Transcript Risk Management

Risk Management
Process
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Augustine’s Law of Counter
Productivity
« It costs a lot to build bad
products »
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Contents
1. Challenges to a project
2. Participants to Risk management
3. Risk management process steps
Source: TBD
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Challenges to a Project
1. Risk exists among opportunities
2. Adequate plans must be maintained
– Continually update plan to reduce risk
3. Must have capability to execute plans
– Resources, process, training, experience
4. Project objectives must be met
– Customer needs, product requirements
5. Decisions must be based on a balance between
risks and benefits
----> There is a need to manage risk
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Risk Management along the Life Cycle
HWCI
Testing
Fabrication
Detailed
Design
Preliminary
Design
Hardware
Rqmts.
Analysis
FCA
PDR
System
Reqmts
Analysis
SRR
System
Design
SDR
PCA
CDR
System
Integration
and Testing
SSR
FQR
PDR
CDR
Software
Rqmts.
Analysis
FCA
Testing
and
Evaluation
Production
and
Development
PCA
Preliminary
Design
Detailed
Design
TRR
REVIEWS
Coding
and CSA
Testing
CSC
Integration
and Testing
SRR - System Requirements Review
SDR - Systems Design Review
SSR - Software Specification Review
PDR - Preliminary Design Review
CDR - Critical Design Review
TRR - Test Readiness Review
CSCI
Testing
PCA - Physical Configuration Audit
FQR - Formal Qualification Review
DEVELOPMENT
CONFIGURATIONS
may be integrated with
hardware reviews
FUNCTIONAL
BASELINE
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ALLOCATED
BASELINE
PRODUCT
BASE LINE
From Figure 1 of DoD-Std.-2167A
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Participants to Risk Management
1.
2.
3.
4.
5.
6.
7.
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Project members
Support groups (finance, MIS, marketing)
Senior management
Customer support
Customer
Partner
Supplier
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Components of Plan
1. Requirements
–
2.
3.
4.
5.
Quantitative and qualitative
Schedule
Description of work to be performed
Budget
Processes
–
technical, communication, reporting, training,
decision making, etc
6. Resources
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When are Plans Complete ?
If the act of performing to the plans and
only to the plans will logically produce
the product the customer wants, when he
wants it, for a pre-defined cost.
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Risk Management Questions
1. What could go wrong with the plan ?
2. How likely is it ?
3. What could be the consequences ?
4. What can I do about it?
5. Are things getter better or worst ?
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Risk Management Process Steps
1: Identify Potential Risks
2: Analyze risks
3: Develop risk reduction plans
4: Communicate & track risks
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Step 1: Identify Potential Risks
1. Assess resource & Process
readiness & plan & adequacy
2. Assess capability to achieve clear
project objectives
Identify undocumented
requirements, tasks, assumptions
3. Collect & integrate potential
risks
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Step 1: Identify Potential Risks
• Risk Identification Methods
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–
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–
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–
–
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Interviews, questionnaires
Risk templates
Integrated scheduling
Trend and failure analysis
Lessons learned
Risk checklists
Pareto charts
Fishbone (Cause and effect diagram)
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Graybeards & Previous PMs
• Pool of talent and experience
– What worked, what didn’t
– Why
• Variety of Forums
– Technical Issues Briefs
– Special Groups/Gatherings
• “If I knew then what I know now…”
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Step 1: Identify Potential Risks
• Risk Areas for Generating Risk Checklists
1. Plans
2. Requirements
3. Materials
4. Suppliers
5. Schedules
6. Costs
7. Personnel
8. Training
9. Facilities
10. Processes
11. Alignment with customer
12. Technology, politic, regulations, etc
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Step 1: Identify Potential Risks
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Key risk clues
1.
2.
3.
4.
5.
6.
7.
8.
9.
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Not sure
Don’t know
May…might..could
Complexity
Dependency
New
‘ Can-do ’
Hopefully
Probably
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Step 1: Identify Potential Risks
• Description of the Risk
– Should be a complete sentence which includes:
• Source of uncertainty (e.g. if …)
• Potential consequence (e.g. ...then …)
• Example
– Source: Management views a member’s projectrelated responsibilities as a higher priority than
process improvement - related responsibilities.
– Consequence: When schedules clash, members
will be pulled from the improvement effort. The
team’s schedule will slip, momentum will be
lost, and morale will suffer.
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Step 1: Identify Potential Risks
• Risk Identification Worksheet
Risk ID:
Probability:
Description of Risk:
Factor type:
Loss:
Report date:
Risk Exposure:
Current Management Plan:
Date Started:
Status./measures:
Date to Complete:
Contingency plan:
Trigger value:
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Step 2: Analyze Risks
1. Select analysis type
(Quantitative - Qualitative)
2. Determine likelihood and
consequence using criteria
3. Determine risk level
4. Collect and integrate risk
assessments
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Step 2: Analyze Risks
• Quantitative Versus Qualitative
– Quantitative: expressible as a specific quantity
or amount, usually numerically
• e.g. the water is flowing at 20 KPH
– Qualitative: characterized by a description of
the fundamental nature of an item. Potentially
different for each observer.
