1. Company Confidential Registration Management Committee (RMC) 1 How to Audit Risk Management Atlanta, GA July 22 & 23, 2010 Kimberly Maggie Ron Tarach QUAL-TECH, INC. Auditor Workshop Atlanta, GA July 22-23, 2010

2. Registration Management Committee (RMC) Atlanta, GA July 22-23, 2010 2 Agenda What is Risk? Risk Management Process Examples Risk Management Criteria Auditor perceptions of Risk Management Risk Management Tools –Auditor knowledge of tools and actions

3. Registration Management Committee (RMC) Atlanta, GA July 22-23, 2010 3 Agenda (continued) Audit Planning –Audit Planning Tools Activity 1 - Brainstorming session using Audit Planning Tool Conducting the Audit of Risk Management Process –Examples of areas to evaluate Activity 2 - Brainstorming session using Case Study and Failure Modes and Effects Analysis (FMEA)

4. Registration Management Committee (RMC) Atlanta, GA July 22-23, 2010 4 Ice Breaker!

5. Registration Management Committee (RMC) Atlanta, GA July 22-23, 2010 5 What is Risk? An undesirable situation or circumstance that has both a likelihood of occurring and a potentially negative consequence. AS9100:2009, clause 3.1

6. Registration Management Committee (RMC) Atlanta, GA July 22-23, 2010 6 “Risk is inherent in all processes. Unfortunately, we don’t see the results of ineffective risk management methods until later”.

7. Registration Management Committee (RMC) Atlanta, GA July 22-23, 2010 7 Risk Management Process –Most organizations spend a great deal of time and manpower trying to document “Risks” but many times this data is decentralized and not easily accessible to the functions that need this information. –Process manufacturing can be so complex that “Risks” can be very subtle and if there is not a structured “Risk Management Process” that takes advantage of corporate knowledge, lessons learned an organization’s exposure to “Risk” can remain high.

8. Registration Management Committee (RMC) Atlanta, GA July 22-23, 2010 8

9. Registration Management Committee (RMC) Atlanta, GA July 22-23, 2010 9 Examples of Risk Management Criteria »Understanding the types of risk that could come into a company. They could be related to Employees Process Design Manufacturing Equipment Environment Project Security

10. Registration Management Committee (RMC) Atlanta, GA July 22-23, 2010 10 Examples of Risk Management Criteria »Understanding the types of risk that could come into a company cont. External Contractor

11. Registration Management Committee (RMC) Atlanta, GA July 22-23, 2010 11 Examples of Risk Management Criteria (continued) –Employees – the organizations need to ensure the safety, training, and qualifications of employees. –Process – managing process variation. –Design – building quality into the product design from the start, including it’s affect on planning. –Manufacturing – ensuring that manufacturing is more efficient with streamlined quality planning.

12. Registration Management Committee (RMC) Atlanta, GA July 22-23, 2010 12 Criteria for Risk Management Process (continued) –Equipment – ensuring that equipment can meet capabilities, current and future. –Environment – ensuring that the operations are not compromising the environment (adequate lighting, temperature control, noise, cleanliness, etc). –Security – managing the security needed by the facility. –Project – ensuring project risks are evaluated before beginning.

13. Registration Management Committee (RMC) Atlanta, GA July 22-23, 2010 13 Criteria for Risk Management Process (continued) –External – developing plans to address the potential impact of weather, issues with transportation companies, city infrastructure (relating to construction, road closures). –Contractor – ensuring impact is considered for contractors working on the building, equipment, or with employees.

14. Registration Management Committee (RMC) Atlanta, GA July 22-23, 2010 14 Auditor Perceptions of Risk Management That’s the way we identified and handled risk when I worked at Aviation Anywhere, Inc. When I audited a Original Equipment Manufacturer (OEM) last month they were using FMEAs. This little company only uses tool XYZ – they can’t be managing risk properly.

15. Registration Management Committee (RMC) Atlanta, GA July 22-23, 2010 15 Auditor Perceptions of Risk Management (continued) “Remember, the design and implementation of an organization’s aerospace quality management system is influenced by varying needs, particular objectives, the products provided, the processes employed and the size and structure of the organization.” AS9100:2009 General

16. Registration Management Committee (RMC) Atlanta, GA July 22-23, 2010 16 Auditor Perceptions of Risk Management (continued) Organizational application of Risk can vary based on situation, customer, product line. Audit approach & interviewing will need to be appropriate to the organization. Remember, what is “Appropriate” to the organization.

