16 Risk-final- V Imp.ppt

© 2001 ConceptFlow
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Risk Management
DFSS

© 2001 ConceptFlow
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Module Objectives
At the end of module participants will be able to:
• Recognize pervasive nature of risk in product/process life cycle
• Define elements of Risk Management
• Apply Risk management principles and procedures
• Identify risk areas in their DFSS project management
• Perform Risk Analysis using qualitative and quantitative tools
• Establish Risk Response Strategies and actions
• Evaluate effectiveness of Risk Response Actions
• Estimate quality, cost and schedule impact
• Develop a Risk Control Plan for communication and monitoring

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Why is Risk Management important?
• Enhance probability of success in realizing project and design goals
• Risk is central, distinguishing and pervasive concept of DFSS
• DFSS projects are large, strategic and visible - thus prone to risk
• Avoid costly rework, defects and failure by proactively focusing on
potential risky areas early in process
Risk is not be avoided; it is to be managed

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What is Risk Management?
• Risk is the degree of exposure to an event that might happen to
detriment of the intended result
• Risk management is structured, formal and disciplined approach,
focused on appropriate steps and planning actions
to contain risks within acceptable limits
• This module will focus on project risk management

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Risk and Probability
• Risk is uncertainty or variability in outcome of some event or decision.
• Points to consider in risk management:
• What are sources of risk?
• What is probability of occurrence?
• What is severity of occurrence?
• Understanding risk begins with process of estimating uncertainty
around a particular occurrence

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Risk Impact
• Each project risk and design risk carries with it loss of value
which adversely affects cost, schedule and quality
• Similarly, risk reduction measures require resources
A p p l i c a t i o n o f R i s k M a n a g e m e n t
Lost Value
from risk Cost of Risk
Reduction
Actions

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Elements of Risk Management
Risk Identification
Risk
Management
Risk Analysis
Risk Response
Impact Assessment
Reporting and Control
Risk Awareness
Qualification
Risk Assessment
Communication
Quantification
Mitigation
Avoidance
Transference
Acceptance
Residual Risk
Risk Control Plan

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Philosophy of Risk Management
• Holistic View - Product Life Cycle -- from conception to end of life
• Viewing risk in the larger systemic perspective
• Identifying both risk and reward aspects
• Prediction and Prevention - Be Prepared - Always!
• Identifying, anticipating potential outcomes
• Managing and organizing for anticipated outcomes
• Continuous vigilance throughout tollgate process
• Multi-functional Team Focus
• Involve all functions, levels
• Integrated management
• Shared Vision and Open Communication
• Common vision and clear measurable results
• Free flow of ideas and information, Listening to clients,
employees and business

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Product Life Cycle Risks
Client
Management
Design
DFSS Project Risks
Operation
Client
Experience
Conceptual
Design
Preliminary
Design
Detail
Design
Pilot/
Prototype
Pre-Launch Launch

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Sources of Product Life Cycle Risks
Market
Competition
Market Trends
Demand, Prices
Management
Business climate
Changing priorities
Scope
CTS, Feasibility
Design
Concept selection
Design issues
Feasibility
Complexity
Suppliers
Availability
Reliability
Quality
Support Structure
Product/process support
Field service, reliability
Technology
Availability
Reliability
Readiness
Project Risks
Budgets, Resources
Scope, Schedules
Operation
Production
Quality, Yield
Effectiveness
Client
Experience, Price
Expectations, Reliability
Performance
Delivery
Timeliness, Availability

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Role of Risk in DFSS Paradigm
• DFSS focuses on Risk Reduction not just defect reduction
• Defect Reduction is reactive, but Risk Reduction is proactive
• DFSS uses proactive tools to predict risk in the designs
• DFSS philosophy extends beyond design.
• It not only applies to end product but also to whole life cycle from
concept, design, management, delivery and to client experience

