ERM Has Become More Important than Ever Before

 By Thomas H. Stanton

OMB Circular No. A‑11 (2025) states, “Enterprise Risk Management (ERM) is a systematic process for identifying, assessing, and managing risks that may impact the achievement of an agency’s strategic objectives, including those related to mission delivery, operations, compliance, and public trust.” ERM is seen as critically important to organizations because it facilitates the flow of information about major risks from across the organization to decision makers who need that information so they can act before harm occurs. In today’s federal context—marked by shifting objectives, workforce disruption, and heightened uncertainty—ERM has become not merely useful, but essential.

The 2024 federal election brought a presidential Administration to power with significant differences in organizational objectives from the previous Administration. High‑level objectives relating to social equity, for example, have been set aside, while objectives focused on reducing the size of the federal government and cutting federal regulations have gained increasing emphasis. The degree of change varies widely across agencies. Objectives of the Federal Aviation Administration relating to air traffic control have changed far less than those of the Consumer Financial Protection Bureau, which the incoming Administration initially sought to eliminate. In such an environment, ERM serves not only to protect organizational objectives, but also to clarify them. Because ERM explicitly evaluates risks in relation to stated objectives, it exposes situations in which objectives are unclear, inconsistent, or rapidly evolving—a frequent condition in today’s federal government.

Organizational uncertainty has increased in other ways as well. The Department of Government Efficiency (DOGE), officially established by executive order on January 20, 2025, and largely ending in November 2025, contributed to a reduction of the federal workforce by several hundred thousand employees. Workforce reductions disproportionately affected seasoned federal officials who accepted buyouts or early retirement. The loss of experienced personnel diminishes organizational capacity, at least until successors acquire comparable institutional knowledge. ERM becomes especially valuable in this context because it captures institutional memory in formal risk profiles, risk registers, and mitigation plans—preserving knowledge that might otherwise be lost when experienced staff depart.

Federal downsizing also targeted sources of independent and internal risk information, including Inspectors General, evaluation offices, and in some cases Chief Risk Officer (CRO) offices themselves. The scope of this turbulence is reflected in the title of a weekly publication of the American Society for Public Administration (ASPA), “Federal Workforce in Turmoil.” As traditional oversight and evaluative functions weaken, ERM increasingly functions as a low‑cost, internal early‑warning system—helping agencies identify mission‑threatening risks before they trigger public failure. Compared with after‑the‑fact damage control, ERM represents a cost‑effective approach to risk governance in fiscally constrained environments.

The Office of Personnel Management (OPM) has further increased uncertainty by extending it to the individual level. On February 6, 2026, OPM issued a final rule, Improving Performance, Accountability and Responsiveness in the Civil Service, allowing agencies to move “policy‑influencing” positions into a new excepted service category, Schedule Policy/Career. While these positions remain career and nonpartisan, they become at‑will, with reduced adverse action procedures and appeal rights. Although statutory whistleblower protections remain, changes to appeal mechanisms may weaken their practical effectiveness. This personnel context fundamentally alters the incentives for employees to report emerging risks.

Traditionally, a major strength of ERM has been its ability to encourage information flow about major risks from throughout the organization. In the current environment, however, employees may reasonably fear being blamed—or worse—for reporting “bad news.” For employees to surface major risks, organizations require a culture that treats risk identification as a value-added responsibility rather than an act of disloyalty. When employees fear bringing “bad news” to superiors, this makes ERM more difficult to implement at precisely the moment when it is most needed.

At the same time, today’s context strengthens the case for ERM as a tool for governing under uncertainty rather than merely managing risk. When risks are reported, ERM institutionalizes judgment, enabling leaders to think systematically about uncertainty rather than relying on ad hoc reactions. It also emphasizes resilience—the capacity to absorb shocks and recover when risks materialize in unexpected ways—rather than assuming all risks can be prevented.

How, then, should federal agencies proceed? As with ERM generally, support from the top remains critical. In agencies where leadership enjoys clear backing—such as parts of the Treasury and Transportation Departments—this may be more feasible than elsewhere. There is also a compelling political logic for ERM adoption. Political appointees typically wish to leave office without major failures tarnishing their reputations. ERM provides a defensible decision‑making framework by documenting that major risks were identified, elevated, considered, and either mitigated or consciously accepted. In this sense, ERM protects not only agency missions, but leaders themselves.

Ultimately, the paradox of the current federal environment is that the same forces making ERM harder to implement—workforce loss, fear‑based personnel systems, weakened oversight, and rapidly changing objectives—are precisely the forces that make ERM indispensable. By clarifying objectives, preserving institutional memory, encouraging information flow, strengthening resilience, and enabling informed judgment under uncertainty, ERM has become more important than ever to political appointees, career leaders, and the public missions they seek to serve.

Thomas H. Stanton is a former President of AFERM. He teaches ERM for the Center for Excellence in Public Leadership at George Washington University.