17. Registration Management Committee (RMC) Atlanta, GA July 22-23, 2010 17

18. Registration Management Committee (RMC) Atlanta, GA July 22-23, 2010 18 Risk Management Tools –FMEAs e.g. dFMEA, pFMEA, etc. –Fault Tree Analysis (FTA) –Probabilistic Risk Assessment (PRA) –Event Tree Analysis (ETA) –Event Sequence Diagram (ESD) –Master Logic Diagrams (MLD) –Reliability Block Diagram (RBD)

19. Registration Management Committee (RMC) Atlanta, GA July 22-23, 2010 19 Risk Management Tools (continued) –Risk Assessment Matrix –Likeliness/Consequence Table –SWOT (Strength Weakness Opportunity Threat) –Business Continuity/Current Capability Matrix –Risk Map and Control Scale

20. Registration Management Committee (RMC) Atlanta, GA July 22-23, 2010 20 Risk Management Tools (continued) –Auditor knowledge of tools and actions »No one auditor has experience with all the tools available in the industry and how they are used. »Familiarize your self with the various Risk Management Tools (self study).

21. Registration Management Committee (RMC) Atlanta, GA July 22-23, 2010 21 Risk controlled – or “Oh No”?

22. Registration Management Committee (RMC) Atlanta, GA July 22-23, 2010 22 Risk Management Tools (FMEA)

23. Registration Management Committee (RMC) Atlanta, GA July 22-23, 2010 23 Risk Management Tools (Influencer Analysis)

24. Registration Management Committee (RMC) Atlanta, GA July 22-23, 2010 24 Risk Management Tools (Risk Consequence)

25. Registration Management Committee (RMC) Atlanta, GA July 22-23, 2010 25 Risk Management Tools

26. Registration Management Committee (RMC) Atlanta, GA July 22-23, 2010 26 Audit Planning –Selecting the right audit tool. –Identifying your audit criteria and any reference documents. –Identifying your audit scope, including identification of the organizational and functional units and processes to be audited. –Identifying an appropriate audit scope.

27. Registration Management Committee (RMC) Atlanta, GA July 22-23, 2010 27 Audit Planning Tools –Process (Turtle) Tool –Process Map Tool –Supplier Input Process Output Customer (SIPOC) Form –Process Based Management (PBM) Process Flow

28. Registration Management Committee (RMC) Atlanta, GA July 22-23, 2010 28 Process (Turtle) Tool With What (Materials, Equipment, Facilities) With What (Materials, Equipment, Facilities) Inputs (information and material from other processes) Inputs (information and material from other processes) How? (Methods/Procedures/Techniques How? (Methods/Procedures/Techniques With Who? (Comp./Skills/Training) With Who? (Comp./Skills/Training) Outputs (information and Material to other processes Outputs (information and Material to other processes How Effective/Efficient? (Measurable Objective) How Effective/Efficient? (Measurable Objective) Process

29. Registration Management Committee (RMC) Atlanta, GA July 22-23, 2010 29 Process Map

30. Registration Management Committee (RMC) Atlanta, GA July 22-23, 2010 30 Supplier Input Process Output Customer (SIPOC) Form

31. Registration Management Committee (RMC) Atlanta, GA July 22-23, 2010 31 Process Based Management (PBM) Process Flow

32. Registration Management Committee (RMC) Atlanta, GA July 22-23, 2010 32 Activity 1 - Brainstorming session using Audit Planning Tool

