16 Risk Final

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© 2001 ConceptFlow1

Risk Management

DFSS

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Module Objectives

At the end of module participants will be able to:

• Recognize pervasive nature of risk in product/process life cycle

• Define elements of Risk Management

• Apply Risk management principles and procedures

• Identify risk areas in their DFSS project management

• Perform Risk Analysis using qualitative and quantitative tools

• Establish Risk Response Strategies and actions

• Evaluate effectiveness of Risk Response Actions• Estimate quality, cost and schedule impact

• Develop a Risk Control Plan for communication and monitoring

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Why is Risk Management important?

• Enhance probability of success in realizing project and design goals

• Risk is central, distinguishing and pervasive concept of DFSS

• DFSS projects are large, strategic and visible - thus prone to risk

• Avoid costly rework, defects and failure by proactively focusing onpotential risky areas early in process

Risk is not be avoided; it is to be managed

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What is Risk Management?

• Risk is the degree of exposure to an event that might happen to

detriment of the intended result

• Risk management is structured, formal and disciplined approach,

focused on appropriate steps and planning actionsto contain risks within acceptable limits

• This module will focus on project risk management

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Risk and Probability

• Risk is uncertainty or variability in outcome of some event or decision.

• Points to consider in risk management:

• What are sources of risk?

• What is probability of occurrence?

• What is severity of occurrence?

• Understanding risk begins with process of estimating uncertainty

around a particular occurrence

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Risk Impact

• Each project risk and design risk carries with it loss of valuewhich adversely affects cost, schedule and quality

• Similarly, risk reduction measures require resources

A p p l i c a t i o n o f R i s k M a n a g e m e n t

Lost Value

from risk Cost of Risk

Reduction

Actions

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7

Elements of Risk Management

Risk Identification

Risk

Management

Risk Analysis

Risk Response

Impact Assessment

Reporting and Control

Risk Awareness

Qualification

Risk Assessment

Communication

Quantification

Mitigation

Avoidance

Transference

Acceptance

Residual Risk

Risk Control Plan

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8

Philosophy of Risk Management

• Holistic View - Product Life Cycle -- from conception to end of life

• Viewing risk in the larger systemic perspective

• Identifying both risk and reward aspects

• Prediction and Prevention - Be Prepared - Always!

• Identifying, anticipating potential outcomes

• Managing and organizing for anticipated outcomes

• Continuous vigilance throughout tollgate process

• Multi-functional Team Focus

• Involve all functions, levels• Integrated management

• Shared Vision and Open Communication

• Common vision and clear measurable results

• Free flow of ideas and information, Listening to clients,

employees and business

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Product Life Cycle Risks

Client

Management

Design

DFSS Project Risks

Operation

Client

ExperienceConceptual

Design

Preliminary

Design

Detail

DesignPilot/

PrototypePre-Launch Launch

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Sources of Product Life Cycle Risks

Market

CompetitionMarket TrendsDemand, Prices

ManagementBusiness climate

Changing priorities

ScopeCTS, Feasibility

Design Concept selectionDesign issuesFeasibilityComplexity

Suppliers AvailabilityReliabilityQuality

Support StructureProduct/process supportField service, reliability

Technology AvailabilityReliabilityReadiness

Project RisksBudgets, ResourcesScope, Schedules

Operation ProductionQuality, YieldEffectiveness

Client Experience, PriceExpectations, ReliabilityPerformance

DeliveryTimeliness, Availability

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Role of Risk in DFSS Paradigm

• DFSS focuses on Risk Reduction not just defect reduction

• Defect Reduction is reactive, but Risk Reduction is proactive

• DFSS uses proactive tools to predict risk in the designs

• DFSS philosophy extends beyond design.

• It not only applies to end product but also to whole life cycle fromconcept, design, management, delivery and to client experience

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Risk management in DFSS

DFSS Risk Areas Description of Risk Techniques

Project scope andexecution

Risks due to including or excluding certain product or process design features.

