A Discussion with Former IRS Commissioner Koskinen on Risk Management

On September 11, 2018, the Association of Federal Enterprise Risk Management (AFERM) hosted an event featuring a discussion with the former Internal Revenue Service (IRS) Commissioner John A. Koskinen facilitated by Tom Brandt, the IRS Chief Risk Officer. Mr. Koskinen spoke about his experiences, lessons learned, and advice related to risk management, drawing upon his time at the IRS, Freddie Mac, the DC Government, the Office of Management and Budget, and in the private sector.

A Risk-Aware Culture

Mr. Koskinen spoke about the importance of building a risk-aware culture. He described that leadership getting information from front-line employees is as important to an organization as leadership sharing information with front-line employees. He also touched on the importance of ingraining risk awareness and a focus on risk management into an organization’s culture. As an example, he noted that if IRS employees only raise a risk in response to a Commissioner’s request, then it will not have a lasting effect on the organization.

Mr. Koskinen noted that to be successful all levels of an organization need to be comfortable with risk management, including raising and openly discussing risks and issues. In his past roles, Mr. Koskinen practically applied this concept by getting to know the people doing the work and encouraging them to talk about risks, issues, and their concerns. At each of the organizations he led, he strived to create a culture where concerns were openly surfaced, and the messenger thanked for sharing them. He shared a favorite mantra of his – the only problem you cannot solve is the one you do not know about. He emphasized that by building a focus on risk management into the culture, it becomes sustainable through leadership changes.

A Balanced Approach with Metrics

Mr. Koskinen spoke about a balanced relationship with metrics. It is essential to have appropriate measures and continually challenge ourselves — Are there things that could go better? Are we measuring the right things? He warned that while focusing on metrics, we must also keep an open mind. Risks are constantly changing and organizations should remain vigilant to new and evolving risks.

Striving For Risk Integration

Mr. Koskinen noted that an important aspect of getting different levels of an organization comfortable with risk management is having a systematic risk management approach  that includes actively surfacing and analyzing potential challenges. He pointed out that it is critical for this system to enable the flow of information and to have adequate resources devoted to risk management. Risk management should be embedded throughout the organization and its business processes. He emphasized that risk should inform decision-making at all levels and that need to be comfortable with owning the risks, which ties back to culture.

The Goal of Risk Management

Mr. Koskinen reminded the audience that the goal of risk management is not to eliminate all risk, but rather to identify and analyze risk and use the information to make better decisions. It does not mean that you will not be surprised one day when a risk manifests. A risk can manifest even when a risk management program is in place. He noted that this does not mean risk management is not working. The risk landscape for any organization is constantly changing. Thus, the focus needs to be on continually identifying new risks, and when risks do manifest, catch them early and quickly respond. Additionally, organizations should use risk events as an opportunity to learn and try to improve processes and techniques going forward.

Former Commissioner John A. Koskinen served as the 48th IRS Commissioner from December 2013 until November 2017. Prior to his appointment, Mr. Koskinen served as the Non-Executive Chairman of Freddie Mac from 2008 to 2012 and the Acting Chief Executive Officer in 2009. Previously, Mr. Koskinen served as President of the U.S. Soccer Foundation, Deputy Mayor and City Administrator of Washington D.C., Assistant to the President and Chair of the President’s Council on Year 2000 Conversion, and Deputy Director for Management at the Office of Management and Budget. Mr. Koskinen also spent 21 years in the private sector in various leadership positions with the Palmieri Company, including President and Chief Executive Officer. He began his career clerking for Chief Judge David L. Bazelon of the DC Circuit Court of Appeals in 1965, practiced law with the firm of Gibson, Dunn and Crutcher and served as Assistant to the Deputy Executive Director of the National Advisory Commission on Civil Disorders, also known as the Kerner Commission. Mr. Koskinen also served as Legislative Assistant to New York Mayor John Lindsay and Administrative Assistant to Sen. Abraham Ribicoff of Connecticut.