33. Registration Management Committee (RMC) Atlanta, GA July 22-23, 2010 33 Process (Turtle) Tool (Design) With What Risk Management Software Forms Documents With What Risk Management Software Forms Documents Inputs Customer, Internal Organization, Regulatory, Statutory Special Requirements (e.g. product or process complexity) Critical Items (functions, parts, software, characteristics, processes) Inputs Customer, Internal Organization, Regulatory, Statutory Special Requirements (e.g. product or process complexity) Critical Items (functions, parts, software, characteristics, processes) How? AS9100, AS9110 and AS9120 Standards Quality Manual Standard Operating Procedure for Contracts FMEA Risk Assessment Matrix How? AS9100, AS9110 and AS9120 Standards Quality Manual Standard Operating Procedure for Contracts FMEA Risk Assessment Matrix With Who? Sales Engineering Production Quality With Who? Sales Engineering Production Quality Outputs Design Planning Production Purchasing Suppliers Shipping Outputs Design Planning Production Purchasing Suppliers Shipping How Effective/Efficient? Customer complaints In process/final rejection Design verification/validation How Effective/Efficient? Customer complaints In process/final rejection Design verification/validation Process Contract Review - Risk Management Process Contract Review - Risk Management Outputs Drawing/Spec Travelers Routers Work Orders Inspection Reports Outputs Drawing/Spec Travelers Routers Work Orders Inspection Reports

34. Registration Management Committee (RMC) Atlanta, GA July 22-23, 2010 34 Process (Turtle) Tool (Design Excluded) With What Risk Management Software Forms Documents With What Risk Management Software Forms Documents Inputs Customer, Internal Organization, Regulatory, Statutory Special Requirements (e.g. product or process complexity) Critical Items (functions, parts, software, characteristics, processes) Inputs Customer, Internal Organization, Regulatory, Statutory Special Requirements (e.g. product or process complexity) Critical Items (functions, parts, software, characteristics, processes) How? AS9100, AS9110 and AS9120 Standards Quality Manual Standard Operating Procedure for Contracts FMEA Risk Assessment Matrix How? AS9100, AS9110 and AS9120 Standards Quality Manual Standard Operating Procedure for Contracts FMEA Risk Assessment Matrix With Who? Sales Engineering Production Quality With Who? Sales Engineering Production Quality Outputs Planning Production Purchasing Suppliers Shipping Outputs Planning Production Purchasing Suppliers Shipping How Effective/Efficient? Customer complaints In process rejection Final rejection How Effective/Efficient? Customer complaints In process rejection Final rejection Process Contract Review - Risk Management Process Contract Review - Risk Management Outputs Travelers Routers Work Orders Inspection Reports Outputs Travelers Routers Work Orders Inspection Reports

35. Registration Management Committee (RMC) Atlanta, GA July 22-23, 2010 35 Conducting the Audit of Risk Management Process –Examples of areas to evaluate »Are all “Risk” identified during the RFQ and Contract Review Process e.g. special requirements, critical requirements. »Ensure Top management clearly understands what “Risks” they have and what they are doing to ensure they are mitigating those “Risk”. »Evaluate the selected Risk Management Tool for effectiveness. »How are “Risks” communicated and managed throughout the organization e.g. Design, Planning, Purchasing, Suppliers, Manufacturing, Inspection, Delivery and Post Delivery. »Design inputs, Design FMEAs, Design Verification and Validation.

36. Registration Management Committee (RMC) Atlanta, GA July 22-23, 2010 36 Conducting the Audit of Risk Management Process –Examples of areas to evaluate continued »Critical characteristics across the quality lifecycle, ensuring the Process FMEAs and Control Plans are linked. »Processes in place for capturing leading and lagging indicators related to Design Quality Performance. »Evaluate whether the organization has closed loop Continual Improvement Processes that captures and sustains Product and Process Quality. »Organization is using Lessons Learned and Best Practices.

37. Registration Management Committee (RMC) Atlanta, GA July 22-23, 2010 37 Conducting the Audit of Risk Management Process –Examples of areas to evaluate continued »Ensure organization’s Change Management Process involves the right people at the right time with the right process. »Ensure integration of Change Management with assessments to ensure correct consideration of “Risk”. »Ensure “Risk Assessment” tracked, recommended controls to completion and ensured that “Risk” were mitigated as prescribed. »Ensure controls are in place for “Risk” that still remain after mitigation actions.

38. Registration Management Committee (RMC) Atlanta, GA July 22-23, 2010 38 Activity 2 - Brainstorming session using Case Study and FMEA

39. Registration Management Committee (RMC) Atlanta, GA July 22-23, 2010 39 Closing!

40. Registration Management Committee (RMC) Atlanta, GA July 22-23, 2010 40 Questions!

41. Registration Management Committee (RMC) Atlanta, GA July 22-23, 2010 41 References 1.AS9100:2009 2.ISO 19011 3.FAA Risk Management Handbook 2009 4.NASA