, HR, Risk Management and Internal Audit
Risk Management reports updates to Finance Committee and Board
Mitigation Plans
Each strategic risk has a corresponding mitigation plan and is assigned
to a risk owner (a member of the Executive Team)
Each plan is reviewed during ERM Team meetings
Discussion considered in updating risk scores
COMING SOON: RISK TEAM MEETINGS
3
Strategic Risk Scoring
Four-part risk assessment, each scored from 1-10
Probability - how often will it happen
Severity - how bad will it be
Mitigation Still to Do - how much work remains to manage the risk
Speed of Onset - how much notice do we get before it occurs
Earthquake = 10 vs Proposed Legislation = 2
Risk Score is the total of four scores
• Ranking based on Risk Score: Highest score = Highest Rank
Economic uncertainty / Recession 7 8 2 a is I
Global Pandemic 6 10 3 5 24 2
Internal Controls Failure 4 3 2 7 16 3
4
April 25, 2023 Special FINANCE Committee Meeting Agenda Packet - Page 154 of 160 2
Page 4 of 5
Top Ten Strategic Risks
Winter 2023
40
30 3, • ,
25
20 ■ ■
is
10 A[T 1 I 1 1
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■S—riq ■Frequency Mitigation ■Sip-dof
Needed On-
5
Strategic Risks 1-14
Winter 2023
.,.:
Falk
Rating March 2023
yem,
F.Wuy
waan
We d,e
sprgiirf
Ori
Current
Score
Trend and
Prior Score
EN,;
'.. 1
Environmental Risk
9
7
10
10
36
't
a
2
Natural �isase
10
5
9
10
34
•'
3
... .... ......
Major Spill
.....
10
6
...
....
32.,,,
1"1
•'
4
......
LossofMajorAsset
...
10
.....
4
....7
7
.9
9
30
...... ....
4y
«'
S
Physical Secuniy Breach
7
6
5
10
28
4#
�•
6
Loss of lltihfeslSupply Chain
10
6
3
a
27
F'1
7
Service orProductFailure
9
2
5
10
26
4�
F1A
8
Economic CowntumlRecession
7
a
2
8
25
t..
F.
9
Cyber5ecurdy _. __.
9
._... 4
__.._2
_.9
24_
t.. _
HR
10
Loss of LOPENalor Injury
10
2
3
8
23
M
f1
Newlroposed RegslLegislabon
6
3
10
2
23
t12
Slow Response to Customer
5
4
2
10
21
4#
13
Continua ThwAa Pandemic
9
5
2
521�ENG
A
14
SelflnsurancelReserwInsuthciency
6
4
3
a
21
j,
6
I
April 25, 2023 Special FINANCE Committee Meeting Agenda Packet - Page 155 of 160 3
Page 5 of 5
Strategic Risks 15-28
Winter 2023
0—',.
F?r
Rating March 2O23
sin,
FeqL.,wq
milin
Needed
9pem of
OrrA
Current
score
T.. and
Prior Score
F1A ''.
15
Failure oflntemal Controls
4
4
3
.......... 7
18
*4
......
F1A
..............
16
............... ............... ...............
External Data Connectivity Risk
.......
5
.........
3
2
7
:................
...............
17
................. ... ............
; 4.*
.......... ..................
F1A
17
............ .................. ..... ........ ......
Lg Tech Implementation Failure
.........:..
5
..:........
3
3
...
e.............. 5
....... ........ .
16
............. .................
l
'....................
......
RA ..................
..............
18
............... ............... ...............
Need for Large Rate Increase
.......
7
.........
3
2
3
... ........ ........
15
............
..........
FNG ..
19
............ ................. ................
Poor Jurisdidonal Coordination
.........:..
6
..:........
4
2
..... ........ ..... ..... ...
2
.... .... ....................
14
.................
Jl
HR
20
Changing Workforce
3
6
3
2
14
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ENG
_.FAA
21 _.Lass
Poor Coordination on large Protects
2
6
5
._._ 1
14
_.14
My
22.
ollMtor CuslomerlPadner
9
1
3
1
40
HA
_.HR
23
Lase Tax Exemption tar Bonds
__..
5
4
2
._._ 3
14
_.13_F/
ISM _.
24._Work
Stoppage
7
1
4
1
HA
25
Social l Political Risk {Civil llnrest etc)
5
2
2
4
13
",: 00
F1A
26
Failure to Adopt New Technology
3
3
3
3
12
F1A
27
Poor Customer Communications
4
3
2
2
11
11 4*
MW
28
Change Readiness Risk
2
2
1
1
6
6
S
April 25, 2023 Special FINANCE Committee Meeting Agenda Packet - Page 156 of 160 4