Risks in project completionwithin schedule, budget andquality levels of deliverables

Technology roadmap Project scope tools

Project simulation

Tollgate process

Risk management

Design process Risks inherent in concept

selection, top level anddetailed designs in meetingclient needs

QFD, Multigen plans,

FMEA, Scorecards Models and Simulation

Operation andImplementation

Risks in designing andrunning operations to deliver product or service processes

Process management

Control plans

Product deliveryandField performance

Meeting delivery expectations

Cost and quality after marketintroduction

Life cycle risks involvingreliability, maintainability etc

VOC analysis

QFD

Test market studies

Competitive analysisReliability analysis

Risk Management Applies to All Facets of Product Life Cycle

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Risk Management Modules

• Project scope risk is discussed in project management module.

• Technology risk is discussed in technology roadmap module.

• Design risks are discussed in Design FMEA and scorecard modules

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Elements of Risk Management

Risk Identification

Risk

Management

Risk Analysis

Risk Response

Impact Assessment


Awareness

Qualify

Assessment

Communicate

Quantify

Mitigate

Avoid

Transfer

Accept

Residual Risk

Control Plan

Client

Management

Design

Project Risks

Operation

AttachmentsActions and Control

Residual Risk ImpactResponse Strategies

Risk AnalysisAssumptions and

TerminologyPurpose and ScopeBig DFSS Project

Risk M anagement

Team:

P. Murphy

K. Jinkson

Rev 2.3 29 Feb

2001

Low Low Low Moderate High

Low Low Moderate Moderate High

Low Low Moderate High Danger

Low Moderate High High Danger

Low Moderate Hi gh Danger Danger

.006

.011

.017

.023

34.3 68.5 102 137

250 812 1,375 1,938 2,500

Factor St ra tegy

High 35 Avoid

Danger 63 Mitigate

Moderate 21 Mitigate

Moderate 25 Transfer


Low 1 Accept

Risk RF

Low 1

Moderate 25

Low 9

Low 3

Low 3

Low 1

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Risk Management is a Control Activity for DFSS Tollgate Process

Risk Management Procedure

Identify Risk Items

Analyze Risk Items

Respond to all Risk Levels

Assess Impact of Residual Risk

Report Risk Control Strategies

Awareness Assessment

Compute Risk Factor

MitigateAvoid Transfer Accept

Risk Control Plan

Severity, SevProbability, Occ

Danger High Moderate Low

Stop andReassess

Slow Downand Address

Proceedwith Caution

Go Right Ahead

Client

Management

Design

Project Risks

Operation

AttachmentsActions and

ControlResidual Risk

ImpactResponse

StrategiesRisk AnalysisAssumptions

and

TerminologyPurpose and

ScopeBig DFSS

Project

Risk

Management

Team:

P. Murphy

K. Jinkson

Rev 2.3 29

Feb 2001





Low Moderate High Danger Danger

Residual Risk

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Risk Identification

Risk Identification

Risk

Management

Risk Analysis

Risk Response

Impact Assessment


Awareness

Qualify

Assessment

Communicate

Quantify

Mitigate

Avoid

Transfer

Accept

Residual Risk

Control Plan

Client

Management

Design

Project Risks

Operation





Risk M anagement

Team:

P. Murphy

K. Jinkson

Rev 2.3 29 Feb

2001






.006

.011

.017

.023

34.3 68.5 102 137

250 812 1,375 1,938 2,500

Factor St ra tegy

High 35 Avoid

Danger 63 Mitigate




Low 1 Accept

Risk RF

Low 1

Moderate 25

Low 9

Low 3

Low 3

Low 1

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Risk Identification

• Risk Identification is the first step in Risk Management

• It systematically identifies risky areas in DFSS processand their degree of risk

• It is organized into two steps

• Risk Awareness of risky areas• Identify the potential areas of risk in DFSS

• Potential areas can be divided into several segments

• Technical, Project related, Organizational etc.

