Guide Home / 5. Resource Allocation / 5.1 Resource Allocation and Prioritization Process / 5.1.4 Consideration of Risk in Resource Allocation


All transportation decision-makers must contend with uncertainty. In regards to resource allocation, uncertainty is inherent in variables such as data on asset conditions and performance, future funding levels and costs, how a transportation system and specific assets will perform, and what external events or other factors may require reallocating resources. This uncertainty complicates efforts to make decisions about the future and forces agencies to be nimble so as to effectively respond to unpredictable events and evolving conditions.

In recent years, transportation and other industries have made significant progress developing improved approaches for managing uncertainty to minimize negative and leverage positive impacts. An area of focus in transportation has been in managing the risk of project cost and schedule overruns; a number of agencies have established enterprise risk management programs in order to address risk and uncertainty across their organizations. Likewise in TAM, there is increased interest in identifying and assessing risk so as to comply with both the best practices and the FHWA requirement for state DOTs to consider risk in developing their NHS TAMP.

The word ‘risk’ can be very context specific, meaning very different things depending on the industry and application. For instance, a financial analyst is primarily concerned with uncertainty in financial returns and the risk of incurring a significant financial loss. In the nuclear power industry, however, the focus of managing risk is on minimizing the potential for catastrophic loss that might occur from damage to a nuclear facility. As discussed in Chapter 2, in this guide risk is defined as the “effect of uncertainty on objectives” consistent with the ISO definition. This definition captures the full range of applications of risk management, and acknowledges the possibility for both positive and negative consequences of uncertainty.

The term ‘risk management’ is used to capture the set of business processes associated with identifying and managing uncertainty and risk. The overall risk management process is described in Chapter 2. The remainder of this section describes how this process relates to resource allocation.