Newsletter

AFERM Newsletter, Issue 33, June 2020

This 33rd issue of the quarterly AFERM Newsletter includes thought leadership articles from ERM practitioners with Grant Thornton, Guidehouse, and RSA, and a short article from WAEPA. Also, AFERM’s Virtual 2020 Summit Training is September 10th – a full day of connectivity, idea sharing, and continuing professional education!

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President’s Corner

Ken FletcherApplying Enterprise Risk Management (ERM) for Post-COVID-19 Operations 

By Ken Fletcher

With the business disruptions and associated layoffs, economic upheaval, extended stay-at-home orders, and nearly $2.4 trillion in federal stimulus spending to date resulting from the enduring COVID-19 pandemic, calendar year 2020 is dramatically different from any year we previously experienced. The stress on our work routines and on our families is causing all of us to demonstrate flexibility, adaptability, and resilience. Although we did not anticipate today’s realities when we settled on the theme for this years’ Summit, “Creating a Clear 20/20 Vision to Take on Tomorrow’s Risks” could not be more relevant to AFERM, our members, and our sponsors.

The current situation in which agencies must navigate has increased the value of ERM in helping understand and respond to the new risk environment. While the future is fraught with increased levels of uncertainty, there are two things I believe are likely over the remainder of 2020 and beyond. First, a return to the “business-as-usual” in our professional and personal lives is highly unlikely anytime soon with some business analysts asserting that the pandemic will change business as usual forever. Few school age children in the region will be in a traditional in-class learning environment through the end of the year, and many federal and private sector employees will continue to work remotely. For government, the lessons learned, and success of this protracted tele-work experience may lead to continuing with expansive tele-work policies to reduce real estate footprints and associated costs or for other benefits to agencies or their employees.

Second, all levels of government are likely to experience considerable pressure on financial resources. How quickly the economy recovers may correlate with how soon these additional financial pressures dissipate. In the near term, federal stimulus spending is likely to increase concerns about the sustainability and long-term impacts of high government debt levels and many agencies may see appropriation cuts over the next several years. At the state and local level, the need to divert public funds to

pandemic response without a federal offset may cause public sector layoffs and a reduction in citizen services.

Scenario planning capabilities of ERM programs will be important for agencies to proactively take on tomorrow’s risks. How quickly and to what extent society recovers to functioning as it did before the pandemic and to what extent an agency experiences appropriation cuts establishes the four quadrants of potential future states and their related risks to government enterprises (presented in the figure below). From this perspective, agencies may begin considering key risk response questions concerning: What must change and what can change; what activities need to stop and what activities could be halted; and what opportunities should be pursued and where to invest for the long-term? The answers to these questions will be different for each potential future and will differ from agency to agency.

These same questions are confronting the AFERM Board of Directors. We have started addressing some of them by shifting to a virtual Summit, conducting webinars and on-line training events instead of in-person lunches and seminars, and delaying the decision to financially commit to a venue for the 2022 Summit. The revised AFERM strategic plan and business operating model review being finalized by the Planning Committee will provide insights to the Board on how we may address these and other questions. Additional insights will come from the plenary speakers and breakout sessions during the upcoming virtual 2020 Summit. The Summit Planning Committee has a wonderful agenda for this year’s Summit on September 10th, with keynote addresses by risk leaders from the Port Authority of New York and New Jersey and from Microsoft. I hope each of you can participate in what should be another exceptional AFERM Summit, and please stay safe and healthy.

All the best,
Ken

Ken Fletcher, AFERM President, may be contacted at president@aferm.org.