Risk Management and Assessment

1. Risk Management and Assessment Wayne Norman, CPPM CF Northrop Grumman

2. risk management, n—structured approach to managing uncertainty through risk assessment, developing strategies to manage it, and mitigation of risk using managerial resources. Risk assessment- examining the past, trends, experiences, and predicting future activities

3. Sound risk management practices must • become a part of our everyday approach • Institute widely accepted risk management • review process we can focus our resources in areas of concern • reduce the likelihood that riskier events will occur.

4. Our stakeholders or Property Focal Points must be • involved in helping us determine the • risk levels. • They must participate in • the risk review process and consequently • support the outcomes. • It would likely be cost prohibitive for any organization • to seek total risk aversion as its standard operating mode. • Determine areas where the risk is too great Risk is inherent in every business process and the decisions we make regarding the management of risk will impact our strategic focus. There are numerous types of risk that must be managed at every level.

5. Understanding how both the life cycle • outcomes for property with functional units • throughout an organization is vital to properly • measuring the risks involved in the overall Property system • Example is if during your annual property • system analysis a deficiency is identified • concerning the material control process • This one finding affects the following functions: • property management, physical inventories, • reports, and records.

6. It is important to understand how the deficiencies in one area can affect other functions. Thus making issues in this outcome more risky. Another example is not properly identifying and documenting outgoing property. Not properly documenting and updating the records in a timely manner can affect the following functions: property management (LDD), utilization, records, reports, physical inventories, and disposition

7. For these reasons, • To be an effective property management organization you • have to be able to view the organization and the entire property process as a whole at a top down view level. • Properly managing risks has been • associated with property management for • many years, nothing has really changed. • Except now, it has more attention and there are newer tools to use • Property Management should be driving the risk assessment- cross functionally • Prop Mgmt should present risk analysis results to upper mgmt at least annually • And be on teams to address risk management • related to our larger organizations

8. 3 E E Near 2 Certain 7 D Highly Likely 6 5 Probability C C Likely 8 B B Unlikely A A Remote 4 1 2 3 5 Insignificant Moderate Unacceptable Significant Modest Consequence WIR Template Watch Issues Risks

9. Supplier Risk Management Key Process/System Risk Rating And/Or 5 M M H H H 4 L M M H H 3 L L M M H 2 L L L M M 1 L L L L M 1 2 3 4 5 What are the CONSEQUENCES to the product/service if the risk event does happen? CUSTOMER FOCUS

10. Example of a lower risk related decision low risk property, n—assets that are monitored and controlled at the discretion of asset managers and typically consists of low risk expendable or durable equipment and tooling valued under $5000 excluding sensitive, controlled, serially managed, or mission essential property.

11. ASTM- Risk Assessment tool for Property Mgmt

12. EMPM Standard Status • Process scoring scale

16. Assign Points to Risk Assessment Questions • Does the subcontractor have documented evidence of an adequate Government Property System? If so, has the system received an adequate rating within the last 2 years? • (1) Yes (2)Yes/CA (3) No • Is the supplier responsive to requests for reports, and are the reports deemed accurate? • (1) Yes (2)Yes/CA (3) No • Is the value of government property reported on the previous years financial report in excess of $500,000 and 50 items? • (2) Yes (0) No • Has the subcontractor subcontracted with a lower tier supplier and provided assigned government-owned property? If so, is the subcontractor ensuring the lower tier subk is complying with contractual requirements? • (1) Yes/Yes (3)Yes/No (0) No (2) unknown

17. Questions continued • During the previous year, has the subcontract reported ANY losses? • Assign 0, or 1 point (non significant); 3 points fairly significant; 5 points alarming problem • Did the subcontractor respond to a request for a limited desk survey? • (0) Yes (1) Yes with "Go Backs" (3) No • Is the supplier reporting excess property in a timely manner? Are the disposition instructions completed in a timely manner? • (0) Yes/Yes (1)Yes/No (3) No/No

18. Assess Supplier’s Risk

19. Determine Type of Audit

20. Risk Management • Create actions plans for the areas where the level of identified risk • is not tolerable • If budget prevents some risks being adressed- make sure you have documented it to senior mgmt • Create and/or use metrics to monitor process health levels in risky areas

21. Resources • ASTM E2452-10 • AIA- Industry leading practices • http://www.aia-aerospace.org/resource_center/resources/property_management_etools/