• Risk Assessment - the degree of risk

• Assign a level of risk - None, Low, High

• Mainly from expertise and previous experience

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18

Risk Awareness

Categorizes risk areas

Can be categorized using tree structures or Fishbone diagram

Major categories include

Design, Project Management, Organizations, Technology

Portion of risk category list is shown below:

Sources for information for risk categories

Charter Documents, Design Documents, VOC data, team

input

Detailed Project plan, Historical data, Statements of Work

Techincal Project Management Pilot and Delivery Field Experience

Unclear Scope Team definition Alpha site Delivery

VOC not performed Timelines Prototypes Meeting expectations

Organizational vision Resource allocation Test startegies Reliability

Customer not clear Budget Operability Timeliness

Functions are new Schedule Safety Availability

Value proposition Scope Satrtup Acceptability

Assumptions Multi-gen plan Suppliers Serviceability

Market Study Funding Regulatory issues Maintenance

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19

Risk Assessment

Once the potential risk categories are collected, a multi functional teamassesses potential risk for each of the items under categories

Different assessors qualitatively evaluate an item to avoid bias

Risk Management Team finalizes the assessment

Assessment communicated to the multifunction team for review

The items with “No” risks are considered safe Items with more than 50% of “High” are definitely considered risky

Items with “Lo” risk are given a lower priority

This information will be included in the Risk Control Plan

Assessment Criteria Potential Risk (Hi, Lo, No)

Assessors A B C

Design Assessment

Customer segmentation Hi Hi Lo

Customer CTS definition Hi H M

Performance metrics Lo No Lo

Functional Requirements H Lo H

Concept Selection Lo Lo Lo

Technology Dependence No No Lo

Assessment Criteria Potential Risk (Hi, Lo, No)

Assessors A B C

Project Assessment

Charter definition

Business Vision

Change Management

Project Plan

Budget Allocation

Human Resources

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20

Risk Control Plan

• Maintained by the Project Manager and Risk Management Team

• Will be reviewed during Tollgate process and whenever necessary

• Contents of the Risk Control Plan:

Attachments

Actions and Control

Residual Risk Impact

Response Strategies

Risk Analysis

Assumptions and

Terminology

Purpose and Scope

Big DFSS Project

Risk ManagementTeam:

P. Murphy

K. Jinkson

Rev 2.3 29 Feb 2001

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21

Risk Analysis

Risk Identification

Risk

Management

Risk Analysis

Risk Response

Impact Assessment


Awareness

Qualify

Assessment

Communicate

Quantify

Mitigate

Avoid

Transfer

Accept

Residual Risk

Control Plan

Client

Management

Design

Project Risks

Operation





Risk M anagement

Team:

P. Murphy

K. Jinkson

Rev 2.3 29 Feb

2001






.006

.011

.017

.023

34.3 68.5 102 137

250 812 1,375 1,938 2,500

Factor St ra tegy

High 35 Avoid

Danger 63 Mitigate




Low 1 Accept

Risk RF

Low 1

Moderate 25

Low 9

Low 3

Low 3

Low 1

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22

Risk Analysis Model

• Risk items from the identification phase are given two parameters:

• Occ = probability of occurrence of the risk event, and

• Sev = severity of impact to the project or design from that event

• Risk Factor, RF, is evaluated by combining Occ and Sev

• Depending on the scales determine qualitative or quantitative methodsfor combining the two to arrive at Risk Factor, RF.

Probability Occurrence, Occ Severity of Impact, Sev

Qualitative Scale Probability Qualitative Scale Value

Very Unlikely 1 < 0.1 Very Low Negligible 1 <10

Unlikely 3 0.1 - 0.3 Low Marginal 3 10 - 30

Likely 5 0.3 - 0.7 Medium Significant 5 30 - 70

Very Likely 7 0.7 - 0.9 High Critical 7 70 - 90

Almost Certain 9 > 0.9 Very High Crisis 9 >90

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23

Operational Definitions

• Since estimating Occ and Sev are usually qualitative and subjective,there is a danger of inconsistency between different evaluators

• To reduce this error clear, simple and easy-to-understand definitionsfor various scales must be established, communicated and agreed

upon at the outset• For example, impact on a project can be defined as below:Severity of Impact, Sev Description of the Criteria

