The document discusses risk analysis and the Failure Mode and Effects Analysis (FMEA) technique. It provides the following information: 1) FMEA is a systematic method to recognize, rate, and prevent potential risks and failures in programs, products, and processes. It involves rating potential failures, their causes and effects, and current controls. 2) The history of FMEA traces back to the aerospace industry in the 1960s and was later adopted by the automotive industry. It is now commonly used for new product development, process planning, and risk management. 3) An example risk analysis application involves a development team quantifying technical and commercial risks to define a project strategy.

1. Risk Analysisy
With supportWith support
of theof the
Strategy FMEAStrategy FMEA Week 1
Knorr-Bremse Group
About this Module
The risk analysis is a structured way of:The risk analysis is a structured way of:
R i i d ti t ti l i k f– Recognizing and rating potential risks for programs or
projects
– Allocation and rating of various factors which causes theseg
risks
– Rating of the possibility how difficultly or easily a risk can
be detected before it occursbe detected before it occurs
The basis for the risk analysis is the proved FMEA
technique.
Knorr-Bremse Group 10 BB W1 Risk analysis, 04, D. Szemkus/H. Winkler Page 2/17

2. Content
• Definition and historical backgroundg
• Areas for application
• Preparation of a risk FMEA
• Definition of improvements• Definition of improvements
• Application examples
• Practical exercise
S• Summary
Knorr-Bremse Group 10 BB W1 Risk analysis, 04, D. Szemkus/H. Winkler Page 3/17
Definition FMEA
• FMEA stands for Failure-Mode and Effect-Analysis
• The FMEA is a formalized, analytical method for a
systematic registration and avoidance of potentialy g p
failures. It can be used for the development of new
products and for process planning
• The potential failure, the consequences for the
customer, the potential failure causes and the possible
failure detection will be shown with a numeric rating.
• Based on the rating, actions will be defined in order toBased on the rating, actions will be defined in order to
avoid the potential failures.
• Of course this tool can be used for the investigation of• Of course, this tool can be used for the investigation of
existing processes as well.
Knorr-Bremse Group 10 BB W1 Risk analysis, 04, D. Szemkus/H. Winkler Page 4/17

3. History
Developed in the 1960’s in the Aerospace industry during
the Apollo missionsthe Apollo missions
In 1974 the US Navy developed MIL-STD-1629 regarding
the use of FMEAthe use of FMEA
In the late 1970’s, automotive applications driven by
li bilit t b t i t th FMEA i t thliability costs, began to incorporate the FMEA into the
management of their processes
Many companies involved in the management of
hazardous materials and potentially dangerous
h d th i i l d l iprocesses, have used the same principals underlying
FMEA in issues of risk management
The automotive industry requires the FMEA for all
processes of suppliers since years
Knorr-Bremse Group 10 BB W1 Risk analysis, 04, D. Szemkus/H. Winkler Page 5/17
Risk Analysis in the DMAIC Cycle
Control
Maintain
DefineMaintain
Improvements
SPC
Control Plans
Project charter (SMART)
Business Score Card
QFD + VOC
D
Documentation
QFD + VOC
Strategic Goals
Project strategy
C M
Measure
B li A l iImprove
AI
Baseline Analysis
Process Map
C + E Matrix
M t S t
Analyze
Improve
Adjustment to the
Optimum
FMEA Measurement System
Process Capability
Definition of critical
Inputs
FMEA
S
FMEA
Statistical Tests
Simulation
Tolerancing Statistical Tests
Multi-Vari Studies
Regression
Tolerancing
Knorr-Bremse Group 10 BB W1 Risk analysis, 04, D. Szemkus/H. Winkler Page 6/17

4. Purpose of the FMEA
The early registration of failure risks and the reductiony g
of occurrence to a minimum.
The avoidance of possibility subsequent liabilityThe avoidance of possibility subsequent liability
claims.
The reduction of costs
• for a change caused due to the failuresg
• for additional work (non value added) due to rejects / scrap
or rework
• For warranty claims in external areas
The FMEA is a efficient tool for preventive quality assurance
Knorr-Bremse Group 10 BB W1 Risk analysis, 04, D. Szemkus/H. Winkler Page 7/17
Application of the Risk Analysis
A development team wants to quantify the• A development team wants to quantify the
commercial and technical risks to define the
project strategyproject strategy.
• A marketing team works on the introduction of E-
Business to improve the value chain. In
j ti ith th i k l i b h kconjunction with the risk analysis a benchmark
study will be conducted.
• A Management team introduces an extended
quality strategy in order to achieve the company
goals.
Knorr-Bremse Group 10 BB W1 Risk analysis, 04, D. Szemkus/H. Winkler Page 8/17

