High Quality or Low Price: Pick One...

Have you ever heard that old saying, "You can have high quality or you can have a low price, pick one." Now apply this to Operational Risk Managment in your domain.

It seems that the U.S. Senate has mixed priorities right now on the U.S. Patriot Act debate. Wyoming is a low risk area in terms of critical infrastructure yet it will receive the same funding as states with more shoreline, ports and vulnerabilities to the security of the United States. James Jay Carafano has identified what the key issue really is:

What’s Missing?

There was one important provision that did not make out of conference. The original Patriot Act established the requirement that a significant percentage of all homeland security grants be distributed automatically to each state, big or small, regardless of national priorities or risks. Current funding formulas guarantee each state .75 percent of the funds available. As a result, 40 percent of these funds are immediately tied up, leaving only 60 percent for discretionary allocations. As the 9/11 Commission’s report rightly stated, the current system is in danger of turning homeland security funding into “pork-barrel” spending, making spending on security just another state entitlement program. In conference, an initiative to restructure the system and allocate money according to risk and needs rather than an archaic formula was rejected by Senate conferees. This is the third time the Senate has turned back House legislation to reform the grant system. And it is just wrong.

Prudent risk management policies and strategy point to investing to improve resilience in the areas that are identified as being most vulnerable and that the consequences of a loss would be unacceptable. What part of the risk management methodology is missing in the presentations or education of our law makers?

The part that is missing is the part that no one can present in fear of it becoming public information and for it to get into the hands of those who may use it to harm the homeland. Those single-points-of-failure exist in every country or city that has a significant capitalist marketplace. The resilience of the respective economies depends on the infrastructure that fuels it and every dollar and resource needs to be focused on those highest risk areas.

Mr. Carafano makes another observation worth consideration, regarding the The September 11 Commission Report Card: The Good, the Bad, and the Ugly:

At the top of the list is the failure of the Congress to put together a comprehensive package of border security and immigration reforms that enhance security, promote economic growth, and protect civil liberties. Also missing from the list is the tragic underfunding of the Coast Guard. The same service that saved 33,000 lives during and following Hurricane Katrina faces cuts to its modernization budget in the House.

The private sector can change all of this in a heart beat. The safety and security of our economic livelihood is in the hands of the telecom/high tech, banking and finance, health care and energy sectors. In the long run, the executives in these industry sectors have the power to change our law makers points of view. Let's just hope that they all realize that it is their own corporate assets that are at a greater risk now, than they were over four years ago.

operational risk