Enterprise Risk Management (ERM) Project 
Seaport Cruise Operations 
Summary Report to the Audit Committee 
February 5, 2013 
Prepared and Presented: 
Jeff Hollingsworth 
Lauren Smith 
Vianney Muse

Enterprise Risk Management (ERM) Project 
Seaport Cruise Operations 
Focusing on the Most Critical Risks to Seaport Cruise Operations 
Reviewed selected documents; conducted industry research  Reviewed selected documents;
Interviewed 10 Harbor Services representatives to identify key enterprise risks  Reviewed goals and objectives 
Selected participants for the project (Mike/Marie) 
Facilitated risk identification workshop to identify key risks to goals/objectives 
(In lieu of one on one interviews) 
Analyzed workshop notes to consolidate similar mentions of risk 
Defined risks, risk drivers, and risk mitigation activities 
Prioritized risks based on frequency of mentions 
Some risk drivers may apply to more than one risk 
Resulted In 11 Risk Definitions 
Conducted Risk Assessment Workshop 
Used impact and likelihood matrix 
Used voting software 

Present to Executives 

Discuss Next 
Steps 


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Enterprise Risk Management (ERM) Project 
Combined Strategies and Goals for Seaport Cruise and Maritime Operations (CMO) 
From "Seaport Commercial Strategies" document, "Objectives"*** 
1.  By 2015, increase annual passenger volumes to over 1 million and annual vessel calls to over
250 
2.  Maintain the Seaport's financial independence. 
3.  Build broad public understanding and acceptance of Seaport activities contributing to
economic sustainability of Seattle and the region. 

From "Cruise and Maritime Operations" document, "Key Goals"*** 
4. Commercial Strategy  Enhance regional economic development by increasing utilization of
Port related facilities and volume of cruise passengers moving through the Port's terminals
resulting in improvement of the Seaport's Net Operating Income 
5. Asset Stewardship - Perform proper maintenance on current assets and align asset investment
to support long term market demand. 
6. Green Gateway/Environmental  Maintain compliance with all local, state, and federal
regulations. Collaborate with industry to reduce environmental impacts. Engage stakeholders
and community to build understanding and support 
*** As defined on October 16th Workshop 

2

Risk Assessment & Prioritization Workshop Results 
Seaport Cruise Operations - Risk Ranking Process 
Initial Prioritization Based Upon Assessments of Impact and Likelihood 
Risk Ranking Matrix              Risk Ranking Overview 
Risk Ranking provides an initial means of prioritizing
assessed risks based upon assessments of Impact and
Risk Map                      Likelihood 
Risk Rankings are used to identify a risk's position on a
Critical 
Risk Map (see chart to left) 
Risk Ranking Calculation Steps 
Major                                                    Multiply the Impact assessment (on a scale of 1-9 with 9
being the highest impact and 1 being the lowest) and the
Likelihood assessment (on a scale of 1-9 with 9 being
Impact   Moderate                                             the highest likelihood and 1 being the lowest) for each
risk 
Reference the product against a range of values (see
Minor                                                     table below) 
Assign one of four risk rankings (Very High, High,
Risk Rankings 
Medium or Low) based upon referenced range 
Insignificant                                                               Risk is ranked                    if the product of Impact &
as        Likelihood is 
VERY HIGH                    Greater than 49.0
Rare    Unlikely    Possible    Likely   Almost Certain 
HIGH              Greater than 27.0, but less than 49.0 
Likelihood                       MEDIUM              Greater than 9.0, but less than 27.0 
LOW                       Less than 9.0 

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RISK ASSESSMENT WORKSHEET 
SEAPORT CRUISE OPERATIONS-RISK MATRIX 
LIKELIHOOD                                        IMPACT 
Measure       Description        Description   Financial (US$)      Operational     Compliance/Security      Community         Environmental 
Revenue shortfall of more Operational budget expense Multiple incidents of non-   Sustained, longer than four   Environmental compliance
than 25% below      increases that were not   compliance with security   days, multi-media negative   regulations that curtail the
projections in budget.   forecast and that exceed   regulations or national      international and national     usage of either P-66 and T-91
ALMOST CERTAIN                                       budgeted costs by more than security threats that result in media coverage regarding   by limiting the number of day
Something already                                                 50%. Force subsidy by    closure of both Pier 66 and T- cruise and or cruise operators. the terminal could be used to 3
happening on a regular   Almost Certain          Critical                    dipping into the tax levy    91 terminal for 3 weeks    For example a top/front page  days a week and/or shortening
basis.                                                                income.                during the middle of the     story.                    the season to June through
cruise season.                                August. Both facilities
impacted. 