5. Examples for Risk Categories
Legal & Statutory
Health, Safety &
Environmentg y
Requirements
Management
P
Market Pressure
Pressure
Risk categories
Technology
Development
Competition
Warranty
Competition
Customer Public LiabilityWarranty
Services
Customer
requirements
Public Liability
The categories have to be adjusted / completed depending of the
project or program
Knorr-Bremse Group 10 BB W1 Risk analysis, 04, D. Szemkus/H. Winkler Page 9/17
project or program
Definitions to Risk Analysis
D fi itiDefinition:
– The FMEA is a formalized, analytical method for a systematic
registration and avoidance of potential risks at the conduction ofregistration and avoidance of potential risks at the conduction of
projects or programs
Examples from the categories:Examples from the categories:
– Category: Customer requirements
• Unsatisfied customer due to product performancep p
• The customer has problems to sell to his customer
– Category: Technical development
• Problems with the Scale-up
• Raw material for calculated price not available
I t t hi h th t d• Investments higher than expected
– Category: Competition
• Marketing concept of the competitor• Marketing concept of the competitor
• New competitor comes up
• Competition reduces the price
Knorr-Bremse Group 10 BB W1 Risk analysis, 04, D. Szemkus/H. Winkler Page 10/17
Competition reduces the price

6. Definitions to Risk Analysis
Potentials risks:
• Definition:
– What influences a project or program that it can not be
conducted as scheduled?
E ample• Example:
– Sales volume lower or higher than predicted.
– Costs are higher than expected.g p
Potential consequences of the risk:
• Definition
– Which influence has the potential risk on the project or
program (But also for customer and internal
requirements)?q )
• Example:
– Due to a predicted increase of sales 30% more capacity is
neededneeded.
– Due to added qualification test the realization shifts by 2
month.
Knorr-Bremse Group 10 BB W1 Risk analysis, 04, D. Szemkus/H. Winkler Page 11/17
Definitions to Risk Analysis
Potential causes for risks:
•Definition:
Which weakness causes the risk or failure?–Which weakness causes the risk or failure?
•Example:
–The customer requirements change over time.
–Not enough attention for the final customer.
–Environment regulations.
–A competitor has improved his process flows.A competitor has improved his process flows.
–Employees have to work with changed processes.
I t ll d C t lInstalled Controls:
Definition:
–Which are the installed measures to detect the risk before it occurs?.Which are the installed measures to detect the risk before it occurs?.
Example:
–Key customer works together in the team.
T t f t ti d t f d–Test of customer reaction due to focused survey.
–Outsourcing of needed additional capacity.
–Collection and evaluation of information from competitor.
Knorr-Bremse Group 10 BB W1 Risk analysis, 04, D. Szemkus/H. Winkler Page 12/17
p

7. Form Sheet for the Risk Analysis
Risk Category Potential Failure Mode
Potential Failure
Effects
S
E
V
Potential Causes
O
C
C
Controls
D
E
T
R
P
NV C T N
What are the risk
categories, e.g.
What ways could the
program product or
What would be the
impact of failure mode on
theeffectto
ram?
What program, product, or
process weakness could
elihoodthat
willoccur?
What methods, tools, or
measures will discover
sittodetect
ofFailure
e?
yNumber
CXDET)
competition,
technology, legal,
resources, etc.?
program, product, or
process not proceed as
planned?
program performance or
meeting customer
requirements?
Howsevereis
theprog
process weakness could
cause the failure mode to
occur?
Whatisthelike
thecausew
measures will discover
the cause before it
occurs?
Howdifficultis
thecauseo
Mode
RiskPriority
(SEVXOCC
R
P
Time
Frame
Triggers Reactions Who
N
Frame
gg
Number
XDET)
Is this likely
t i
What measure of the
What contingency plan
ill i iti t t
Who is responsible
f it i th
RiskPriorityN
(SEVXOCCX
to occur in
the short,
mid, or long
term?
What measure of the
potential cause will
trigger your
contingency plan?
will you initiate to
eliminate or minimize the
impact of the failure
mode?
for monitoring the
potential cause and
initiating the
contingency plan?
File: FMEA xls form sheet: risk analysis
Knorr-Bremse Group 10 BB W1 Risk analysis, 04, D. Szemkus/H. Winkler Page 13/17
File: FMEA.xls ... form sheet: risk analysis
Example for the Rating
Risk detection -- control
Cause -- Probability of
occurrence
Effect -- Severity of
consequences
Dangerous without warning
Danger about > 50%
Rating
10
No controls for failure
detection available.
Very high
Risk is almost inevitable > 20%
Danger about > 50%
9
Dangerous with warning
Danger about 45-50%
detection available.
Very unlikely, that current controls
will detect the possible failure.
7
8
Very high
Risk is almost inevitable < 15%
Very high
Danger about 40-45%
High
D b t 35 40%
Unlikely, that current controls
will detect the possible failure.
Very low probability that the current
controls will detect the possible failure7
6
Danger about 35-40%
Medium
Danger about 30-35%
controls will detect the possible failure.
Low probability that the current controls
will detect the possible failure.
Moderate:
Occasional risks <5%
5
4
Low
Danger about 25-30%
Very low
Moderate probability that the current
controls will detect the possible failure.
Moderate high probability that the current
3
4
Low:
Occasional risks <2%
Danger about 20-25%
Marginal
Danger about 15-20%
controls will detect the possible failure.
High probability that the current controls
will detect the possible failure.
R t i k i lik lN D
2
1
Very low:
Occasional risks <1%
Very marginal
Danger about 10-15%
Very high probability that the current
controls will detect the possible failure.
Current controls will detect the
Knorr-Bremse Group 10 BB W1 Risk analysis, 04, D. Szemkus/H. Winkler Page 14/17
Remote: risk is unlikelyNo Danger1 possible failure in every case.