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Risk management in DFSS
DFSS Risk Areas Description of Risk Techniques
Project scope and
execution
 Risks due to including or
excluding certain product or
process design features.
 Risks in project completion
within schedule, budget and
quality levels of deliverables
 Technology roadmap
 Project scope tools
 Project simulation
 Tollgate process
 Risk management
Design process  Risks inherent in concept
selection, top level and
detailed designs in meeting
client needs
 QFD, Multigen plans,
 FMEA, Scorecards
 Models and Simulation
Operation and
Implementation
 Risks in designing and
running operations to deliver
product or service processes
 Process management
 Control plans
Product delivery
and
Field performance
 Meeting delivery expectations
 Cost and quality after market
introduction
 Life cycle risks involving
reliability, maintainability etc
 VOC analysis
 QFD
 Test market studies
 Competitive analysis
Reliability analysis
Risk Management Applies to All Facets of Product Life Cycle

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Risk Management Modules
• Project scope risk is discussed in project management module.
• Technology risk is discussed in technology roadmap module.
• Design risks are discussed in Design FMEA and scorecard modules

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Elements of Risk Management
Risk Identification
Risk
Management
Risk Analysis
Risk Response
Impact Assessment
Awareness
Qualify
Assessment
Communicate
Quantify
Mitigate
Avoid
Transfer
Accept
Residual Risk
Control Plan
Client
Management
Design
Project Risks
Operation
Attachments
Actions and Control
Residual Risk Impact
Response Strategies
Risk Analysis
Assumptions and
Terminology
Purpose and Scope
Big DFSS Project
Risk Management
Team:
P. Murphy
K. Jinkson
Rev 2.3 29 Feb
2001
Low Low Low Moderate High
Low Low Moderate Moderate High
Low Low Moderate High Danger
Low Moderate High High Danger
Low Moderate High Danger Danger
.006
.011
.017
.023
34.3
68.5
102
137
250 812 1,3751,9382,500
Factor Strategy
High 35 Avoid
Danger 63 Mitigate
Moderate 21 Mitigate
Moderate 25 Transfer
Low 1 Accept
Risk RF
Low 1
Moderate 25
Low 9
Low 3
Low 3
Low 1

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Risk Management is a Control Activity for DFSS Tollgate Process
Risk Management Procedure
Identify Risk Items
Analyze Risk Items
Respond to all Risk Levels
Assess Impact of Residual Risk
Report Risk Control Strategies
Awareness Assessment
Compute Risk Factor
Mitigate
Avoid Transfer Accept
Risk Control Plan
Severity, Sev
Probability, Occ
Danger High Moderate Low
Stop and
Reassess
Slow Down
and Address
Proceed
with Caution
Go Right
Ahead
Client
Management
Design
Project Risks
Operation
Attachments
Actions and
Control
Residual Risk
Impact
Response
Strategies
Risk Analysis
Assumptions
and
Terminology
Purpose and
Scope
Big DFSS
Project
Risk
Management
Team:
P. Murphy
K. Jinkson
Rev 2.3 29
Feb 2001
Residual Risk

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Risk Identification
Risk Identification
Risk
Management
Risk Analysis
Risk Response
Impact Assessment
Awareness
Qualify
Assessment
Communicate
Quantify
Mitigate
Avoid
Transfer
Accept
Residual Risk
Control Plan
Client
Management
Design
Project Risks
Operation
Attachments
Actions and Control
Response Strategies
Risk Analysis
Assumptions and
Terminology
Purpose and Scope
Big DFSS Project
Risk Management
Team:
P. Murphy
K. Jinkson
Rev 2.3 29 Feb
2001
.006
.011
.017
.023
34.3
68.5
102
137
250 812 1,3751,9382,500
Factor Strategy
High 35 Avoid
Danger 63 Mitigate
Low 1 Accept
Risk RF
Low 1
Moderate 25
Low 9
Low 3
Low 3
Low 1

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Risk Identification
• Risk Identification is the first step in Risk Management
• It systematically identifies risky areas in DFSS process
and their degree of risk
• It is organized into two steps
• Risk Awareness of risky areas
• Identify the potential areas of risk in DFSS
• Potential areas can be divided into several segments
• Technical, Project related, Organizational etc.
• Risk Assessment - the degree of risk
• Assign a level of risk - None, Low, High
• Mainly from expertise and previous experience

