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Risk Management is the Key to Success Presented to the

Space Projects. Risk Management is the Key to Success Presented to the. AIMS. To create an awareness of some of the techniques that can be employed to complete a successful Project Risk Analysis. Today’s Agenda. Background to the Problem A Process to address the Problem

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Risk Management is the Key to Success Presented to the

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  1. Space Projects Risk Management is the Key to Success Presented to the 1 UNCLASSIFIED

  2. AIMS To create an awareness of some of the techniques that can be employed to complete a successful Project Risk Analysis 2 UNCLASSIFIED

  3. Today’s Agenda • Background to the Problem • A Process to address the Problem • An Example of a Project Risk Network • Summary and Questions 3 UNCLASSIFIED

  4. PROJECT SUCCESS = on time, on cost, to spec 4 UNCLASSIFIED

  5. BACKGROUND • NAO audits MoD’s Major Projects • Yearly monitor of Costs and Timescales • Benefits of SMART Acquisition • Moving towards a more informed forecast 5 UNCLASSIFIED

  6. Defence Journal of the DPA - 2003 6 UNCLASSIFIED

  7. Initial Process Risk Maturity Assessment • WHAT IS A RISK MATURITY ASSESSMENT? • to independently assess maturity of the risk management process • to produce prioritised action plans for improvement 7 UNCLASSIFIED

  8. 8 UNCLASSIFIED

  9. MoD’s Risk Management Process 9 UNCLASSIFIED

  10. Identify • Use prompts, list and characterise elements • Include risk source, event consequences & context of the risk • Opportunities may also be revealed • Think out of the box • Engage all stakeholders - IMPORTANT 10 UNCLASSIFIED

  11. Analyse 11 UNCLASSIFIED

  12. Analyse • Two stage assessment process • Qualitative against agreed criteria • Probability of risk occurring • Impact on time, cost and performance • Display as a PIG • Ownership of risk • Where and when it could occur • Quantitative 12 UNCLASSIFIED

  13. Quantitative stage • Define the measure of PROBABILITY e.g. • High >50%, Medium 20%- 50%, Low <20% • Define IMPACT on COST e.g. • High >30%, Medium 10 - 30%, Low <10% or • High >£250k, Medium £50k- £250k, Low <£50K • Define IMPACT on TIME e.g. • High >30%, Medium 10 - 30%, Low <10% or • High >6 months, Med 3m - 6 m, Low <3m 13 UNCLASSIFIED

  14. Risk Register Serial No. Sample summary Sheet Risk Title Activities Affected Probability Impact Perf. Cost Sched. Risk Reduction Ownership Risk Questionnaire Level 1 14 UNCLASSIFIED

  15. Plan 15 UNCLASSIFIED

  16. Plan • Classify • Tolerate - No action but reassess • Reject - i.e. not valid at this stage • Handle - require action • Risk Handling • Mitigation Strategies - risk reduction • Fallback Plans - an alternative 16 UNCLASSIFIED

  17. Risk Handling • Mitigation Strategies • Terminate • Treat • Transfer • Tolerate • Fallback or Contingency Plans • an alternative taken up if a risk occurs • trigger point set to allow sufficient time to be effective 17 UNCLASSIFIED

  18. Manage 18 UNCLASSIFIED

  19. Proactive/Reactive • Implement • by the Risk Manager, Stakeholders, using the Risk Plan • Monitor • Maintain Risk Records/Register, easy access • Review • Use results of Qualitative/Quantitative analysis • Report • Relevant & Concise analysed data 19 UNCLASSIFIED

  20. Managing a Project Why Plan? What do we need to know about the schedule? • Duration of the project • Milestones • Chances of achieving target? • By how much? • What part of project needs special attention? 20 UNCLASSIFIED

  21. Point Estimates Conventional single point estimate 0 95 Time 21 UNCLASSIFIED

  22. May Jun Jul Aug Sep Element Description • Project Total • Design • Design Approval • Purchase L/ L Items • Produce Drags • Purchase Raw Matls • Make Piece parts • Purchase B/O Items • Purchase Sub-Con • Inspect Sub-Con • Prepare Tech Docs • Typeset, print & bind • Assemble • Test • Pack & Despatch Sample Network Dur 95 22 5 40 20 25 18 20 20 10 5 35 10 5 3 22 UNCLASSIFIED

  23. Could be as low as this Could be as high as this Reality ! 0 90 95 105 Time 23 UNCLASSIFIED

  24. Time 20 30 50 Risks Time 20 35 65 Cycling to Work Uncertainty: Most likely - 30 mins Minimum - 20 mins Maximum - 50 mins Risks: Puncture? 3PE & Prob Accident? 3PE & Prob 24 UNCLASSIFIED

  25. Combining Risk with Uncertainty • Achieved via Monte Carlo Simulation • Works by simulating the project many times using the estimated distributions and plotting the outcomes • Can be used for time or cost • Achieved using a Computer Based Tool such as Predict, @Risk, Crystal Ball, ARM 25 UNCLASSIFIED

  26. Risk Register 3 Point Estimates Cost 3 Point Estimates Schedule 3 Point Estimates * Modelling Schedule 10%-50%-90% Confidence levels Cost 10%-50%-90% Confidence levels The Estimate Process 26 UNCLASSIFIED

  27. 3 Point Estimates 27 UNCLASSIFIED

  28. Roll the dice !! 28 UNCLASSIFIED

  29. Monte Carlo Simulation Combined distribution = 29 UNCLASSIFIED

  30. Time Probability of outcomes 100 80 60 42% Probability % 40 20 95 Days 0 85 90 95 100 Days 30 UNCLASSIFIED

  31. Target here? Target here? Target here? ManageableProblems Expected SeriousProblems Expected No Problems Expected Target Outcome 100% % Confidence 0% Range of Project Outcomes 31 UNCLASSIFIED

  32. Understanding the results • ‘Serious Problem’ targets are likely to be unachievable.  • ‘No problem’ targets are likely to be inefficient and contain contingency  • Targets within the range of possible outcomes are likely to be achievable and efficient  32 UNCLASSIFIED

  33. Criticality - Single Point 30 Critical Path 90 60 120 130 140 70 10 20 40 FINISH START 100 80 110 50 33 UNCLASSIFIED

  34. Criticality - 3 point 30 90 60 120 130 140 70 10 20 40 START FINISH 100 80 Critical Path 110 50 34 UNCLASSIFIED

  35. Criticality Index 35 UNCLASSIFIED

  36. High Medium Low Low Medium High Schedule Summary • Identify Risks • Prioritise Risks • Quantify Risks • Understand Results 36 UNCLASSIFIED

  37. Summary 1 • Risk Identification • Break down the task, identify the risks and their responses • Analysis • Model the individual elements and combine them to form an overall result • Planning • Plan for corrective actions, risk reduction options and fall-back plan • Management • Carry out and monitor the plans 37 UNCLASSIFIED

  38. Summary 2 • GIGO • Stakeholder involvement • Take it seriously • Mandated Process in MoD 38 UNCLASSIFIED

  39. ANY QUESTIONS ? • More information ?? • DAWN Knowledge Base • PFG WEB Site PFG “Professional Services that Count” • PFG Risk-1 (Dave Burgin) • PFG Risk-8 (Paul Woodward) Mail Point # 2104 LARCH level 1a MoD Abbey Wood , Bristol • Tel No 0117-91-34382 • FAX 0117-91-33970 • E-mail - • PFG-Risk-Analysis-Team@dpa.mod.uk 39 UNCLASSIFIED

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