Good Risk Software and Why a Spreadsheet will not DO IT!

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  • Robust Risk Management is Essential in ALL Business EndeavoursWhy a spreadsheet will not cut it

    Andrew Ferguson, FIE Aust, CPEng, CPL, MBA, BEngRisk Decisions Pty Ltd4 Oct 2015Phone: 0408 466 276andrew.ferguson@riskdecisions.com

    Risk Decisions, 2015

    IntroductionRisk and managementManage risk to create, maintain and add value from key projects, ventures, operations, enterprisesWhy Spreadsheets WILL NOT do the job requiredFeatures of well designed risk softwareWhat good risk software should doExamples of good softwareRepresentative screen shots only

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    This paper will discuss the need for a robust risk management culture in the management of capital assets including software systems, defence systems as well as commercial assets including water treatment infrastructure, mining assets and utilities (including power distribution, telecommunications and power generation).

    Risk Management Tool Options purpose designed softwareOR spreadsheetsbespoke databases MS Word tables and various manual methodsLatter methods have failings companies rarely track mitigation actions to risk mitigation or treatment results

    various manual methods which can include action plans, meeting agendas, meeting minutes, costing workshop notes, and so on.

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    Risk Decisions, 2015

    Risk Management Failures?ALL business endeavours AND projects run into cost, schedule and performance problems (see the examples below add your own!)robust enterprise risk management helps!COTS hardware obsolete before system SW delivered ~$3mUnderstanding of brownfield project risksmisunderstood complexity ~ $25m x nChanged life cycle environment risks ~ $100m x nComplex IT project abandoned ~$20maccounts still using DOS system!!!Company insolvencies.x nnWHS events, product failures,Systems fail to meet expectations...

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    Many projects run into cost, schedule and performance problemsrobust risk management helps!Purchase of $3M system hardware that became obsolete before SW was readyDesign complexity of military vehicle upgrade overwhelmed design team customer misunderstood complexity risks to projectRetro fit of Air conditioning system for European main battle tank$10M lost when project cancelledDesign and through life problems of Collins SubmarineChanged operating environment affected systems reliability over life cycleComplex Company finance systems abandoned after $20M spentCompany still uses their old DOS based accounting system*

    Risk Decisions, 2015

    Proactive Risk Managers Left Shift

    *Lifecycle CostsApply to all phases of Asset Life Cycle

    Key aim is to discover and treat risks early PROACTIVELY.

    Risk management is essential in asset managementRisk based decision making - essential in all stagesThese stages include:design and developmentacquisition / production operations and maintenance disposal*

    Risk Decisions, 2015

    Proactive Risk Management EssentialsEstablish context for venture and risk management;Determine risk appetite, culture and tolerancerisk hierarchy and structure to record risks flexible and adaptable risk management processapplying analysis to risks, actions, processesrisk reporting: risks and actions visible across the enterpriserisk monitoring, consulting and communicating

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    Establish context for asset and risk management;Determine risk appetite, culture and tolerancerisk hierarchy and structure to record risks and opportunities;flexible and adaptable risk management processUnderstandable including the managers;system of identifying, assessing, approving risks, managing and rejecting risk;encouraging all management and staff to identify and propose possible risks;allocating responsibilities for the management, mitigation and treatment of risks;managing and tracking mitigation or avoidance actions for each risk;applying analysis (mathematics and statistics) to risk management processes; andrisk reporting: making risks and their management actions visible across the enterpriserisk monitoring and communicating*

    Risk Decisions, 2015

    Why spreadsheets will NOT cut it #1No version control There will be no single point of truth as spreadsheets encourage independent working. No process workflow - Without process or workflow control there is no audit trail of who changed what and when and whyNo history inherently retained no reasons for change kept, qualitative and quantitative data lost.People Break good spreadsheets - invariably

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    Risk Decisions, 2015

    Why spreadsheets will NOT cut it #2No deadline tracking Without tracking of deadlines for risk assessments; risk actions and mitigation achievements are seldom visibleLimited ability to roll up risks into management view of whole enterprise / venture / projects / divisionsLimited security and access control as once the spreadsheet is open all users will see all risks and actions, even sensitive ones commercial, financial, staff in confidence etc(single user at a time)

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    Risk Decisions, 2015

    Why spreadsheets will NOT cut it #3Easy to corrupt information or use out of date informationLimited ability to measure risk treatment and effectivenessNo easy link to corporate reporting tools for review by selected levels of enterprise / managementNo linking of project schedule and risks to view effect of risks and uncertainty what is CRUCIAL?