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Risk Awareness
Categorizes risk areas
Can be categorized using tree structures or Fishbone diagram
Major categories include
Design, Project Management, Organizations, Technology
Portion of risk category list is shown below:
Sources for information for risk categories
Charter Documents, Design Documents, VOC data, team
input
Detailed Project plan, Historical data, Statements of Work
Techincal Project Management Pilot and Delivery Field Experience
Unclear Scope Team definition Alpha site Delivery
VOC not performed Timelines Prototypes Meeting expectations
Organizational vision Resource allocation Test startegies Reliability
Customer not clear Budget Operability Timeliness
Functions are new Schedule Safety Availability
Value proposition Scope Satrtup Acceptability
Assumptions Multi-gen plan Suppliers Serviceability
Market Study Funding Regulatory issues Maintenance

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Risk Assessment
Once the potential risk categories are collected, a multi functional team
assesses potential risk for each of the items under categories
Different assessors qualitatively evaluate an item to avoid bias
Risk Management Team finalizes the assessment
Assessment communicated to the multifunction team for review
The items with “No” risks are considered safe
Items with more than 50% of “High” are definitely considered risky
Items with “Lo” risk are given a lower priority
This information will be included in the Risk Control Plan
Assessment Criteria Potential Risk (Hi, Lo, No)
Assessors A B C
Design Assessment
Customer segmentation Hi Hi Lo
Customer CTS definition Hi H M
Performance metrics Lo No Lo
Functional Requirements H Lo H
Concept Selection Lo Lo Lo
Technology Dependence No No Lo
Assessment Criteria Potential Risk (Hi, Lo, No)
Assessors A B C
Project Assessment
Charter definition
Business Vision
Change Management
Project Plan
Budget Allocation
Human Resources

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Risk Control Plan
• Maintained by the Project Manager and Risk Management Team
• Will be reviewed during Tollgate process and whenever necessary
• Contents of the Risk Control Plan:
Attachments
Actions and Control
Response Strategies
Risk Analysis
Assumptions and
Terminology
Purpose and Scope
Big DFSS Project
Risk Management
Team:
P. Murphy
K. Jinkson
Rev 2.3 29 Feb 2001

© 2001 ConceptFlow
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Risk Analysis
Risk Identification
Risk
Management
Risk Analysis
Risk Response
Impact Assessment
Awareness
Qualify
Assessment
Communicate
Quantify
Mitigate
Avoid
Transfer
Accept
Residual Risk
Control Plan
Client
Management
Design
Project Risks
Operation
Attachments
Actions and Control
Response Strategies
Risk Analysis
Assumptions and
Terminology
Purpose and Scope
Big DFSS Project
Risk Management
Team:
P. Murphy
K. Jinkson
Rev 2.3 29 Feb
2001
.006
.011
.017
.023
34.3
68.5
102
137
250 812 1,3751,9382,500
Factor Strategy
High 35 Avoid
Danger 63 Mitigate
Low 1 Accept
Risk RF
Low 1
Moderate 25
Low 9
Low 3
Low 3
Low 1

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Risk Analysis Model
• Risk items from the identification phase are given two parameters:
• Occ = probability of occurrence of the risk event, and
• Sev = severity of impact to the project or design from that event
• Risk Factor, RF, is evaluated by combining Occ and Sev
• Depending on the scales determine qualitative or quantitative methods
for combining the two to arrive at Risk Factor, RF.
Probability Occurrence, Pi Severity of Impact, Si
Qualitative Scale Probability Qualitative Scale Value
Very Unlikely 1 < 0.1 Very Low Negligible 1 <10
Unlikely 3 0.1 - 0.3 Low Marginal 3 10 - 30
Likely 5 0.3 - 0.7 Medium Significant 5 30 - 70
Very Likely 7 0.7 - 0.9 High Critical 7 70 - 90
Almost Certain 9 > 0.9 Very High Crisis 9 >90

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Operational Definitions
• Since estimating Occ and Sev are usually qualitative and subjective,
there is a danger of inconsistency between different evaluators
• To reduce this error clear, simple and easy-to-understand definitions
for various scales must be established, communicated and agreed
upon at the outset
• For example, impact on a project can be defined as below:
Severity of Impact, Si Description of the Criteria
Qualitative Scale
Negligible 1 Minimal impact on budget and schedules no impact on deliverables
Marginal 3 Minor modification and redesigns, no major impact on scope
Significant 5 Scope change, considerable impact on project metrics and on deliverables
Critical 7 Deliverables cannot be achieved, significant scope cahnge, project at risk
Crisis 9 Project cannot be completed, unacceptable costs, catostrophic schedules