Revenue shortfall of more Operational budget expense Multiple incidents of non-   Sustained, 2-4 days, multi-  Environmental compliance
than 20% below      increases that were not   compliance with security   media negative international  regulations that curtail the
projections in budget.   forecast and that exceed   regulations or national      and national media coverage  usage of either P-66 or T-91
LIKELY 
budgeted costs by more than security threats that result in regarding cruise and or cruise by limiting the number of day
Something already
40%. Force subsidy by   closure of either terminal for operators. For example a   the terminal could be used to 3
happening on a regular
Likely             Major                  dipping into the tax levy   2 weeks during the middle of top/front page story.       days a week and/or shortening
basis but overall
income.             the cruise season.                          the season to June through
temporary in nature. 
August. Only one facility
impacted. 

Revenue shortfall of more Operational budget expense Multiple incidents of non-   Local news focus for 2 days   Environmental compliance
than 15% below      increases that were not   compliance with security   regarding cruise and or cruise regulations that curtail the
POSSIBLE                              projections in budget.  forecast and that exceed  regulations or national    operators. Makes evening   usage of either P-66 or T-91
Something not happening
Possible          Moderate                budgeted costs by more than security threats that result in news and the front page.    for 3-5 days in mid cruise
currently, but anticipated                                                      25%. Force subsidy by    closure of either terminal for                        season. 
to happen.                                                         dipping into the tax levy    1 week during the middle of
income.             the cruise season. 
Revenue shortfall of more Operational budget expense Isolated incidents of non-   Local news focus for one day  Environmental compliance
than 10% below      increases that were not   compliance with security   only regarding cruise and or regulations that curtail the
UNLIKELY                              projections in budget.  forecast and that exceed  regulations or national    cruise operators. Makes some usage of either P-66 or T-91
Something not happening                                              budgeted costs by more than security threats that result in talk show coverage, and an   for 1 day in mid cruise season. 
but it could in very         Unlikely               Minor                       10%. Force subsidy by    closure of a terminal for 1-5  article in the paper; not all TV
infrequent cycles.                                                       dipping into the tax levy    days during the middle of the stations provide cover or
income.             cruise season.          mention the event. 

RARE                              Revenue shortfall of less Operational budget     No compliance concerns   No negative or adverse media No environmental regulations
Something not happening                              than 10% below      increases that were not    security threats reported   coverage on cruise industry;  that restrict Port's use of the
and not anticipated to        Rare             Insignificant projections in budget.   forecast are limited to less  through various channels; No                      facilities at P-66 and T-91.
happen.                                                 than 10%.            fines or legal judgments
against the Port. Any closure
is limited to less than 24
hours. 
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Risk Assessment & Prioritization Workshop Results 
Seaport Cruise Operations - Risks Prioritized to Risk Ranking 
Rank   Risk Name/ Risk Definition                               Likelihood      Impact       Risk Ranking 
1     RD11  Costs: Risk that rising operating costs could make continuing to use        5.50          7.40             40.70 
Seattle as home port unsustainable. 
RD-3 - Environmental Constraints: Risk that environmental regulations could limit
2                                                                    5.80          6.40             37.12 
facility use and growth thus reducing opportunities to increase the ROI and NOI. 
RD-5 - Increase of Maintenance Costs: Risk that the increased maintenance costs could result in more deference of maintenance
3                                                                    5.30          6.40             33.92 
constraints and reduce the ROI and NOI associated with improvements and increased revenue. Deferral of maintenance could
result in more frequent breakdowns which during cruise season could interrupt or delay sailings. 
4     RD-1 - Future Investments: Risk that future investments could be more costly        6.10          5.30             32.33 
and limit opportunities to increase the ROI and NOI. 
RD-7 - Cruise Lines Reduce Vessel calls: Risk that the cruise operators decrease their interest and vessels
5                                                                    4.60          6.90             31.74 
devoted to the Alaska cruise market or to Seattle as a home port thus decreasing the number of passengers
and vessel calls for the Port. 
RD-6 - Demand for Cruise Goes Down: Risk that the demand for Alaska cruises decreases resulting
6                                                                    4.50          7.00             31.50 
in a reduced number of passengers and consequently a reduced number of vessel calls for the Port. 
RD-9 - Localized Event/Disaster Shuts Down Facilities: Risk that a sudden unexpected event, such as a
7                                                                   3.40          8.00             27.20 
labor strike or medical outbreak or mechanical breakdown forces an extended shutdown mid-season for up to
four weeks. 
RD-8 - Port Facilities Cannot Accommodate Increased Demand: Risk that the facility
8                                                                    5.20          5.00             26.00 
size limitations do not allow the Port to reach the targeted number of 250 vessel calls. 
RD-2 - Seasonal Constraints: Risk that the constraints around seasonal facility use limit
9                                                                    5.50          4.50             24.75 
opportunities to increase the ROI and NOI. A lack of year round diverse income streams. 
RD-10 - Area Wide Disaster Shuts Down Facilities For Entire Season: Risk that a sudden unexpected
10                                                             2.60         8.70            22.62 
event, such as an earthquake results in major facility damage thus forfeiting an entire cruise season.
(Example: 9/11 type of event resulting in direct hit or ripple effect.) 
RD-4 - Lack of Regional Support for Cruise:                              Risk that at the State and Local government levels, there is little
11                                                             4.20         4.90            20.58 
support through incentives, lobbying, or outreach to cruise lines to invest in cruise operations at Port facilities. 




