National GuardBlack Belt Training

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Module 49

Risk Assessment

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CPI Roadmap – Improve

Note: Activities and tools vary by project. Lists provided here are not necessarily all-inclusive.

TOOLS

•Brainstorming

•Replenishment Pull/Kanban

•Stocking Strategy

•Process Flow Improvement

•Process Balancing

•Standard Work

•Quick Change Over

•Design of Experiments (DOE)

•Solution Selection Matrix

• ‘To-Be’ Process Mapping

•Poka-Yoke

•6S Visual Mgt

•RIE

ACTIVITIES• Develop Potential Solutions

• Develop Evaluation Criteria

• Select Best Solutions

• Develop Future State Process Map(s)

• Develop Pilot Plan

• Pilot Solution

• Develop Full Scale Action/

Implementation Plan

• Complete Improve Gate

1.Validate the

Problem

4. Determine Root

Cause

3. Set Improvement

Targets

5. Develop Counter-

Measures

6. See Counter-MeasuresThrough

2. IdentifyPerformance

Gaps

7. Confirm Results

& Process

8. StandardizeSuccessfulProcesses

Define Measure Analyze ControlImprove

8-STEP PROCESS

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3Risk Assessment

Learning Objectives

Understand the concept of Risk Assessment and how it impacts your project

Understand some of the tools available to identify and reduce risk before solutions are implemented

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4Risk Assessment

Risk Defined

Risk – The chance of loss or the perils to loss; also the degree of probability of loss

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5Risk Assessment

Risk Management

Risk Management is a comprehensive means to proactively

Identify

Assess

Mitigate

the risks of your proposed project changes throughout the project

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6Risk Assessment

Tools to Assess Risk

Risk Standards Matrix

Risk Identification Matrix

Controls Assessment Matrix

FMEA

FMEA

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7Risk Assessment

Risk Standards Matrix

What is a Risk Standards Matrix?

Simple but effective tool for identifying potential problems

Prompts a BB to consider the ways in which the implementation could impact:

Users

Cost

Safety

IT

Environment

Other Areas

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8Risk Assessment

Risk Standards Matrix (Cont.)

How to Construct a Risk Standards Matrix

Create a standardized list of potential risk areas to be used on all projects. Think in terms of big risk and likely probability. Consider risks arising from external sources like:

Supply Source

Technology changes

Economic condition

Political conditions

Regulation

National

Also Consider“The 6 M’s”

Man

Material

Machine

Method

Measurement

Mother Nature

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9Risk Assessment

Risk Standards Matrix ExampleExample

Create Standard Risk Categories

Create Scale of Either 1-5 or 1-10 to Assess

Create Standard for Totals Based on Risk ToleranceEx over 50 High, Over 40 Med, Over 30 Low

Category Risk Score

Human Resources 3

M & A Activity 6

Capacity Planning 4

Global Sourcing 3

Tactical Purchasing 7

Scheduling 4

Materials Management 2

Environment 4

Accounting 3

Hazardous Materials 3

Community Responsibility 2

Depot Management 3

Finance 1

Quality 1

Total 46

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10Risk Assessment

Risk Identification Matrix

What is a Risk Identification Matrix?

Brainstormed list of potential project risks

Prioritization of “pain” this would cause

Prioritize the likelihood of occurrence

Concentrate efforts on High Likelihood and High Pain Items

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11Risk Assessment

Risk Identification Matrix - Template

Brainstorm risks

Rate the risk in terms of potential damage or cost to the organization

Rate the risk in terms of the likelihood that it will occur

Focus on risks that have a large impact and are most likely to occur

Project

Date: Prepared by: Reviewed by: Next Update:

Risks Impact Probability ofOccurrence

Priority

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12Risk Assessment

Controls Assessment Matrix

Helps identify the activities designed to protect you and your unit from high priority risks identified.

To construct a controls assessment matrix:

List the highest priority risk from the Risk Assessment Matrix.

List the Controls that would help mitigate or eliminate the risk.

Does this control exist?

Discuss the appropriateness and sufficiency of each control.

Identify the actions that need to take place to address any control deficiencies.

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13Risk Assessment

Controls Assessment Matrix Example

Sufficiency of Control: (x = excessive, a = adequate, i = inadequate)

Controls Existing Is it sufficient? If not, why? Next Steps

Y/N

Y

N

N

What? Who? When?Training conducted

System Configured to

prevent submission of

transactions without

required data

User master verification

(a) Training

(b) Procedures not

specific

(c) No process for

user master

Date: Prepared by: Reviewed by: Next Update:

Risk: Information is lost in transaction

Project Objective: Accurate receipt of contracts via EDI

Controls are not always cheap or easy!

Be sure that there is a balance between risks to controls, and that other objectives such as efficiency and speed are not lost.

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14Risk Assessment

Failure Mode and Effects Analysis (FMEA)

A preliminary FMEA was introduced earlier to help identify potential causes of failures in the process

As the project advances, the FMEA can be developed more fully to address and re-evaluate potential solutions

FMEA is a way to organize possible product or process failures and the risks associated with these failures - from this information action can be planned to reduce or eliminate that risk

Complete the FMEA in the Improve phase

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15Risk Assessment

Types of Failure Mode and Effects Analysis

Design FMEA

Product or Service Design FMEA

Uncover problems that may result in:

Safety hazards

Malfunctions

Shortened product life or decreased service satisfaction

Ask how can the product or service fail

Process FMEA

Uncover process problems that may result in:

Safety hazards

Defects in product or service production process

Reduced process efficiency

Ask how people, materials, equipment, methods, and environment cause process problems

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16Risk Assessment

Failure Mode and Effects Analysis Worksheet

Identify failure modes

and their effectsIdentify causes of the

failure modes

and controls

PrioritizeDetermine and assess

actions

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17Risk Assessment

How to Complete an FMEA

1. Review the product, service or process

2. Brainstorm and group possible failure modes

3. List one or more potential effects for each failure mode

• Answer the question: If the failure occurs, what are the consequences?