Qualitative Scale

Negligible 1 Minimal impact on budget and schedules no impact on deliverables

Marginal 3 Minor modification and redesigns, no major impact on scope

Significant 5 Scope change, considerable impact on project metrics and on deliverables

Critical 7 Deliverables cannot be achieved, significant scope cahnge, project at risk

Crisis 9 Project cannot be completed, unacceptable costs, catostrophic schedules

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Qualitative Risk Analysis

Establish operational definitions for Occ and Sev for your project

Develop a Risk Factor table similar to the one shown aboveFor each items identified as risky, assign Occ and Sev values

Evaluate the appropriate risk factor from the table

Enter the results in the Risk Analysis section of the Risk Control

Plan

Low Go Right Ahead

Moderate Proceed With Caution

High Slow Down and Address Issue

Danger Stop and Reassess Project

Risk Factors

Very

Unlikely Low Low Low Moderate High

Unlikely Low Low Moderate Moderate High

Likely Low Low Moderate High Danger

Very

LikelyLow Moderate High High Danger

Almost

CertainLow Moderate High Danger Danger

Negligible Marginal Significant Critical Cris is

Sevirity of Imapct, Sev P r o b a b

i l i t y o f O c c u r r e n c e ,

O

c c

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Quantitative Risk Analysis

• If we have numerical values for Occ and Sev, then RF = Occ x Sev

• We can either use the 1-9 scales for Occ and Sev

• We will have more quantitative power if we can reliably estimate

probability Occ and represent Sev in value terms (e.g. $)• In early stage, these numbers are, at best, are only guesses

• As the design progresses the quantitative method becomes moreuseful since we have better understanding, estimates and metrics

• For example, FMEA will use this principle to prioritize failure modes

• Other quantitative methods:

• Fault tree analysis, decision trees, monetary value analysis

• Monte Carlo simulation ( we will use this in later sections)

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Risk Analysis Tools

Qualitative Tools

•Risk Matrix

•Multi Generation Planning

•Technology Assessment•Failure Modes Effect Analysis

•Quality Function Deployment

•TRIZ

Quantitative Tools

•Simulation

•Decision Tree

•Fault Tree•Designed Experiments

•Prototypes, Pilots,

•Capability studies

•Design Scorecards•Design Review

•Project Plans - CPM and PERT

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Qualitative Risk Analysis - Design Example

• Design Category is analyzed in this example

• First, establish Operational Definitions for the risk items

• Design risk is determined using the awareness of three assessors

• The team assigned Occ and Sev values for each of the items

• Then analyzed risk using the table from previous page• Defining client requirements is identified as a show stopper

• Note that qualitative and “quantitative” RFs agree with each other

• The above table is ready to be included in the Risk Control Plan

Assessment Criteria Potential Risk (Hi, Lo, No) Risk Management Team

Assessors A B C Probability Severity Risk RF

Design Assessment Risk Occ Sev Factor

Customer segmentation Hi Hi Lo Hi Likely 5 Critical 7 High 35

Customer CTS definition Hi H M H Very Likely 7 Crisis 9 Danger 63

Performance metrics Lo No Lo Lo Very Likely 7 Marginal 3 Moderate 21

Functional Requirements H Lo H H Likely 5 Significant 5 Moderate 25

Concept Selection Lo Lo Lo Lo Very Likely 7 Marginal 3 Moderate 21

Technology Dependence No No Lo No Very Unlikel 1 Negligible 1 Low 1

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Risk Identification and AnalysisProject Exercise

• Establish the top level project plan through Tollgate 1 or 2

• Define operational definition for these terms

• Identify / Assess the risk of the top level Work Breakdown Structure

• As a team analyze the risky items and assign Occ and Sev values

• Derive RF values for the project plan• Prepare a 5 minute presentation for your Tollgate committee

• Place operational definitions, Risk Analysis results and presentation inyour Risk Control Plan folder with a suitable cover sheet