8. The Practical Part
The first steps for a risk
analysis
– Collect potential risks and groupCollect potential risks and group
these in categories.
– Identify the potential effect of each
Competition Safety and
environmenty p
risk.
– Rate the effects in accordance to
th i i ttheir importance.
– Identify and rate the 5 highest risks,
causes and controls Safety and
Competitioncauses and controls.
– Enter it in the form sheet
environmentCompetition
Time about 45 minutes
Risk
Risk
Knorr-Bremse Group 10 BB W1 Risk analysis, 04, D. Szemkus/H. Winkler Page 15/17
Risk at Growth Projects
Market
Sensing
Identify
Opportunity
Define
Business Model
Provide
Superior Value
Communicate
and Deliver
Measure and
Improve
• Inadequate focus • Fail to validate concept with • Incompletely and improperly • Improper scale-up • All failure modes not
g
Opportunity Business Model
p
Offering
and Deliver Improve
• Inadequate focus
particularly on segment
needs
• Fail to align with
customer/market
• Fail to validate concept with
customers and quantify trade-
offs of product features vs.
price
• Inadequate understanding of
• Incompletely and improperly
defined specification
• Product superiority not built in
• Don’t talk to the right person
within the customer’s
• Improper scale-up
• Inadequate test market to
determine the marketing mix
(e.g. 4 Ps)
• Inadequate field test to debug
• All failure modes not
explored
• Inattention to value
migration
• Lack of proper metrics
• Don’t pick the right
customers
• Don’t get clear
customer needs
q g
demand (volume, price, and
timing)
• Inadequate analysis of
competitive reaction
within the customer s
organization
• Incomplete and lack of
functional participation in the
project team
• Inadequate field test to debug
and to work out customer
application/use issues
• Lack of proper metrics
to drive growth
customer needs
• Inadequate
assessment of
competition
• Business model not
completely defined, its
ramification on products and
services not clearly
understood
project team
• Customers don’t
know/articulate what they
want (didn’t ask the right
questions)
understood
• customer/supplier
partnerships defined (end
state)
• license requirements
• Inadequate program
management execution (and
PIAs)
• Don’t quantitatively linklicense requirements q y
product design to customer
specifications
• Too many projects
(inadequate resources,
i ffi i t f )
Knorr-Bremse Group 10 BB W1 Risk analysis, 04, D. Szemkus/H. Winkler Page 16/17
insufficient focus)

9. Six Sigma Implementation
1. Strategic Analysis and Alignment
2 Th l f th t2. The role of the management
3. Professional Six Sigma organization
4. Qualification concept
5. Communication concept5. Communication concept
6. Six Sigma Roll-out / distribution
7 P f i l j t t7. Professional project management
8. Project tracking and controlling
9. Six Sigma incentive and culture
10.Duration and cost for the implementation10.Duration and cost for the implementation
10 issues and all include potential risks!
Knorr-Bremse Group 10 BB W1 Risk analysis, 04, D. Szemkus/H. Winkler Page 17/17
10 issues … and all include potential risks!