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Qualitative Risk Analysis
Establish operational definitions for Occ and Sev for your project
Develop a Risk Factor table similar to the one shown above
For each items identified as risky, assign Occ and Sev values
Evaluate the appropriate risk factor from the table
Enter the results in the Risk Analysis section of the Risk Control
Plan
Low Go Right Ahead
Moderate Proceed With Caution
High Slow Down and Address Issue
Danger Stop and Reassess Project
Risk Factors
Very
Unlikely
Unlikely Low Low Moderate Moderate High
Likely Low Low Moderate High Danger
Very
Likely
Almost
Certain
Negligible Marginal Significant Critical Crisis
Sevirity of Imapct, Si
Probability
of
Occurrence,
Pi

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Quantitative Risk Analysis
• If we have numerical values for Occ and Sev, then RF = Occ x Sev
• We can either use the 1-9 scales for Occ and Sev
• We will have more quantitative power if we can reliably estimate
probability Occ and represent Sev in value terms (e.g. $)
• In early stage, these numbers are, at best, are only guesses
• As the design progresses the quantitative method becomes more
useful since we have better understanding, estimates and metrics
• For example, FMEA will use this principle to prioritize failure modes
• Other quantitative methods:
• Fault tree analysis, decision trees, monetary value analysis
• Monte Carlo simulation ( we will use this in later sections)

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Risk Analysis Tools
Qualitative Tools
•Risk Matrix
•Multi Generation Planning
•Technology Assessment
•Failure Modes Effect Analysis
•Quality Function Deployment
•TRIZ
Quantitative Tools
•Simulation
•Decision Tree
•Fault Tree
•Designed Experiments
•Prototypes, Pilots,
•Capability studies
•Design Scorecards
•Design Review
•Project Plans - CPM and PERT

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Qualitative Risk Analysis - Design Example
• Design Category is analyzed in this example
• First, establish Operational Definitions for the risk items
• Design risk is determined using the awareness of three assessors
• The team assigned Occ and Sev values for each of the items
• Then analyzed risk using the table from previous page
• Defining client requirements is identified as a show stopper
• Note that qualitative and “quantitative” RFs agree with each other
• The above table is ready to be included in the Risk Control Plan
Assessment Criteria Potential Risk (Hi, Lo, No) Risk Management Team
Assessors A B C Probability Severity Risk RF
Design Assessment Risk Pi Si Factor
Customer segmentation Hi Hi Lo Hi Likely 5 Critical 7 High 35
Customer CTS definition Hi H M H Very Likely 7 Crisis 9 Danger 63
Performance metrics Lo No Lo Lo Very Likely 7 Marginal 3 Moderate 21
Functional Requirements H Lo H H Likely 5 Significant 5 Moderate 25
Concept Selection Lo Lo Lo Lo Very Likely 7 Marginal 3 Moderate 21
Technology Dependence No No Lo No Very Unlikely 1 Negligible 1 Low 1

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Risk Identification and Analysis
Project Exercise
• Establish the top level project plan through Tollgate 1 or 2
• Define operational definition for these terms
• Identify / Assess the risk of the top level Work Breakdown Structure
• As a team analyze the risky items and assign Occ and Sev values
• Derive RF values for the project plan
• Prepare a 5 minute presentation for your Tollgate committee
• Place operational definitions, Risk Analysis results and presentation in
your Risk Control Plan folder with a suitable cover sheet
• Optional: Check to see if the important RFs follow the critical path
• Use the spreadsheet, if necessary
• 30 Minutes

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Risk Response
Risk Identification
Risk
Management
Risk Analysis
Risk Response
Impact Assessment
Awareness
Qualify
Assessment
Communicate
Quantify
Mitigate
Avoid
Transfer
Accept
Residual Risk
Control Plan
Client
Management
Design
Project Risks
Operation
Attachments
Actions and Control
Response Strategies
Risk Analysis
Assumptions and
Terminology
Purpose and Scope
Big DFSS Project
Risk Management
Team:
P. Murphy
K. Jinkson
Rev 2.3 29 Feb
2001
.006
.011
.017
.023
34.3
68.5
102
137
250 812 1,3751,9382,500
Factor Strategy
High 35 Avoid
Danger 63 Mitigate
Low 1 Accept
Risk RF
Low 1
Moderate 25
Low 9
Low 3
Low 3
Low 1