• Optional: Check to see if the important RFs follow the critical path

• Use the spreadsheet, if necessary

• 30 Minutes

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Risk Response

Risk Identification

Risk

Management

Risk Analysis

Risk Response

Impact Assessment


Awareness

Qualify

Assessment

Communicate

Quantify

Mitigate

Avoid

Transfer Accept

Residual Risk

Control Plan

Client

Management

Design

Project Risks

Operation





Risk M anagement

Team:

P. Murphy

K. Jinkson

Rev 2.3 29 Feb

2001






.006

.011

.017

.023

34.3 68.5 102 137

250 812 1,375 1,938 2,500

Factor St ra tegy

High 35 Avoid

Danger 63 Mitigate




Low 1 Accept

Risk RF

Low 1

Moderate 25

Low 9

Low 3

Low 3

Low 1

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Risk Response

• Purpose of the risk response is to decide level acceptable anddetermine a set of course of actions to that effect.

• Risk response strategies fall into the following categories:

Risk Acceptance Risk Transfer

Risk Mitigation Risk Avoidance • Risk Factors for DFSS items and project context are often used to

choose an initial Risk Response as shown in the following example:

• Risk level remaining after the response actions is called Residual Risk

Accept Transfer Mitgate Avoid

Low XXXX X

Moderate X XX XX

High XX XX XX

Danger XX XXX

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Risk Response Strategies -Descriptions

Risk Avoidance:

Completely eliminates the risk Employs redesign, change of scope

etc. to attack risk opportunities

It is ideal if no side effects

Triz can be used to attain IFR

Residual Risk is zero

Impacts project metrics and scope

Risk Mitigation

Reduces high Occ and Sev values Uses known methods and controls

e.g. action part of FMEA

Risks are reduced but not eliminated

New lower levels of Occ and/or Sev

Cost and budget implications exist

Minimal impact on scope

Risk Transfer: Transfer risk to another project,

vendor, or generation for moreeffective and efficient risk reduction

The residual risk is zero – for now

Non trivial future and transfer risks

Low impact on project and scope

Risk Acceptance Used when Risk Factor is low

Basically a “no action” strategy

Residual risk is same as before

Contingency plans can bedeveloped to handle this risk

No impact on project and scope

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Effects of Risk Response

Response Risk Project Scope Residual RiskStrategy Factors Impact Change Risk Reduction

Avoidance High + High Needed None Complete

Mitigation Mod-High Med-Hi Often Yes Partial

Transfer Low-High Minimal Minimal Minimal Complete Accept Low None None Maximum None

For each risk item and the corresponding risk response strategy,

• Outline a set of Risk Response Actions with the team• Estimate Risk Residuals, cost and schedule impacts, and potential

consequences of the Risk Response Actions (RRA)

• Evaluate RRAs for acceptable Residual Risk and reasonable project impact

• These steps are iterative and might change original strategy

• Document all the above in the Risk Control Plan for review

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Selecting Risk response strategies and impact assessment are iterative

Risk Response Actions and their Impact


Low XXXX X

Moderate X XX XX

High XX XX XX

Danger XX XXX

Select a Risk Response StrategyProject Scopeand context

Select Risk Response Actions

Are the

Residual Risk

and Consequences

Acceptable?

Are the Project

costs and schedules

acceptable?

No Yes No

Estimate Residual Risk Project SchedulesUnintended Consequences Project Costs

Review and Document

in Risk Control Plan

Yes

Risk

Response

Impact

Assessment

Control and

Reporting

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Risk Response Strategy - Example

• The following table shows Risk Response Strategies adopted basedon the risk factor and project context.

