Measuring Risk in Federal Credit Programs

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While the credit subsidy cost figure mandated by the Federal Credit Reform Act indicates the expected budgetary cost of federal credit programs, it does not indicate what could be lost in plausible stress scenarios. We propose development of a Loss Volatility metric for greater insight into essential program financial risks.

Loss Volatility should be viewed as part of the overall transformation of federal program risk culture. That transformation will demand deeper reflection on program policies, organizational strategies and training efforts. But the potential payoff goes to the heart of what federal agencies can become: organizations that consciously develop program risk appetites, build a culture of resilience, and lay the foundation for better-informed and transparent decision making.

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This article originally appeared in the Spring edition of the Journal of Government Financial Management produced by the Association of Government Accountants (AGA).