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    Risk Decisions, 2015

    Benefits of Good Risk Software #1Standardisation across organisation / divisionsUser Configurable to suit level of user Smaller projects need less functions but same power Web Based easy multi user access across time zones, clients, stakeholdersMultiple Simultaneous Access no overwriting, ability to selectively lock parts of project / enterprise structure

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    Risk Decisions, 2015

    Benefits of Good Risk Software #2Data Security - visibility and access can be controlledIntegrated Schedule / Costs risk assessmentImport directly from key Project schedule tools (MS Project, Primavera)Enterprise Risk ManagementScalable to manage risk, opportunities and issues across enterprise functions, projects, operations, divisions, subcontractors link to key objectives

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    Risk Decisions, 2015

    Smaller projects gain access to world class tool through concurrent licencing trains people for large projects common tool / process useExecutive reportingWide range of flexible reports - standard, ad hoc, Charts, tables, dashboards,pdf, MS Office outputsIntegration into enterprise reporting tools

    *Benefits of Good Risk Software #3

    Risk Decisions, 2015

    Speed and efficiency!Excel based systems soak up time on data consolidation, manipulation, reformatting, quality and error checking (~84% have errors)A robust and mature Risk Management SW Tool enables this time to be spent on adding value to the risk based decision making process that is essential to good managementOut of the box usability low cost implementation and maintenance over life cycleGood Support - Technical / Business and Training

    *Benefits of Good Risk Software #4

    84% error rate quoted from UK data probably worse in the colonies!Recent spreadsheet summation missed a $750K RISK impact*

    Risk Decisions, 2015

    The Following slides show some examples of what good risk software can doWe agree that in some cases a spreadsheet can do the same or a similar function

    But not without careful design and ongoing effortAnd someone can break or change the settings unknowinglyOnly one person can use it at a timeYou will have difficulty in saving the history and trendsAnd so onView and Enjoy

    *Example Graphics from Good Risk Software

    84% error rate quoted from UK data probably worse in the colonies!Recent spreadsheet summation missed a $750K RISK impact*

    Risk Decisions, 2015

    Cumulative Risk Burndown Reporting

    *All / Grouped RisksSingle Risk

    Explain differences between 2 charts.*

    Risk Decisions, 2015

    Reporting Flexibility Export to pdf, MS OfficeGraphical / Tabular

    Geo mapping views

    Risk Decisions, 2015

    Filter data in flexible charts / dashboards~Key data of interest1 x Data item removedFull ReportRisks by owner & status2 x Data items removedCreate Dashboards

    PRI chart, selectively remove data no needed, thus concentrate on key data of interest.Note number of data items reduced without redesigning the report/chart*

    Risk Decisions, 2015

    Heat Mapping of Risks / Opportunities

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    Risk Decisions, 2015*

    End date: ~Apr 17MS Project Gantt view critical path

    Original MS Project gantt chart view showing critical pathNo indication of how critical each activity is to end date or key milestones!*

    Risk Decisions, 2015*

    Good SW Gantt View - CrucialityEnd date: ~Jan 2018@ 90% confidence

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    Risk Decisions, 2015*

    End Date Monte Carlo modelling

    MS project 3 point estimates plus impact of mitigated risks: = residual.*

    Risk Decisions, 2015*

    WBS Cost / Risk Analysis Monte Carlo

    Risk Decisions, 2015*

    Schedule, Risk, & Cost Sensitivity Analyses tornado charts (or table % format)

    AND SCHEDULE*

    Risk Decisions, 2015

    Visual capture of current and planned risk assessment levels

    *Configurable n x n Risk Matrices / thresholdsCurrent RiskResidual Risk

    Prompt for risk commencement and expiry datesAbility to map risk levels over time across all risk in pre set report formats*

    Risk Decisions, 2015

    Risk Structure & Risks for Attention promptPlus email alerting of actions required to participants

    Risk Decisions, 2015

    Risk Identification, Categorisation screensRisk linked to Key ObjectivesKey Risk ID Data

    Risk Decisions, 2015

    Standard Reports Menu

    Risk Decisions, 2015

    Example out of the box reports -