Launching an ERM John Milton Washington DOT Experience
Launching an Enterprise Risk Management Program Lessons learned Lynn Peterson Risk and Asset Management Peer Exchange John Milton, Ph.D. PE Director - Quality Assurance and Secretary of Transportation August 25, 2015 Transportation System Safety Minneapolis, Minnesota Washington State Department of Transportation 2
§ At ¡WSDOT ¡risks ¡have ¡different ¡levels ¡of ¡ Today oday’s governance. ¡ pr pres esent entation ion § Each ¡program ¡area ¡has ¡performance ¡ goals. ¡(e.g., ¡zero ¡fatal ¡and ¡serious ¡ • Enterprise ¡Risk ¡ crashes) ¡and ¡reporBng ¡requirements ¡ Management ¡ § Tools ¡are ¡used ¡to ¡increase ¡efficiency ¡& ¡ Snapshot ¡ effecBveness ¡and ¡to ¡address ¡risk ¡in ¡a ¡ • Enterprise ¡Risk ¡ proacBve ¡manner ¡ Management ¡Tools ¡ § Examples ¡including ¡asset ¡based ¡risk ¡ • Examples ¡ assessment ¡ • Insurance ¡ § Risk ¡transfer ¡through ¡insurance ¡
On the state-owned system alone: Was ashingt hington on’s § Highways : 87 million vehicle miles/day (18,500 state highway lane miles) trans anspor portation ion - 309 lane miles of the 320 miles funded for HOV systems are in place system em is is big, big, (Including transit and HOV treatments on arterials and ramps) - More than 3,600 bridges and structures comple complex x and and § Ferries: 23 million passengers/year (23 ferry vessels, 19 terminals in mult multimodal imodal Washington, and 450 total sailings per day with 900 total sailings) § Aviation: 17 WSDOT-managed airports (138 public-use airports) Compr omprehens ehensiv ive e § Passenger rail: Nearly 850,000 passengers in 2011 (partner in Amtrak system em connect connects Cascades state passenger rail) road oadway ays, , § Freight rail: 3,600 miles of operated public and private freight air airpor ports, , railroads move 103 million tons of freight. (2009 data) water erway ays and and - Grain Train delivers more than 1.6 million tons of grain since 1994, 100 tons railw ailway ays per car in 2010. (The Grain Train program runs 118 cars, including 29 added in 2010.) - WSDOT owns 326 miles of short-line railroad. (During 2010, shipping on the Palouse-Coulee City rail system increased 20% over 2009 to 8,000 carloads) § Transit support - Business and state partnerships in commute programs support more than 810,000 workers statewide (160 million vehicle miles traveled reduced annually) - Vanpool program includes more than 2,400 vans (largest public fleet in the nation) 4 Source: WSDOT Strategic Assessment; Freight
Why enterprise risk management? 5
Ent nter erpr pris ise e Risk Portfolio Ris isk k Mana anagement gement Optimized decision making Mitigate Accept Linked to strategic goals and objective Transfer Avoid Balancing tradeoffs “across the enterprise” 9/1/15 6
Ris isk k § Developed In-house tools mana management gement § Increasing maturity of ERM in in Pract actice ice program § Common understanding of risk • Enterprise Risk categories and measures Management § Working across boundaries • Performance Management § Useful day-to-day to increase • Project and efficiency & effectiveness Programs § Understand and address risk in a • Asset Management proactive manner
Enterprise ¡Risk ¡ Management ¡ at ¡WSDOT ¡ Strategic Goals & Objectives Risk Management Asset Performance Management Management Source: TRB International Risk Management Practices for Program Development and Project Delivery (2012) 8
Integra<ng ¡ Enterprise ¡Risk ¡ Management ¡ at ¡WSDOT ¡ Strategic Goals & Evaluation & Performance Objective s Measurement Risk Management Asset Performance Management Management Operations & Maintenance Source: ¡ Milton ¡and ¡Van ¡Schalkwyk ¡(2012) ¡
