Federal Solutions
Key Components of Risk-Based Allocation
Digital Sandbox can help you develop a repeatable, defensible process for evaluating alternatives that reflects your organization’s strategic objectives by carefully defining three RBA components:
- Management Objectives. The methods you use to manage risks, priorities, portfolio diversification principles, and fixed business costs are the guiding principles that will lead you from analysis to portfolio allocation. No two organizations have the same RBA objectives. You must clearly define, communicate, and defend the objectives of your specific RBA process. If your objectives are defensible, your processes and allocations will be much easier to defend.
- Risk Measures. Some organizations only evaluate mission risk. Others add terrorism or human error into the mix. Still others use a full all-hazards view to assess program risks. All approaches require a high-level methodology that analyzes threats, vulnerabilities, and consequences to related critical infrastructure, populations, and mission objectives. Ideally, your methodology should align with national best practices and provide a level of detail appropriate for an RBA process.
- Measure of Effectiveness or Return for Candidate Investments. Using a simple two-by-two matrix to clarify and organize complex decisions, you can develop measures and metrics that reflect your mission objectives to balance against risk. One well-known example is the peer-reviewed Expected Effectiveness measure employed in the Homeland Security Grant Program. You can establish a similar effectiveness measure or return on investment measure based on an investment’s ability to “buy down risk.”
Using the two-by-two matrix approach, you can determine risk and effectiveness thresholds (i.e., higher versus lower in the matrix) and spending for projects or organizations within each quadrant.