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Risk Response
• Purpose of the risk response is to decide level acceptable and
determine a set of course of actions to that effect.
• Risk response strategies fall into the following categories:
Risk Acceptance Risk Transfer
Risk Mitigation Risk Avoidance
• Risk Factors for DFSS items and project context are often used to
choose an initial Risk Response as shown in the following example:
• Risk level remaining after the response actions is called Residual Risk
Accept Transfer Mitgate Avoid
Low XXXX X
Moderate X XX XX
High XX XX XX
Danger XX XXX

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Risk Response Strategies -Descriptions
Risk Avoidance:
 Completely eliminates the risk
 Employs redesign, change of scope
etc. to attack risk opportunities
 It is ideal if no side effects
 Triz can be used to attain IFR
 Residual Risk is zero
 Impacts project metrics and scope
Risk Mitigation
 Reduces high Occ and Sev values
 Uses known methods and controls
 e.g. action part of FMEA
 Risks are reduced but not eliminated
 New lower levels of Occ and/or Sev
 Cost and budget implications exist
 Minimal impact on scope
Risk Transfer:
 Transfer risk to another project,
vendor, or generation for more
effective and efficient risk reduction
 The residual risk is zero – for now
 Non trivial future and transfer risks
 Low impact on project and scope
Risk Acceptance
 Used when Risk Factor is low
 Basically a “no action” strategy
 Residual risk is same as before
 Contingency plans can be
developed to handle this risk
 No impact on project and scope

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Effects of Risk Response
Response Risk Project Scope Residual Risk
Strategy Factors Impact Change Risk Reduction
Avoidance High + High Needed None Complete
Mitigation Mod-High Med-Hi Often Yes Partial
Transfer Low-High Minimal Minimal Minimal Complete
Accept Low None None Maximum None
For each risk item and the corresponding risk response strategy,
• Outline a set of Risk Response Actions with the team
• Estimate Risk Residuals, cost and schedule impacts, and potential
consequences of the Risk Response Actions (RRA)
• Evaluate RRAs for acceptable Residual Risk and reasonable project impact
• These steps are iterative and might change original strategy
• Document all the above in the Risk Control Plan for review

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Selecting Risk response strategies and impact assessment are iterative
Risk Response Actions and their Impact
Low XXXX X
Moderate X XX XX
High XX XX XX
Danger XX XXX
Select a Risk Response Strategy
Project Scope
and context
Select Risk Response Actions
Are the
Residual Risk
and Consequences
Acceptable?
Are the Project
costs and schedules
acceptable?
No Yes No
Estimate Residual Risk Project Schedules
Unintended Consequences Project Costs
Review and Document
in Risk Control Plan
Yes
Risk
Response
Impact
Assessment
Control and
Reporting

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Risk Response Strategy - Example
• The following table shows Risk Response Strategies adopted based
on the risk factor and project context.
• The High RF value is avoided by redefining and rescoping the project
• The “Danger” item is mitigated through VOC and QFD work
• Some items are transferred to next DFSS phase when the team will
have more reliable information
• The lowest risk factor item is accepted without any change
• The resulting Occ and Sev values shown along with Residual Risk
• There will be still some Residual Risk impact
Risk RF Risk Response Strategy Probability Severity Residual
Design Assessment Factor Strategy Response Action Who New Pi New Si Risk RF
Customer segmentation High 35 Avoid Redefine Segementation CS Very Unlikely
1 Negligible 1 Low 1
Customer CTS definition Danger 63 Mitigate Perform VOC and QFD VK Likely 5 Significant 5 Moderate 25
Performance metrics Moderate 21 Mitigate Benchmark with XYZ Co. PS Unlikely 3 Marginal 3 Low 9
Functional Requirements Moderate 25 Transfer Move it to Concept PhaseCC Unlikely 3 Negligible 1 Low 3
Concept Selection Moderate 21 Transfer Move it to Concept PhaseCC Unlikely 3 Negligible 1 Low 3
Technology Dependence Low 1 Accept Document Reasons RJ Very Unlikely
1 Negligible 1 Low 1