• e.g. the pattern is random
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Step 2: Analyze Risks
• Likelihood Criteria - no mitigation plans
– Low
• Proven approach or design, problem very unlikely to
occur
– Moderate
• Partially demonstrated approach or design
– High
• Speculative approach or design, or ‘ To be
determined ’
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Step 2: Analyze Risks
• Likelihood Criteria - with approved
mitigation plans
– Low
• Proven or completely mitigated by an approved plan
– Moderate
• Partially demonstrated or somewhat mitigated by
approved plan
– High
• Speculative with no identified mitigation plan
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Step 2: Analyze Risks
• Consequence criteria
– Low
• Little or no impact
– Moderate
• Major problems that could be tolerated
– High
• Major crisis that could result in project termination
if not mitigated
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Step 2: Analyze Risks
Top 10 Risk Analysis Chart
Project Name:
Date:
ID - numeric identifier of the risk
Risk Item - describe the potential problem
Prob - probability it will arise
Loss - relative loss potential (range of 1 through 10)
ID Risk Item [unsatisfactory outcome]
Risk Exposure - product of probability and loss
Risk Management Approach - action planned to mitigate risk
Who - person responsible for the action
Date - date by which to complete
Risk
Prob Loss Exp Risk Management Approach
Who
Date
1
2
3
4
5
6
7
8
9
10
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Step 2: Analyze Risks
• Risk levels
– Low risk
• No specific action required to reduce risk
– Medium risk
• Special project emphasis and close monitoring will
probably be sufficient to overcome potential
difficulties
– High risk
• Special action needs to be taken as soon as
possible.Some or much negative impact to the
project might still occur.
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Step 2: Analyze Risks
Medium
High
Probability
of
Occurrence
Low
Impact- Consequence
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US F-18 Program Risk Analysis
What Is the Likelihood the Risk Will Happen?
Your Approach and Processes...
1
Not Likely:
2
Low Likelihood:
3
Likely:
4
Highly Likely:
5
Near Certainty:
...Will effectively avoid or mitigate this risk
based on standard practices
...Have usually mitigated this type of risk with
minimal oversight in similar cases
...May mitigate this risk, but workarounds will be
required
...Cannot mitigate this risk, but a different
approach might
...Cannot mitigate this type of risk; no known
processes or workarounds are available
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Likelihood
Likelihood
Level
High
4
Medium
3
2
Low
1
1
Given the risk is realized, what would be the magnitude of the impact?
Consequence
Level
1
2
3
4
5
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Technical
Minimal or no impact
Minor performance
shortfall, same
approach retained
Moderate performance
shortfall, but workarounds available
Unacceptable,
but workarounds
available
Unacceptable; no
alternatives exist
Schedule
Minimal or no impact
Additional activities
required; able to meet
key dates
Minor schedule slip;
will miss need date
Program critical path
affected
Cannot achieve key
program milestone
Cost
Minimal or no impact
Budget increase or
unit production cost
increase <1%
Budget increase or
unit production cost
increase <5%
Budget increase or
unit production cost
increase <10%
Budget increase or
production cost
increase >10%
2
3
4
Consequence
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Questions about Risk Management?
Call a member of the Risk Mgmt Team
Xxxxx Xxxx
Yyy Yyyy
Zzzz Zzzzzz
Aaa Aaaaa
Bbbbbb Bbb
800-555-5555 x 5555
888-555-5555
800- 555-5555
800- 555-5555
800- 555-5555
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Step 3: Develop Risk Reduction Plans
1. Select risk reduction technique
2. Develop specific risk reduction
plan
3. Estimate impacts and prepare
planning changes
4. Approve risk reduction plans
& implement planning changes
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Step 3: Develop Risk Reduction Plans
•
Risk reduction strategies
1. Avoid risk, e.g. choosing an alternative path
2. Control-mitigate risk: reduce probability-impact
•
Example: feature creep
–
–
Incremental development practices
Design for change
3. Assume risk: plan a contingency
4. Transfer risk
•
e.g. get someone else to assume: Insurance policy
5. Reduce uncertainty
•
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Examples: Parallel development, Multiple suppliers
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Step 4: Communicate & Track Risks
1. Communicate Risk & Plan
status and compare Plans Vs
actuals
2. Iterate Risk management
process
3. Update risk database
4. Update risk reduction reports
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Risk Management Cannot
1. Identify all risks (e.g. unknown risks)
2. Minimize or eliminate all known risks
3. Guarantee best course of action is
always chosen
4. Provide early warning of all problems
5. Compensate for poor planning
6. Work in spite of a lack of commitment
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Risk Management Can
1. Minimize or eliminate many risks
2. Highlight areas of uncertainty and false
confidence
3. Help to decide best course of action
4. Provide early warning of many
problems
5. Provide basis for plan changes
6. Increase management and customer
confidence
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Review
1. Challenges to a project
2. Participants to Risk management
3. Risk management process steps
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