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Risk Assessment & Prioritization Workshop Results 
Seaport Cruise Operations - Enterprise Risk Map Showing Assessed Risks 
Cruise Operations Enterprise Risk Map 
Rank              Risk Name              Risk Ranking 
1     RD-11 Costs                                          40.70 
10                                            2      RD3 - Environmental Constraints                         37.12 
7                                              3     RD5 - Increase of Maintenance Costs                        33.92 
4     RD1 - Future Investments                                 32.33 
1 
6                                      5     RD7 - Cruise Lines Reduce Vessel Calls to Seattle               31.74 
5 
3   2                              6      RD6 - Demand for Cruise Goes Down                       31.50 
7     RD9 - Localized Event/Disaster Shuts Down Facilities            27.20 
4                            8     RD8 - Port Facilities Cannot Accommodate Increased Demand         26.00 
8 
11                                    9     RD2 - Seasonal Constraints                            24.75 
9 
Impact                                         10   RD10 - Area Wide Disaster                    22.62 
11    RD4 - Lack of Regional Support for Cruise                   20.58 



Likelihood 
Workshop participants assessed each risk on two criteria: 
The estimated likelihood of a risk's occurrence
The estimated impact of a risk's occurrence on Seaport Cruise Operations' ability to meet its strategic objectives 
The assessments of Impact and Likelihood are used to develop Risk Maps to focus management attention on the most critical risk risks.
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Seaport Division- Detailed Risk Overview: 
Seaport Cruise Operations 

Risk Definition RD-11 
RD11 - Costs: Risk that rising operating costs could make continuing to use Seattle as a home port
unsustainable. 

Risk Drivers                                Existing Risk Management Activities 
Fuel costs increase dramatically, expected to increase by          Stay educated on upcoming technology to increase fuel
$4-$5Million between 2012-2015 due in part to cleaner fuel         efficiencies and keep updated on the cruise line's efforts
requirement within 200 miles of shoreline (ECA)                to use emissions averaging and other equivalencies to
Cost to travel to Seattle from other parts of the country are         stay in compliance with the Emission Control Area
on the rise                                            (ECA). 
Ongoing relations/communication with labor leadership.
Labor costs put Seattle at a competitive disadvantage (i.e.,         Seaport leadership routinely meets with union
costs in Seattle are very high)                              representatives. 
Unfunded security mandates                           Lease administration/management 




8

Seaport Division - Workshop Results: 
Seaport Cruise Operations 
RD11 - Costs: Risk that rising operating costs could make continuing to use Seattle as a home port
unsustainable. 
Risk Score = 40.70
Risk Map 
Critical 
1 
Major   Impact    Moderate Minor Insignificant
Rare    Unlikely    Possible    Likely   Almost Certain 
Likelihood 

8

Seaport Division - Workshop Results: 
Seaport Cruise Operations 
RD4 - Lack of Regional Support for Cruise: Risk that at the State and Local governmental levels, there is little
support through incentives, lobbying, or outreach to cruise lines to invest in cruise operations at Port facilities. 
Risk Score = 20.58 
Risk Map 
Critical Major    Impact     Moderate                          11 
Minor Insignificant
Rare    Unlikely    Possible    Likely   Almost Certain 
Likelihood 

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Enterprise Risk Management (ERM) Project 
Seaport Cruise Operations  Process Next Steps 
Possible Next Steps for Consideration 
Assess current mitigation efforts for identified risks or top priority risks 
Evaluate if sufficient to reduce or eliminate the risk? 
Evaluate if current mitigation is necessary to reduce or eliminate the risk? 
Ask whether mitigation is aligned with risk tolerance thresholds? 
Determine any budget impacts for risk mitigation 
Create integrated risk mitigation plans and identify sponsor and set timeline 
Implement and monitor integrated risk mitigation plans 


10

Enterprise Risk Management (ERM) Project 
Seaport Cruise Operations  Process Next Steps 
Items Open for Port Discussion 
Where does Port take ERM moving forward and what do we do with ERM results? 
ERM assessment versus performance audit 
Response to findings 
Mitigation efforts  funding for 
Who is the audience for reporting ERM findings? 
Audit Committee versus Commission or both 
Division finance and budget 
Establish Roles & Responsibilities and Policies & Procedures 
What is the merit of establishing an ERM process and identify ERM roles and responsibilities 
Establish Initial Risk Reporting Framework 
Should formal reporting tools and approaches for ERM results be created? 
Define Risk Appetite and Tolerances  Recommendation from Last Year's Consultants 
Formally define the Port's risk appetite and establish a consistent and documented approach
to understanding risk drivers, risk management options, and governance for key risks 
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