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Risk Identification
Risk Identification
Risk
Management
Risk Analysis
Risk Response
Impact Assessment
Awareness
Qualify
Assessment
Communicate
Quantify
Mitigate
Avoid
Transfer
Accept
Residual Risk
Control Plan
Client
Management
Design
Project Risks
Operation
Attachments
Actions and Control
Response Strategies
Risk Analysis
Assumptions and
Terminology
Purpose and Scope
Big DFSS Project
Risk Management
Team:
P. Murphy
K. Jinkson
Rev 2.3 29 Feb
2001
.006
.011
.017
.023
34.3
68.5
102
137
250 812 1,3751,9382,500
Factor Strategy
High 35 Avoid
Danger 63 Mitigate
Low 1 Accept
Risk RF
Low 1
Moderate 25
Low 9
Low 3
Low 3
Low 1

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Impact of risk response actions can be qualified and, with data, can be
quantified
Effects of Risk Response Actions on residual risk, cost and schedules must be
estimated prior to implementation. This process is iterative.
For design, use reviews, models, simulations, prototype and similarity studies
For project, What-if analysis on costs and schedules using detail plans
Risk Impact Assessment
Major Risk Categories Impact Description DFSS Tools
Design Program
Residual Risk
Risk of not meeting design intent
Cost Impact Over all life cycle cost of the design.
Change in value proposition
Schedule Impact Design, production and launch delays
Unintended
Consequences
Reactions, unforeseen results from risk
response actions
Project Charter
QFD, FMEA,TRIZ
Simulation, Pilots
DOE, Prototypes
Economic models
Capability studies
Design Scorecards
Design Review
Project Management
Residual Risk
Risk of not providing scoped deliverables
Cost Impact Cost over runs during project life cycle
Schedule Impact Changes in critical path and delivery schedules
Project Plan, FMEA
Multigen Scoping
Budget Control
Project Metrics
CPM, PERT
Simulation

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Risk Response and Impact Assessment
Project Exercise
• Establish Risk Response Strategy for the top level project plan items
from the previous exercise.
• Identify Risk Response Actions and responsible person for each
• Assuming that the actions will be completed, guesstimate the new Occ
and Sev and Risk Factors to (Residual Risk) - qualitatively
• Can you estimate the new cost, schedule and quality implications?
• If yes, what are your suggestions to estimate them for your project?
• Prepare a 5 minute presentation of your results to Tollgate committee
• Place Risk Response strategies, actions, responsible people and your
new estimates (if any) in your Risk Control Plan
• Optional: As a project manager, in light of the above actions, how can
you quantify the new risk, cost and schedules for your project ?
• 30 Minutes

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Risk Impact
• Each project and design risk carries with it loss of value
in terms adversely affecting cost, schedule and quality
• Similarly, risk reduction measures require resources
• Risk level remaining after the risk measures is called Residual Risk
A p p l i c a t i o n o f R i s k M a n a g e m e n t
Cost of Risk
Reduction
Actions

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Quantification of Residual Risk Impact
• Even after the Risk Response strategies, the residual risk affects cost,
schedule and quality
• How can one quantify these? Let us consider cost example.
• Though exact cost due to residual risk can not be determined, one
might know its distribution (min, most likely, and max costs)
• What is the new cost from these risk response actions? 150? 2730?
Residual Risk Impact Assessment Cost Consequences
Design Assessment Risk RF Description of Residual Risk Best Most Likely Worst
Customer segmentation Low 1 Overseas customers excluded 0 200 600
Customer CTS definition Moderate 25 QFD not fully reliable 100 500 2000
Performance metrics Low 9 20 % CTS do not have metrics 50 70 100
Functional Requirements Low 3 No residual risk for now 0 5 10
Concept Selection Low 3 No residual risk for now 0 5 10
Technology Dependence Low 1 Residual risk negligible 0 5 10
Total Cost Implications 150 785 2730