• The High RF value is avoided by redefining and rescoping the project

• The “Danger” item is mitigated through VOC and QFD work

• Some items are transferred to next DFSS phase when the team willhave more reliable information

• The lowest risk factor item is accepted without any change

• The resulting Occ and Sev values shown along with Residual Risk

• There will be still some Residual Risk impact

Risk RF Risk Response Strategy Probability Severity Residual

Design Assessment Factor Strategy Response Action Who New Occ New Sev Risk RF

Customer segmentation High 35 Avoid Redefine Segementation CS Very Unli 1 Negligible 1 Low 1

Customer CTS definition Danger 63 Mitigate Perform VOC and QFD VK Likely 5 Significant 5 Moderate 25

Performance metrics Moderate 21 Mitigate Benchmark with XYZ Co. PS Unlikely 3 Marginal 3 Low 9

Functional Requirements Moderate 25 Transfer Move it to Concept Phas CC Unlikely 3 Negligible 1 Low 3

Concept Selection Moderate 21 Transfer Move it to Concept Phas CC Unlikely 3 Negligible 1 Low 3

Technology Dependence Low 1 Accept Document Reasons RJ Very Unli 1 Negligible 1 Low 1

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Risk Identification

Risk Identification

Risk

Management

Risk Analysis

Risk Response

Impact Assessment


Awareness

Qualify

Assessment

Communicate

Quantify

Mitigate

Avoid

Transfer

Accept

Residual Risk

Control Plan

Client

Management

Design

Project Risks

Operation





Risk M anagement

Team:

P. Murphy

K. Jinkson

Rev 2.3 29 Feb

2001






.006

.011

.017

.023

34.3

68.5 102 137

250 812 1,375 1,938 2,500

Factor St ra tegy

High 35 Avoid

Danger 63 Mitigate




Low 1 Accept

Risk RF

Low 1

Moderate 25

Low 9

Low 3

Low 3

Low 1

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Impact of risk response actions can be qualified and, with data, can be

quantified

Effects of Risk Response Actions on residual risk, cost and schedules must be

estimated prior to implementation. This process is iterative.

For design, use reviews, models, simulations, prototype and similarity studies

For project, What-if analysis on costs and schedules using detail plans

Risk Impact Assessment

Major Risk Categories Impact Description DFSS Tools

Design ProgramResidual Risk

Risk of not meeting design intent

Cost Impact Over all life cycle cost of the design.Change in value proposition

Schedule Impact Design, production and launch delays

UnintendedConsequences Reactions, unforeseen results from riskresponse actions

Project Charter QFD, FMEA,TRIZSimulation, PilotsDOE, PrototypesEconomic modelsCapability studiesDesign Scorecards

Design Review

Project ManagementResidual Risk

Risk of not providing scoped deliverables

Cost Impact Cost over runs during project life cycle

Schedule Impact Changes in critical path and delivery schedules

Project Plan, FMEAMultigen ScopingBudget ControlProject MetricsCPM, PERTSimulation

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Risk Response and Impact AssessmentProject Exercise

• Establish Risk Response Strategy for the top level project plan itemsfrom the previous exercise.

• Identify Risk Response Actions and responsible person for each

• Assuming that the actions will be completed, guesstimate the new Occ

and Sev and Risk Factors to (Residual Risk) - qualitatively• Can you estimate the new cost, schedule and quality implications?

• If yes, what are your suggestions to estimate them for your project?

• Prepare a 5 minute presentation of your results to Tollgate committee

• Place Risk Response strategies, actions, responsible people and your

new estimates (if any) in your Risk Control Plan• Optional: As a project manager, in light of the above actions, how can

you quantify the new risk, cost and schedules for your project ?

• 30 Minutes

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Risk Impact

• Each project and design risk carries with it loss of valuein terms adversely affecting cost, schedule and quality

• Similarly, risk reduction measures require resources

• Risk level remaining after the risk measures is called Residual Risk

A p p l i c a t i o n o f R i s k M a n a g e m e n t

Cost of Risk

Reduction

Actions

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Quantification of Residual Risk Impact

• Even after the Risk Response strategies, the residual risk affects cost,schedule and quality

• How can one quantify these? Let us consider cost example.

• Though exact cost due to residual risk can not be determined, one

might know its distribution (min, most likely, and max costs)

• What is the new cost from these risk response actions? 150? 2730?