4. Assign severity rating for each effect

5. Assign an occurrence rating for each failure cause

6. Assign a detection rating for each failure mode

7. Calculate risk priority number (RPN) for each effect

8. Use the RPNs to select high priority failure modes

9. Plan to reduce or eliminate the risk associated with high priority failure modes

10. Carry out the plans

11. Recompute RPN

How-to

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18Risk Assessment

Calculating Risk Priority

Risk Priority =

Severity

x

Occurrence

x

Detection

Severity ScaleBad Rating Criteria: A Failure Could

10 Injure a customer or employee9 Be illegal8 Render product or service unfit for use7 Cause extreme customer dissatisfaction6 Result in partial malfunction5 Cause a loss of performance which is likely to result in a complaint4 Cause minor performance loss3 Cause a minor nuisance but can be overcome with no performance loss2 Be unnoticed and have only minor effect on performance1 Be unnoticed and not affect the performance

GoodOccurrence ScaleBad Rating Time Period Probability

10 More than once per day >30%9 Once every 3-4 days 30%8 Once every week 5%7 Once per month 1%6 Once every 3 months .03%5 Once every 6 months 1 per 10,0004 Once per year 6 per 100,0003 Once every 1-3 years 6 per million2 Once every 3-6 years 3 per 10 million1 Once every 6-9 years 2 per billion

GoodDetection ScaleBad Rating Definition

10 Defect causes by failure is not detectable9 Occasional units are checked for defects8 Units are systematically sampled and inspected7 All units are manually inspected6 Manual inspection with mistake-proofing modifications5 Process is monitored (SPC) and manually inspected4 SPC is used with an immediate reaction to out of control conditions3 SPC is above 100% inspection surrounding out of control conditions2 All units are automatically inspected1 Defect is obvious and can be kept from affecting the customer

Good

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19Risk Assessment

Appeal Process ExampleExample

Identify failure modes

and their effectsIdentify causes of the

failure modes

and controls

Prioritize Determine and assess

actions

Appeal Process

Application Incomplete Delay 5 Sales Rep Rushed 8 Clerk Checks 1 40

315

50

Application Incorrect Bad Decision 7 Sales Rep Mistake 5 Review by Mgr 9

Committee Members Absent Bad Decision 5 Illness/Bus Trips 10 Clerk Checks 1

Identify error types JG 3/12/01

Appeals Process Team

BB: E. Jones 1 6

3/01/01

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Failure Mode Effects Analysis (FMEA)

Process Step /

Input

Potential Failure

Mode (X)

Potential Failure

Effects (Y)

Potential Root

Causes Current Controls

Actions

RecommendedResp. Actions Taken

What is the

process step

and Input

under

investigation?

In what ways does

the Key Input go

wrong?

What is the impact

on the Key Output

Variables (Customer

Requirements)?

What causes the Key

Input to go wrong?

What are the existing

controls and procedures

(inspection and test) that

prevent either the cause

or the Failure Mode?

What are the

actions for reducing

the occurrence of

the cause, or

improving

detection?

What are the

completed actions

taken with the

recalculated

RPN?

Updating

Tollgates

Ineffective

templatesIneffective reviews 5

Discrepancies: POI vs

Templates4 None 5 100

Adjust templates to

match POIPMO 5 2 2 20

Users and leaders

don't buy-in to LSS

Slide purposes not

clear4 None 4 80

Adjust slide titles

and notesPMO 1 2 10

Redundant and NVA

slides3 None 4 60

Eliminate NVA

slidesPMO 1 2 10

Incomplete SOP or

"Help" within PS3 None 5 75

Develop "read me"

slidesPMO 1 2 10

Updating

Tollgates

Too many steps to

build/updateInefficient updating 3 NVA steps 5 None 4 60

Link templates to

PS PhasePMO 3 3 2 18

Users get frustrated

and delay projects

Too many choices

between templates4 None 4 48

Eliminate NVA;

group in foldersPMO 2 2 12

Inconsistent file

names and locations3 None 4 36

Simple names;

group in foldersPMO 1 2 6

LSS Tool

Access

Not all LSS tools &

refs in PS

User cannot find

tools & references4

Not all tools available

in PS5 None 4 80

Revise list of tools

and joggersPMO 4 2 2 16

Project completion is

delayed

Poor explanation in

some references3 None 3 36

Develop direct

access pdf filePMO 2 2 16

LSS Tool

Access

Too many steps to

retrieve tools

Inefficient retrieval of

LSS tools/refs2

Multiple means for

accessing tools3 None 5 30

"Read me" file; one

folderPMO 2 2 2 8

NVA steps 3 None 5 30Eliminate NVA

stepsPMO 2 2 8

S

E

V

E

R

I

T

Y

O

C

C

U

R

R

E

N

C

E

D

E

T

E

C

T

I

O

N

RPN

S

E

V

E

R

I

T

Y

O

C

C

U

R

R

E

N

C

E

D

E

T

E

C

T

I

O

N

R

P

N

Required Deliverable

- Example -

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21Risk Assessment

Takeaways

Many tools exist to help identify project risks

Risk Standards Matrix

Controls Matrix

FMEA

Identify risks early – evaluate their likelihood and impact

Create a comprehensive plan to reduce risk exposure

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What other comments or questions

do you have?