Categorizing, ¡assessing ¡and ¡mapping ¡risks ¡ Risk ¡Assessment ¡Guide ¡ 10 ¡
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Analyzing ¡Risks ¡to ¡Strategic ¡ObjecBves ¡ ERM ¡Risk ¡Examples ¡and ¡Tools ¡ 12 ¡
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Risk ¡ranking ¡patron ¡walking ¡in ¡cabin ¡ trips ¡resul<ng ¡in ¡incident ¡ (Riskex ¡soCware) ¡ ¡
Visual ¡risk ¡ assessment ¡ used ¡for ¡ asset ¡ management ¡ purposes! ¡ 15 15 ¡
Clima limate e Change hange Assessment ¡of ¡ impacts ¡and ¡risks ¡
Telling elling the he stor ory Communicating the funding crisis, while achieving pavement preservation goals Pavement ement: : WSDOT uses graphs and charts to illustrate declining funding: Tar arget get lo lowes est lif life- e- § Maintaining over 20,000 lane miles while funding dropped by cycle le cos cost $600 million in 10 years (27% reduction) WSDOT uses performance management to create efficiencies: § Target lowest life-cycle cost – WSDOT achieves pavement condition goals amidst funding crisis (next slide) *Note: Projections as of December 2011. 17
Highway Construction Program PRESERVATION (P) Roadway (P1) Structures (P2) Other Facilities (P3) Program Support (P4) Paving Preservation Rest Areas Unstable Slopes Safety Catastrophi Weigh Stations Major Drainage & Electrical Restoration c Reduction IMPROVEMENT (I) Mobility (I1) Safety (I1) Economic Initiatives (I3) Environmental Retrofit (I4) Program Support (I5) Urban Collision All Weather Stormwater Chronic Env Reduction Deficiency 1995 2007 Rest Rural Fish Barriers Wildlife Connectivity Area Stations Collision Urban Noise Reduction Mgmt of Environmental Preventio Scenic Byways Bicycle Mitigation Sites n Air Quality Trunk System Core HOV Restricted 18 Bridges Strategy no longer active Bicycle Touring
Strategic gic Object Objectiv ives es What ¡are ¡the ¡risks ¡and ¡ opportuni<es ¡to ¡ achieving ¡our ¡objec<ves ¡ • WSDOT ¡Business ¡ Direc<ons ¡ • Moving ¡Washington ¡ • Target ¡Zero ¡ ¡
§ (Strategy): Efficient use of system § (Performance Metric: Increase LOS of Example: xample: Har Hard d facility/Lower Delay/Recurrent or Non Shoulder houlder Recurrent Congestion Running unning § Assets Impacted: Pavement Shoulder, Electrical Systems, Signage, etc. Developed strategic § Competing Risks: Hard shoulder running and targeted has the potential to create its own risks to approaches to added the enterprise and programs , as an capacity example, what if: • The shoulder structure fails? Strong performance management and • Crashes increase due to proximity measurement. of barriers and rails? • Public doesn’t like it?
Le Legal gal Ris isk k • Presentation by Attorney’s Summit ummit General on key risks from the legal perspective • Allow experts and • Major cases and their effects attorneys to share • Torts/Jones Act/Environmental/ information Right of Way • Highlight potential • Presentation by WSDOT on areas of risks and changes to major programs with continuing legal liability discussion on risks mitigation • Share settlement • Action items related to new and case elements of risk and next steps outcomes 21
• WSDOT is self insured for up $10M Ins nsur urance ance on torts related actions • For Owner and Contractors • Self Insurance Protective liability on projects between $3-$10M • OCP/CGL for projects • For Commercial General Liability a minimum of $3M with state named • Property as additional insured Insurance for large assets • WSDOT insures some of its bridges and ferry boats. Policy costs and replacement values vary on assets. • Assets are insured for property, business interruption, including earthquake, flood and terrorism 22
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