The enterprise risk management department at RTI International, a not-for-profit that provides research services to government and commercial clients, was charged with developing a risk tolerance matrix for the organization. And because RTI was seeing a change in the type of work it was getting, the matrix would encompass not only critical indicators such as loss of life, loss of business or negative impacts exceeding $5 million, but also factors related to the effect projects could have on the company's overall financial position.

"What we have seen recently, certainly in the last three years, is a shift from fee-bearing work to non-fee bearing work—grants and cooperative agreements," says E. Ward Sax, RTI's treasurer and chief risk officer. "RTI has had to respond to that business model in terms of understanding what those terms."

While historically 16% to 20% of RTI's revenue was generated by arrangements like grants and cooperative agreements, which include no profit for the organization, that type of work now makes up more than 30% of revenue, Sax says. That poses a challenge since it could limit the free cash flow that RTI depends on to invest in the company, he says. "So one element of this risk tolerance was to get our arms around this nutritious vs. non-nutritious portfolio."

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