Week 2 – Risk Planning & Identification

Risk & Risk Management

Risk Management Art and science of planning, assessing, & handling future events to assure favorable outcomes Alternative is crisis management Resource-intensive Constrained options Goal: avert crisis management

What Is Risk? Formerly considered something to be avoided Now accepted as an inherent part of all programs DoD required that risks be characterized and managed SE goal – reduce all risks to manageable levels

What Constitutes a Risk? Is an event Has a probability of occurrence May be known or unknown Has a consequence of occurrence Technical Cost Schedule

Characteristics of Risk Inherent in all activities A potential event Not a problem - a problem is a consequence that has occurred Can be an opportunity Cannot be changed by force of thought – hope, ignoring, or mandate

Root Causes of Risk Internal to design Manage with design reviews, risk assessments External from environment Manage with requirements & constraints Design integration Within design Between design and external environment

GAO: Good Risk Assessment Criteria Planned and systematic procedures Consider current and future risks Explicit attention to technical risk All aspects are recorded & data is maintained Is a continuous evaluation process

Risk Management Scope Involves entire program team Utilizes outside expertise in critical areas Scope Covers Hardware Software Human element Integration

Risk Management Process Risks must be reduced to acceptable level to complete program milestones and move to next phase

Risk Management Components

Risk Management - Planning Develop a comprehensive strategy and establish RM objectives Define methods for tracking & documentation to execute the strategy Identify resources Overall: Document & Disseminate information

Planning - Strategy Performance characteristics are embedded in SE process Is continuous Integrated across all program activities & phases Tailored to each program

Planning - Outline

Planning – Inputs/Outputs

Planning - Results Identifies specific tasks to be accomplished Timing of tasks is incorporated into program schedule Assigns responsibility for execution However – is a team effort May suggest techniques, funding, use of outside experts, …

Planning – Example Overview

Updating the Plan Identify significant occasions Change in program empahsis In preparation for major decision points Technical audits & reviews As update other program plans

Opportunity Management

Risk Planning Exercise Document an overview of a risk assessment plan for the Peace Whey program. Relate the plan to the program timeline You have __ minutes for this exercise. Be prepared to present your results. Define any acronyms you use.

Risk Management - Assessing Problem definition stage Purpose: Id and analyze so the most critical risks can be controlled Assessments are considered when setting cost, schedule & performance objectives

Assessments Quantify potential events in terms of probability & consequence Results are basis for RM actions Risk events best identified by examining each WBS element Events are then prioritized

Integrated Risk Assessment Top-level actions are common to all programs Address 3 major risk areas Technical assessment Schedule assessment Cost estimate and assessment

Technical Assessment Provides technical foundation Addresses threat, technology, design, manufacturing… Prioritize with relative or quantified weight Relate to other internal and external risks Quantify associated program activities with both time duration and resources Quantify inputs for schedule & cost assessments Document technical basis & risk definition

Schedule Assessment Evaluate baseline schedule inputs Incorporate technical & schedule uncertainty Evaluate schedule impacts of technical risk Analyze program integrated master schedule Quantify effects of cost risks & resource constraints Document schedule basis and risk impacts

Cost Estimate & Assessment Build on technical and schedule assessment results Translates technical & schedule risks into cost Derive estimate by integrating technical & schedule impacts with resources Establish budgetary requirements Assess funding with respect to meeting technical & schedule requirements Assess impacts of potential budget changes Document cost basis & risk impacts

Risk Identification Consider program phase ID low level requirements, assess riskiness Program WBS elements & processes Mission profile timeline Risk

Risk Identification Address sources of risk by WBS element and process

Risk Identification Assess impacts of mission profile timeline

Utilize Reqmts. Anal. Process Supplier “Hows” Design Features/ Performance Measures Utility/Relationship Matrix Measures How Well “Wants” are Met. “Customer Wants” Needs Identification 1. Close Air Support 2. Deck Launched Intercept Prioritization of Customer “Wants” 1. Cost 2. Supportability 3. Mission Effectiveness Sensitivity to Design Features Prioritization of Relative Importance of Changes in Design Features

Rank Technologies & Configs.

Primary Functional Flows Consider processes by function Development, Manufacturing, Deployment, Operations, Support, Training Identify risks in each step, example: Ready system for shipping Shipping documentation, permits System in transit Receive, uncrate system Inspect, accept shipment

Risk Identification Use experience, brainstorming, lessons learned … Consider if risks are inter-related Start risk watch-list

Risk Identification Exercise Identify potential risks assessing both WBS and mission timeline information from the Peace Whey project. Identify a technical, cost, and schedule risk. Identify an opportunity. Document each on a risk watch list. You have __ minutes for this exercise. Be prepared to present your results. Define any acronyms used.

Analysis Tools and Methods

Identification of Metrics Measurements collected to determine Project progress Overall project condition Observes changes over time Extent & level of detail varies Seek balance between cost to collect and risk if don’t

Product Metrics Track development of the product Metrics Hierarchy Measures of effectiveness Reflect operational performance requirements Measures of performance Reflect system requirements Technical performance metrics Support traceability of operational needs to design effort

Product-related Metrics

TPM Metrics Projects & tracks progression to goal

Choosing Parameters Traceable to user needs Concrete parameters that can be projected & measured Survivability? Critical to program success Potential risk areas

WBS – Good place to start

Cost, Schedule Metrics Provided by earned value data

Earned Value Metrics Tracks conformance to planned schedules & costs ACWP – actual cost of work performed BCWP – budgeted cost of work performed BCWS – budgeted cost of work scheduled Total is BAC – budgeted cost at completion EAC – estimated cost at completion Difference from ACWP is ETC – estimate to complete

Earned Value Metrics Assess schedule & cost variances

Insight from Variances Cost variance CV = BCWP – ACWP Schedule variance SV = BCWP – BCWS Insights from combinations of variance results

Management Process Metrics Track process of developing, building & introducing the system Program unique factors Resource availability Competency levels Activity timelines & timeline rates Approval cycle time Items completed; completion rates ECPs, drawings, risk resolution

Process-related Metrics

Metrics Selection/Detail Balance effort/cost with need Tailor to program and system System complexity No. of organizations involved Past performance history Program visibility

Exercise In your study groups, identify metrics that may be applicable to tracking risks and opportunities on the Peace Whey program You have __ minutes for this exercise. Be prepared to discuss your results. Define any acronyms used.

Next Week: Risk Assessment Read: Risk Management Guide sections Mid-term exam, turn in Part I of project