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Simulation Results
Frequency Chart
Certainty is 50.00% from 1,159.38 to +Infinity
.000
.006
.011
.017
.023
0
34.25
68.5
102.7
137
250.00 812.50 1,375.00 1,937.50 2,500.00
6,000 Trials 2 Outliers
Forecast: RR Cost
Frequency Chart
Certaintyis 83.37% from 785.00 to +Infinity
.000
.006
.011
.017
.023
0
34.25
68.5
102.7
137
250.00 812.50 1,375.00 1,937.50 2,500.00
6,000 Trials 2 Outliers
Forecast: RR Cost
After response actions, using the min,
likely and max values for cost for
each item, a Monte Carlo simulation
is made to estimate over all cost due
to residual risk.
Cost distribution is approximately
triangular also (300,900,2600)
Results show that probability of
exceeding cost of 785 is 83% !
50% chance of exceeding 1159!
Forecast Statistics: RR Cost Trials 6,000
Mean 1,220 Median 1,159
Std Dev 434.88 Variance 189,120
Minimum 312 Maximum 2,609
Range Width 2,297 Std. Error 5.61

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How it is Done
Client
segmentation
Client
CTS definition
Performance
metrics
Functional
Requirements
Concept
Selection
Technology
Dependence
0 200 600
100 500 2000
50 70 100
0 5 10
0 5 10
0 5 10
Triangular Distributions (min, likely, max)
Frequency Chart
.006
.011
.017
.023
34.3
68.5
102
137
250 812 1,375 1,938 2,500
Forecast: RR Cost
Forecast RR Cost Trials 6,000
Mean 1,220 Median 1,159
Std Dev 434.88 Variance 189,120
Minimum 312 Maximum 2,609
Range Width 2,297 Std. Error 5.61
200 950 $K 2500
USL 1200 Budget
Risk

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Project Risk Estimation Using Simulation
• Cost simulation applies to estimate total project costs too!
• Total project cost distribution can be compared to project budget to
estimate the risk of exceeding budget
• Similarly project schedules can be simulated if we know the frequency
distribution of each project work break down step
• If we don’t, then we can use (best, likely or worst) case scenario as we
did with the cost simulation
• In addition to Critical Path we can also have the Risk Path for a project
which is more meaningful
• Popular PM tools such as,
Risk for Microsoft Project,
provide these features
10 50 days 200
USL 120 Schedule
Risk

© 2001 ConceptFlow
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Selecting Risk response strategies and impact assessment are iterative
Risk Response Actions and their Impact
Low XXXX X
Moderate X XX XX
High XX XX XX
Danger XX XXX
Select a Risk Response Strategy
Project Scope
and context
Select Risk Response Actions
Are the
Residual Risk
and Consequences
Acceptable?
Are the Project
costs and schedules
acceptable?
No Yes No
Estimate Residual Risk Project Schedules
Unintended Consequences Project Costs
Review and Document
Risk Control Plan
Yes
Risk
Response
Impact
Assessment
Control and
Reporting

© 2001 ConceptFlow
44
Risk Identification
Risk Identification
Risk
Management
Risk Analysis
Risk Response
Impact Assessment
Awareness
Qualify
Assessment
Communicate
Quantify
Mitigate
Avoid
Transfer
Accept
Residual Risk
Control Plan
Client
Management
Design
Project Risks
Operation
Attachments
Actions and Control
Response Strategies
Risk Analysis
Assumptions and
Terminology
Purpose and Scope
Big DFSS Project
Risk Management
Team:
P. Murphy
K. Jinkson
Rev 2.3 29 Feb
2001
.006
.011
.017
.023
34.3
68.5
102
137
250 812 1,3751,9382,500
Factor Strategy
High 35 Avoid
Danger 63 Mitigate
Low 1 Accept
Risk RF
Low 1
Moderate 25
Low 9
Low 3
Low 3
Low 1

© 2001 ConceptFlow
45
Risk Reporting and Control
• The purpose of this step is to document and control all relevant risk
identification, analysis, response and assessment activities
• This is not a final step but done throughout the project
• This documentation will act as a reference, risk management activity
log, reference material and a controlled document for the project
• This document is called Risk Control Plan
• Any activities and actions determined by the team to handle risk are
documented in the Risk Control Plan
• Any project metrics or other risk related measurements collected over
time are included in this report
• Project Risk Control Plan defines what risk parameters have to be
monitored

