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Regular-General Government # 51.
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| Board of Supervisors |
Financial Services |
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| Subject |
| Receive report on enterprise risk management and direct staff to develop an implementation plan. (No general fund impact) (Newens) |
| Recommended Action |
- Receive report on the need for enterprise risk management in Yolo County; and
- Direct staff to develop a plan to implement enterprise risk management in Yolo County.
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| Strategic Plan Goal(s) |
| Operational Excellence |
| Reason for Recommended Action/Background |
State of Risk in Yolo County
In the present state of the world, organizations including governmental agencies are experiencing increasing volatility, uncertainty, complexity and ambiguity in the world. Each choice made in the pursuit or organizational goal achievement entails risk and opportunities.
Currently Yolo County has a disparate risk management process involving these different groups's activities:
- Risk Management Unit
- Office of Emergency Services
- Departmental Operational Plans
- Internal Audit
This process is a fragmented risk management function where each department approaches risk from a different aspect and manages the perceived risk in a silo-ed fashion, and only allows for ad hoc reporting to the Board. A preliminary assessment of risk management capability using the Risk Management Society (RIMS) assessment tool yielded a low score for Yolo County, demonstrating the immaturity of our process. There is much room for improvement, as indicated by newly issued standards on risk management.
Concept of ERM
Enterprise Risk Management (ERM) is a strategic discipline that supports organizational goal achievement by addressing the full spectrum of risks, and manages the combined risk impact as part of an overall risk portfolio. Calculating the residual risk score requires the identification and assessment of each significant risk, its impact, likelihood, and potential mitigation efforts.
ERM should encompass all major risk areas such as:
- Financial Risk
- Operational Risk
- Reporting Risk
- Compliance Risk
- Governance Risk
- Strategic Risk
- Reputation Risk
Through ERM these risks would be identified and evaluated through utilization of standardized and methodical approach that is embedded in the decision making process, rather than being delegated to specialized units. These identified risk exposures would then be categorized, measured, summarized and updated regularly, and their treatment would be administered on a holistic basis rather than piecemeal.
Development and Outcomes of ERM
Studies have demonstrated that ERM in the corporate sector translates to higher market value for organizations that are mature in their ERM initiatives. In the public sector, ERM is a newer concept; however several professional standards and best practices have been issued, including circulars issued by the federal Office of Management and Budget. Examples include the Uniform Guidance which recommends risk assessment in federal grants and programs, and OMB Circular A-123 which requires federal agencies to implement ERM. There are also other related professional standards such as ISO 31000 which is a principle based system of integrating risk based decision making.
The development of an ERM initiative in Yolo County would likely follow a 4 step plan as follows which would need to be further expanded into a detailed implementation plan:
- Plan and design ERM concept
- Implement risk identification and measurement, and benchmark risk appetite and tolerance
- Evaluate controls and embed risk management process
- Monitor ERM performance and report back to Board and Leadership
Recommendation
Staff recommend that the Board consider the concept of Enterprise Risk Management as described in detail in Attachment A and direct staff to develop an implementation plan for Yolo County. |
| Collaborations (including Board advisory groups and external partner agencies) |
| The Department of Financial Services presented the concept of Enterprise Risk Management and received feedback from county departments at the November 14 leadership meeting. |
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| Fiscal Impact |
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| Source of Funds for this Expenditure |
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