The California Department of Transportation (Caltrans) is under two risk management mandates.  One is the federal requirements under the Moving Ahead for Progress for the 21^st Century Act (MAP 21).

This act requires state departments of transportation to develop and have certified by the U.S. Department of Transportation Highway Administration (FHWA), a Transportation Asset Management Plan (TAMP).  This plan is to include a Risk Based Asset Management Plan. In 2017 FHWA issued their guidelines for incorporating risk management into the TAMP. The second is the 2015 State Leadership Accountability Act (SLAA).  The SLAA requires that a bi-annual report be submitted on the status of the agency’s internal controls. Part of the internal controls includes risk assessment. This piece examines the approach Caltrans has taken to implement ERM.

ERM Development

In 2013, the Executive Board established the Office of Enterprise Risk Management (OERM).   The OERM is to implement the department’s risk management strategy. The model used to develop Caltrans’ risk management process is the International Organization for Standards (ISO) 31000.  ISO 31000 is the international ERM standard.  It is also the approach used by the FHWA to integrate risk management into the TAMP.

To establish the initial risk management strategy, OERM staff met with each of Caltrans’ programs and districts to identify risks and mitigation strategies. Approximately 1,000 risks were identified. The risks were broken into two groups, Threats 672 and Opportunities 327. The threats were analyzed in terms of impact and likelihood. They were then grouped. Below is the board administrative objectives into which they were group.

Percent of Risk by Administrative Objectives

• Delivery – 20%
• Stewardship – 19%
• Professional Workforce – 20%
• Integrity – 8%
• Commitment – 7%
• Teamwork – 9%
• Innovation – 7%
• Safety – 5%
• System Performance – 5%

The administrative objectives cover more than one program or department.  Using a modified affinity approach, the risks were windowed to the top fifteen risks. These became the foundation of Caltrans Enterprise Risk profile.  Two of the top risks and mitigation actions are presented below.

Two Top Risks

1. Workforce Knowledge Base

Mitigations:

Promulgate knowledge transfer
Bolster recruitment and retention
Implement workforce planning solutions

2. Financial Risks from External Mandates

Mitigations:

Zero Based Budgeting
Buy America
Fully expended federal funds
Adequate funding for mandates

In 2016 Caltrans submitted the SLAA required bi-annual report. One of the major risks identified is presented below. It is same concern as the Workforce Knowledge Base identified 2013. It is also part of a larger statewide knowledge base problem.

SLAA 2016 Risk Report

In a statewide review to determine agencies at High Risk, the California Auditor identified Caltrans as a high-risk department in terms of the prospective loss of organizational knowledge through retirement attrition. As of June 2015, 55.5% of its employees were eligible to retire.  If these employees retire and Caltrans fails to recruit and retain high-caliber employees, it risks experiencing a generational vacuum with less experienced and knowledgeable employees filling important operational positions.

Recognizing this risk, Caltrans, in the SLAA report submitted in 2016, notes the following mitigative actions.

1. Surveyed all employees to determine workforce and succession planning efforts.
2. Adopted strategic workforce planning objectives for inclusion into the 2015-2020 Strategic Plan.
3. Identified workforce planning champions to act as focal point in districts and division for quarterly reporting.
4. Implement bi-monthly workforce planning forum and brown bag sessions
5. Create and maintain workforce succession plans for each occupational and demographic group.

Summary

Caltrans’ development of it ERM process indicates that using ISO 31000, as a basic framework, allowed it to meet the dual federal and state mandates.  Its risk assessment process determined that risks cut across departmental lines and can be broadly grouped. The ERM process allowed the risks to be identified and prioritized.  But the 2013 risk analysis and the 2015 SLAA report shows that some risks may require long term mitigation approaches.

Bio:

James J. Kline is a Senior Member of ASQ, a Six Sigma Green Belt, a Manager of Quality/Organizational Excellence and a Certified Enterprise Risk Manager.  He has over ten year’s supervisory and managerial experience in both the public and private sector.  He has consulted on economic, quality and workforce development issues for state and local governments.  He has authored numerous articles on quality in government and risk analysis. jeffreyk12011@live.com