Residual Risk Impact Assessment Cost ConsequencesDesign Assessment Risk RF Description of Residual Risk Best Most Likely Worst

Customer segmentation Low 1 Overseas customers excluded 0 200 600

Customer CTS definition Moderate 25 QFD not fully reliable 100 500 2000

Performance metrics Low 9 20 % CTS do not have metrics 50 70 100

Functional Requirements Low 3 No residual risk for now 0 5 10

Concept Selection Low 3 No residual risk for now 0 5 10

Technology Dependence Low 1 Residual risk negligible 0 5 10

Total Cost Implications 150 785 2730

8/22/2019 16 Risk Final



Simulation Results

Frequency Chart

Certainty is 50.00% from 1,159.38 to +Infinity

.000

.006

.011

.017

.023

0

34.25

68.5

102.7

137

250.00 812.50 1,375.00 1,937.50 2,500.00

6,000 Trials 2 Outliers

Forecast: RR Cost

Frequency Chart

Certainty is 83.37% from 785.00 to +Infinity

.000

.006

.011

.017

.023

0

34.25

68.5

102.7

137

250.00 812.50 1,375.00 1,937.50 2,500.00

6,000 Trials 2 Outliers

Forecast: RR Cost

After response actions, using the min,likely and max values for cost for

each item, a Monte Carlo simulation

is made to estimate over all cost due

to residual risk.

Cost distribution is approximately

triangular also (300,900,2600)

Results show that probability of

exceeding cost of 785 is 83% !

50% chance of exceeding 1159!

Forecast Statistics: RR Cost Trials 6,000

Mean 1,220 Median 1,159

Std Dev 434.88 Variance 189,120

Minimum 312 Maximum 2,609

Range Width 2,297 Std. Error 5.61

8/22/2019 16 Risk Final



How it is Done

Clientsegmentation

Client

CTS definition

Performance

metrics

Functional

Requirements

Concept

Selection

Technology

Dependence

0 200 600

100 500 2000

50 70 100

0 5 10

0 5 10

0 5 10

Triangular Distributions (min, likely, max)

Frequency Chart

.006

.011

.017

.023

34.3

68.5

102 137

250 812 1,375 1,938 2,500

Forecast: RR Cost

Forecast RR Cost Trials 6,000Mean 1,220 Median 1,159

Std Dev 434.88 Variance 189,120Minimum 312 Maximum 2,609Range Width 2,297 Std. Error 5.61

200 950 $K 2500

USL 1200 BudgetRisk

8/22/2019 16 Risk Final



Project Risk Estimation Using Simulation

• Cost simulation applies to estimate total project costs too!

• Total project cost distribution can be compared to project budget toestimate the risk of exceeding budget

• Similarly project schedules can be simulated if we know the frequency

distribution of each project work break down step• If we don’t, then we can use (best, likely or worst) case scenario as we

did with the cost simulation

• In addition to Critical Path we can also have the Risk Path for a projectwhich is more meaningful

• Popular PM tools such as,Risk for Microsoft Project,provide these features

10 50 days 200

USL 120 ScheduleRisk

8/22/2019 16 Risk Final



Selecting Risk response strategies and impact assessment are iterative

Risk Response Actions and their Impact


Low XXXX X

Moderate X XX XX

High XX XX XX

Danger XX XXX

Select a Risk Response StrategyProject Scopeand context

Select Risk Response Actions

Are the

Residual Risk

and Consequences

Acceptable?

Are the Project

costs and schedules

acceptable?

No Yes No

Estimate Residual Risk Project SchedulesUnintended Consequences Project Costs

Review and Document

Risk Control Plan

Yes

RiskResponse

Impact Assessment

Control andReporting

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Risk Identification

Risk Identification

Risk

Management

Risk Analysis

Risk Response

Impact Assessment


Awareness

Qualify

Assessment

Communicate

Quantify

Mitigate

Avoid

Transfer

Accept

Residual Risk

Control Plan

Client

Management

Design

Project Risks

Operation





Risk M anagement

Team:

P. Murphy

K. Jinkson

Rev 2.3 29 Feb

2001






.006

.011

.017

.023

34.3 68.5 102 137

250 812 1,375 1,938 2,500

Factor St ra tegy

High 35 Avoid

Danger 63 Mitigate




Low 1 Accept

Risk RF

Low 1

Moderate 25

Low 9

Low 3

Low 3

Low 1

8/22/2019 16 Risk Final



Risk Reporting and Control

• The purpose of this step is to document and control all relevant riskidentification, analysis, response and assessment activities

