Risk Management

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Risks and Risk Management• Risks are potential events that have negative impacts on

safety or project technical performance, cost or schedule• Risks are an inevitable fact of life – risks can be

reduced but never eliminated• Risk Management comprises purposeful thought to the

sources, magnitude, and mitigation of risk, and actions directed toward its balanced reduction

• Beneficial Risk - The same tools and perspectives that are used to discover, manage and reduce risks can be used to discover, manage and increase project opportunities (increased performance).

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What if?

IF

• Predict “IF” Identify• Evaluate “IF” Analyze• Plan for “IF” Plan• Tracking “IF” Track• Budget for “IF” Control

Risk Management

• Laws• Terms• Types of Risk• Risk Management

Laws

• Murphy’s Law

If something can go wrong it will go wrong

• Finagle’s Law of Dynamic Negatives (corollary to Murphy’s Law

Things will go wrong at the worst possible time

What is Risk Management?

• Seeks or identifies risks• Assesses the likelihood and impact of these risks• Develops mitigation options for all identified risks• Identifies the most significant risks and chooses which

mitigation options to implement• Tracks progress to confirm that cumulative project risk is

indeed declining• Communicates and documents the project risk status• Repeats this process throughout the project life

Risk management is a continuous and iterative decision making technique designed to improve the probability of success. It is a proactive approach that:

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Risk Matrix

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3

2

4

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Impact

Probability of Occurrence

Risk Warning Signs

• TPMs• Schedule Projections• Cost Projections• Supplier problems• Late technology demonstrations

Types of Risk

• Technical Risks

• Programmatic Risks• Cost • Schedule

• Supportability Risks

• Beneficial Risks

Risk Analysis

• What Could Go Wrong• What is the Probability• What is the Magnitude of Impact

• Cost• Schedule• Performance

• Alternate Strategies (Off Ramps)

Beneficial Risk

• High Risk – High Payoff

• Mitigation Strategy• Alternate Plans• Criteria• Schedule• Budget

Risk Handling

• Have a Plan• Total Program

• Budget (Cost / Schedule) for Plan• Get “Buy-In”• Monitor Status

• Metrics• Close out

Risk – In General

• Risk is Healthy• Not Identifying Risk shows:

• You don’t understand the programAND/OR• You are dishonestAND/OR• You think the customer is stupid

• Identify all potential Risk• Knock them down with Mitigation Plans

Summary

“It’s risky not to embrace risk.”

SE = Technical Program Mgmt

• Key focus of systems engineering• includes the direction of a totally integrated effort of

system design, test and evaluation, production, and logistics support over the system life cycle

• The goal is timely deployment of an effective system, sustaining it, and satisfying the user’s need at an affordable cost.

• Involves balancing a system’s cost, schedule, and performance while controlling risk.

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Technical Performance Measures

• TPMs are measures of the system technical performance that have been chosen because they are indicators of system success. They are based on the driving requirements or technical parameters of high risk or significance - e.g., mass, power or data rate.

• TPMs are analogous to the programmatic measures of expected total cost or estimated time-to-completion (schedule).

Technical Performance Measures

• Actual versus planned progress of TPMs are tracked so the systems engineer or project manager can assess progress and the risk associated with each TPM.

• The final, delivered system value can be estimated by extending the TPM trend line and using the recommended contingency values for each project phase.

• The project life trend-to-date, current value, and forecast of all TPMs are reviewed periodically (typically monthly) and at all major milestone reviews.

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TPMs Are Tools

• Technique of predicting the future value of a key technical performance parameter

• Continuous verification confirms progress and identifies variances

• Assessed values falling outside established tolerances indicate the need for management attention

Why TPMs

• A well thought out TPM program provides • Early warning of technical problems• Supports assessments of the extent to which

operational requirements will be met• Assesses the impacts of proposed changes made to

lower-level elements in the system hierarchy on system performance.

Balancing Cost, Sked, Performance

Selecting TPMs

• Parameters to be tracked are typically based on the combined needs of the customer and the contractor

• Contractor may track more items than are reported to the customer, as the contractor needs information at a more detailed level than does the customer program office.

• Customer requires visibility into the technical performance of key elements of the work breakdown structure• Especially those which are needed to meet system key

performance parameters (KPPs), are cost drives, lie on critical path or high risk items

Example TPMShipboard

Fire Control System

CWTransmitter

DataProcessor

Antenna

Power Density Detection RangeSlew Time Tx Ant Side lobesCW Ant Side lobes Tx Track AccAM Noise FM NoisePointing Acc WeightRadiated Power MTBFMTTR Range ResAngle Res

AM/FM NoiseRadiated Pwr

MTBF

MTBFMemory

Proc SpeedMTTR

Slew TimeMTTR

Side LobesBeam Width

TPM Selection

• The level of the system at which parameters are selected is based on how readily the information supports timely design decisions.

• For example, the timely identification and neutralization of targets and threats are essential to both the operational effectiveness and survivability of a ship.

• If there is a risk associated with meeting the detection range requirement allocated to the ship’s fire control system, then the technical manager will want to have data that supports design decisions related to achieving both the system and subsystem performance during the design process, such as predicted (and actual) radiated power and data processor speed.

TPM Selection

• These are metrics that can be measured under laboratory conditions before costly and time-consuming fabrication, integration, and conformance testing of higher assemblies; and continued monitoring assures that required values are met under actual environmental conditions and system loading.

• Thoughtful selection of the parameters to measure can minimize unpleasant surprises in formal developmental and operational testing.

Conceptual TPM Graphic

Team Project

• Make sure you have at least 4-5 TPMs for your project. They must be presented in graphical form like previous slide

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