© 2001 ConceptFlow
46
Risk Control Plan
Maintained by the Project Manager and Risk Management Team
It will be reviewed during Tollgate process and whenever necessary
Contents of the Risk Control Plan:
Cover Sheet: Title, Team, Date and Revision #
Purpose, Scope and Risk Management Methodology
Assumptions and Terminology
Roles and Responsibilities
Risk Identification: Awareness and assessment
Risk Analysis and Quantification
Risk Response Strategies and Actions
Residual risk Impact Assessment
Design Impact
Project Impact
Reporting/Meeting Schedules
Control / Tracking Reports
References: Glossary, Definitions
Guidelines, Communications
Examples, Forms and Tools
Attachments
Actions and Control
Response Strategies
Risk Analysis
Assumptions and
Terminology
Purpose and Scope
Big DFSS Project
Risk Management
Team:
P. Murphy
K. Jinkson
Rev 2.3 29 Feb 2001

© 2001 ConceptFlow
47
Risk Monitoring
• Purpose of risk monitoring to make sure the risk management actions
are done as planned throughout the project life cycle
• Monitoring is critical when there are new risks or the risk handling
tactics and strategies change
• Risk monitoring includes tracking of
• Project accomplishments pertaining to risk management
• Cost and schedule data - Projected, actual, expected etc
• Agreements between stakeholders around risk management
• Background material for risk management
• Meeting minutes, risk action items, deliverables, responsibilities
• Periodic status reports
• Tollgate review and design review action items
• Project performance metrics

© 2001 ConceptFlow
48
Risk Communication
The language of DFSS is Risk Management - all project team
members must be aware of the risk management imperatives and
status
Risk reporting must be done during the tollgate review
In addition, risk assessment, analysis and response must be
addressed at every design meeting
Additional communications will be needed as Risk management
process progresses
The contents of the risk report must be readily available to the
team
Risk management is not a one time activity - it needs to be
performed whenever there is a a change that affects the project
risk profile

© 2001 ConceptFlow
49
Risk management is not a one time activity - it is DFSS
Risk Management - Key Points
Risk
Identification
Risk
Management
Planning
Risk
Analysis
Risk
Response
Impact
Assessment
Reporting
and Control
Risk Awareness For life cycle
Qualification Risk Matrix
Risk Assessment For all Items
Communication Risk Monitoring
Quantification RF = Occ x Si
Mitigate Response Actions
Avoid
Transfer Accept Consequences
Design Residual Risk Cost Impact
Risk Control Plan
Project Residual Risk Schedule Impact
Client
Management
Design
Project Risks
Operation
Attachments
Actions and Control
Response Strategies
Risk Analysis
Assumptions and
Terminology
Purpose and Scope
Big DFSS Project
Risk Management
Team:
P. Murphy
K. Jinkson
Rev 2.3 29 Feb
2001
.006
.011
.017
.023
34.3
68.5
102
137
250 812 1,3751,9382,500
Factor Strategy
High 35 Avoid
Danger 63 Mitigate
Low 1 Accept
Risk RF
Low 1
Moderate 25
Low 9
Low 3
Low 3
Low 1

© 2001 ConceptFlow
51
Module Objectives
At the end of module participants can:
• Recognize pervasive nature of risk in product/process life cycle
• Define elements of Risk Management
• Apply Risk management principles and procedures
• Identify risk areas in their DFSS project management
• Perform Risk Analysis using qualitative and quantitative tools
• Establish Risk Response Strategies and actions
• Evaluate effectiveness of Risk Response Actions
• Estimate quality, cost and schedule impact
• Develop a Risk Control Plan for communication and monitoring

Trademarks and Service Marks
Six Sigma is a federally registered trademark of Motorola, Inc.
Breakthrough Strategy is a federally registered trademark of Six Sigma Academy.
VISION. FOR A MORE PERFECT WORLD is a federally registered trademark of Six Sigma Academy.
ESSENTEQ is a trademark of Six Sigma Academy.
FASTART is a trademark of Six Sigma Academy.
Breakthrough Design is a trademark of Six Sigma Academy.
Breakthrough Lean is a trademark of Six Sigma Academy.
Design with the Power of Six Sigma is a trademark of Six Sigma Academy.
Legal Lean is a trademark of Six Sigma Academy.
SSA Navigator is a trademark of Six Sigma Academy.
SigmaCALC is a trademark of ix Sigma Academy.
SigmaFlow is a trademark of Compass Partners, Inc.
SigmaTRAC is a trademark of DuPont.
MINITAB is a trademark of Minitab, Inc.

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