• This is not a final step but done throughout the project

• This documentation will act as a reference, risk management activity

log, reference material and a controlled document for the project• This document is called Risk Control Plan

• Any activities and actions determined by the team to handle risk aredocumented in the Risk Control Plan

• Any project metrics or other risk related measurements collected over

time are included in this report• Project Risk Control Plan defines what risk parameters have to be

monitored

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Risk Control Plan

Maintained by the Project Manager and Risk Management Team

It will be reviewed during Tollgate process and whenever necessary

Contents of the Risk Control Plan:Cover Sheet: Title, Team, Date and Revision #Purpose, Scope and Risk Management Methodology

Assumptions and TerminologyRoles and Responsibilities

Risk Identification: Awareness and assessmentRisk Analysis and QuantificationRisk Response Strategies and ActionsResidual risk Impact Assessment

Design Impact

Project ImpactReporting/Meeting SchedulesControl / Tracking Reports

References: Glossary, DefinitionsGuidelines, CommunicationsExamples, Forms and Tools

Attachments

Actions and Control


Response Strategies


Terminology

Purpose and Scope

Big DFSS Project

Risk ManagementTeam:

P. Murphy

K. Jinkson

Rev 2.3 29 Feb 2001

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Risk Monitoring

• Purpose of risk monitoring to make sure the risk management actionsare done as planned throughout the project life cycle

• Monitoring is critical when there are new risks or the risk handlingtactics and strategies change

• Risk monitoring includes tracking of • Project accomplishments pertaining to risk management

• Cost and schedule data - Projected, actual, expected etc

• Agreements between stakeholders around risk management

• Background material for risk management

• Meeting minutes, risk action items, deliverables, responsibilities

• Periodic status reports

• Tollgate review and design review action items

• Project performance metrics

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Risk Communication

The language of DFSS is Risk Management - all project teammembers must be aware of the risk management imperatives and

status

Risk reporting must be done during the tollgate review

In addition, risk assessment, analysis and response must be

addressed at every design meetingAdditional communications will be needed as Risk management

process progresses

The contents of the risk report must be readily available to the

teamRisk management is not a one time activity - it needs to be

performed whenever there is a a change that affects the project

risk profile

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Risk management is not a one time activity - it is DFSS

Risk Management - Key Points

Risk

Identification

RiskManagement

Planning

Risk

Analysis

Risk

Response

Impact

Assessment

Reporting

and Control

Risk Awareness For life cycle

Qualification Risk Matrix

Risk Assessment For all Items

Communication Risk Monitoring

Quantification RF = Occ x Si

Mitigate Response ActionsAvoid

Transfer Accept Consequences

Design Residual Risk Cost Impact

Risk Control Plan

Project Residual Risk Schedule Impact

Client

Management

Design

Project Risks

Operation



Response StrategiesRisk AnalysisAssumptions and


Risk M anagement

Team:

P. Murphy

K. Jinkson

Rev 2.3 29 Feb

2001






.006

.011

.017

.023

34.3 68.5 102 137

250 812 1,375 1,938 2,500

Factor St ra tegy

High 35 Avoid

Danger 63 MitigateModerate 21 Mitigate



Low 1 Accept

Risk RF

Low 1

Moderate 25Low 9

Low 3

Low 3

Low 1

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Key Learning Points

•

•

•

•

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Module Objectives

At the end of module participants can:

• Recognize pervasive nature of risk in product/process life cycle

• Define elements of Risk Management

• Apply Risk management principles and procedures• Identify risk areas in their DFSS project management

• Perform Risk Analysis using qualitative and quantitative tools

• Establish Risk Response Strategies and actions

• Evaluate effectiveness of Risk Response Actions

• Estimate quality, cost and schedule impact

• Develop a Risk Control Plan for communication and monitoring

T d k d S i M k

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