ERM

Enterprise Risk Management (ERM) Pilot Project
Harbor Services Group

Summary Report to Port Audit Committee
October 5, 2010

Enterprise Risk Management (ERM) Pilot Project-Harbor Services Group
Enterprise Risk Management Defined

Enterprise Risk Management
A process applied across an enterprise designed to identify potential events
that may affect the entity's strategies and objectives; assess the risks of the
identified events;   and to provide a consistent framework with which to
manage the most significant risks in order to provide reasonable assurance
to management regarding the achievement of its objectives.

Key Points:
It is a process implemented within the entity
Aligns to support and help achieve entities' strategies and operations
Helps to prioritize risks based on entities' tolerance to risk
Evaluates risks based on likelihood and impact
Includes governance, audit, and compliance
Recognizes that risk has both an upside and a downside
Creates a common risk assessment platform
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Enterprise Risk Management (ERM) Pilot Project-Harbor Services Group
Overview of Project
1. Port selected Harbor Services Group as the pilot group to
evaluate ERM
2. Port selected Aon Risk Services as the consultant to assist with
pilot study
3. Port assembled internal team to run the project
4. Interviews conducted of Harbor Services management by
consultants June 29-30th
5. 104 risks defined based on interviews and consolidated by
consultant and Port team to 25 risks

2

Enterprise Risk Management (ERM) Pilot Project-Harbor Services Group
Overview of Project

6. The 25 risks further refined to 20 risks by Port and consultant
7. A facilitated workshop conducted on August 5th to rank risks
based on impact and likelihood
8. The Executive Team briefed on September 10th on the results of
the pilot study
9. Port received final draft of report from Aon on September 23rd
10. Presentation to Audit Committee on October 5th

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Enterprise Risk Management (ERM) Pilot Project-Harbor Services Group
Overview of Project
Focusing on the Most Critical Risks to the Harbor Services Group
Reviewed selected documents; conducted industry research
Interviewed 10 Harbor Services representatives to identify key enterprise risks
Resulted in 104 Mentions of Risk
Analyzed interview notes to consolidate similar mentions of risk

Resulted in 25 Unique Risks
Prioritized 25 unique risks based on frequency of mentions
and management attention required
Resulted In 20 risks recommended for Assessment

Conducted Risk Assessment Workshop

Developed Summary
Report
4 Critical Risks
Assigned to
Risk
Owners


4

Enterprise Risk Management (ERM) Pilot Project-Harbor Services Group
20 Risks Selected for Risk Assessment
#                 Risk Name                    #                 Risk Name
1    Access to Capital                                   11   Land Use / Zoning
2    Budgeting                                         12   Legal & Regulatory Compliance
3    Commercial Fishing Industry                          13   Litigation
4    Competition                                        14   Maintenance
5    Customer Service                                   15   Marketing
6    Economy                                          16   Natural Disasters/Cat. Events and Business Continuity
7    Employee Costs                                    17   Political Relations
8    Environmental Regulations                            18   Public Relations
9    Hiring & Retention                                   19   Safety & Security
10   Internal Port Support Services                         20   Strategic Business Model
Note: Risks are listed in alphabetical order; additional information for each risk can be found in the detailed risk overviews
Workshop participants assessed each risk on two criteria:
The estimated likelihood of a risk's occurrence within the next 18-24 months
The estimated impact on finances, operations, the community, and the environment .


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Enterprise Risk Management (ERM) Pilot Project-Harbor Services Group
Risk Ranking and Assessment 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
Critical                                                                                    Risk Rankings are used to identify a risk's position on a
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 & Prioritization Workshop Results
Harbor Services Enterprise Risk Map
Harbor Services: Enterprise Risk Map          Rank             Risk Name             Risk Ranking
1     Land Use / Zoning*                                        53.20
2     Environmental Regulations                                   50.25
3     Political Relations                                           49.40
4     Maintenance*                                             43.55
2                           5     Commercial Fishing Industry                                  42.84
11
1
6  5                               6     Access to Capital*                                         40.12
8     4      3
12   10                                   7     Internal Port Support Services                                 38.64
13
18                        7                          8     Strategic Business Model                                     37.05
14
9
19                                                 9     Litigation                                                  35.88
Impact                     16
20
10     Legal & Regulatory Compliance*                             35.28
17    15
11     Natural Disasters, Cat. Events and Business Continuity             30.24
12     Economy                                                 29.61
13     Competition                                               27.60
14     Public Relations                                            27.00
15     Budgeting                                                 22.79
16     Employee Costs                                            19.11
17     Marketing                                                 18.92
18     Customer Service                                           18.81
Likelihood
19     Safety & Security                                           18.36
20     Hiring & Retention                                          17.28
Note: Risks are listed in the order of Risk Ranking; additional information for each risk can be found in the detailed risk overviews

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Detailed Risk Overview (1 of 20): Harbor Services Group Pilot ERM
Land Use / Zoning (selected for Risk Mitigation Discussion)
Definition                                                                     Risk Assessment Results: Risk Map

Risk of conflict between zoning laws / regulations and Port's desired or
intended use for that land                                                                                           2
11
11
6 5
8    4     3
12   10
13
18
Risk Drivers                                                                                              7
14
9
19
Impact                     16
20
17   15
Reliance on other's jurisdiction or the City for the revision of land use
Restrictions on the use of and improvements to land
Uncertainty of changing laws and regulations
Threat of re-zoning negatively affecting the Port
Likelihood
Existing Risk Management Activities                                      Risk Assessment Results: Details

Risk
Likelihood       Impact
Ranking
Ensuring frequent and regular contact with internal lobbyists and
contractors at the state and federal level to ensure we know of proposed
and actual changes to zoning laws and regulations.
7.6                 7.0               53.20


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Detailed Risk Overview (2 of 20): Harbor Services Group Pilot ERM
Environmental Regulations
Definition                                                                     Risk Assessment Results: Risk Map
Risk of not staying current with or non-compliance with existing or new
environmental regulations or failing to identify changes in federal, foreign,
22
11
state and/or local regulations                                                                                             1
6 5
8    4     3
12   10
13
18
Risk Drivers                                                                                              7
14
9
19
16
Challenges to adapting to changes in environmental regulations (ex.                Impact              20
17   15
gray water rule)
Demand on resources to comply with environmental regulations
(recovering sunken boats, walking the docks, etc.) competes with using
those resources elsewhere.
Escalating costs of compliance
Threat of legal action against the Port
Likelihood
Existing Risk Management Activities                                      Risk Assessment Results: Details

Risk
Likelihood       Impact
Ranking
Existing response programs in place to respond to an event
Keeping facility inspections up to date
6.7                 7.5               50.25


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