credibility is the key to successful risk management - risk managemen… · credibility is the key...

CREDIBILITY IS THE KEY TO SUCCESSFULRISK MANAGEMENT

SEPTEMBER 25, 2013

Scott Luce & Ryan Crum

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Risk ManagementSeptember 25, 2013

Instructor’sBackground

25-Years with EXELIS (1989 – Present)• 15-Years Design Engineering• 8-Years Program Office• 2-Years Business Development

GOES-R ABI Program Mgt (2006 - 2012)• Roles and Responsibilities Included: DPM, Risk Mitigation

Execution Mgr, Mechanical IPT, Subcontract Mgr, Project Execution, Vibe Campaign Mgr, etc…

Risk Mgt Assignment (2007)VOCs - EXELIS Senior Leadership / NASA• Develop a better risk mgt. plan / process that will:

1. Determine how much real risk is on the program2. Develop a credible burn-down plan & methodology

to track progress3. Forecast where we are going

Black Belt Certified (2009)• Case Study: Risk Management• Scope: Develop a credible risk mgt. system• Goal: Automate to make risk mgt. fun and easy

Revised EXELIS’ Risk Process (2009)• Update legacy risk processes & procedural documentation• Train EXELIS program mgt. teams throughout organization

EXELIS GEOSPATIAL SYSTEMSU.S. LOCATIONS

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~3,300 Geospatial Systems Employees Worldwide

~475 in Fort Wayne

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EXELIS has delivered more than 60 ensors to-date

NASA and NOAA - Weather and Climate instruments:• Since 1965, supplied weather and climate sensors for NASA and NOAA• Provided every Imager and Sounder for NOAA’s POES program since

1970s, including CrIS sounder for next-gen JPSS program• Provided every GEO imager / sounder for NOAA GOES program since

1994, including ABI imager for GOES-R• Provided instruments to Europe, Japan, and Korea

NASA - Space Sciences• Integration and test lead for the James Webb Space Telescope• Built Focal Planes, Mirrors and Telescopes for several NASA space /

ground missions

DOD - Global Positioning System (GPS)• Built GPS payloads for every USAF GPS program, including new

contract for GPS III

Commercial Remote Sensing, US Government Programs• Providing most advanced high-resolution imagery for government and

commercial customers, such as Google-Earth ™ and Yahoo-maps™

EXELIS’ SPACE PAYLOADSA SIGNIFICANT PRESENCE IN SPACE FOR OVER 50 YEARS

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•Himawari

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Why Risk Management? Top 5

5) Required• Many contracts require Risk Management and is often an evaluation criteria

for contract award

2) Disciplined Approach • Risk Management is a structured tool for day-to-day decision-making

3) Proactive • Risk Management provides leverage on the front-end of a project and helps

avoid costly performance over-runs.• Used as a vehicle for increasing funding flow into a program team

(EXELIS Capital, Customer ECP / SEA, MR, etc…)

4) Value Added• A single averted risk on a project or operation can pay for many, if not all,

Risk Management activities

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Have You Ever?

Had an engineer approach you stating that “risk is everywhere on the program” and is in need of:1. Additional Funding2. Additional Staffing3. Additional Schedule

Justifying Existence & Importance of Role

Then, have the same engineer present during a review claiming that no risks exist in their dept.:1. On-Budget2. Fully-Staffed3. On-Schedule

Revealing Total Control of Program

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Agenda

What is / is not a Program Risk

6-Basic Steps to Risk Management

Risk Mechanics Understood• Case Study – Supplier Late Hardware Delivery

GOES-R ABI Lessons Learned / Shared

RMIS delivers Automation• Overview – ease of usage

• New risk submittal – minimal input required

CaveatNeither EXELIS norScott Luce claims to be experts in Risk Management

IntentSimply share EXELIS lessons learned, what has worked, and what hasn’t

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What a Program Risk Is & Is Not

Program Risk Is:• Risk is the Probability (Likelihood) of an Undesirable Event

Occurring and the Consequence of the Occurrence

Program Risk Is Not:• A holding bin of worries and / or gut feel maybes

• Rule of thumb: If you cannot assign at least 1 valid mitigation activity – It should not be considered a Program Risk

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Risk Management Purpose Defined

We manage known Risks through forward looking “active” mitigation, reducing the likelihood of the realization

Scott Luce, GOES-R ABI DPM / Risk Manager, June 2007

Act or practice of controlling risk by mitigating (reducing) either…

• Likelihood of Occurrence

• Consequence / Severity of Occurrence

Project Management Body of Knowledge Guide Book– Chapter 11

• Increase the Probability and Impact of Positive events

• Decrease the Probability and Impact of Negative events

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Who Owns a Program’s Risk?

B) Cost Plus Contract (CPAF / CPFF) =

A) Firm Fixed Price Contract (FFP) =

They Do!

C) Any “all” Contracts =

Answer really depends on Contract-Type?

We Do!

In the long-run We both do - Embrace the process!Best Answer

6-BASIC STEPS TORISK MANAGEMENT

Scott Luce

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Exelis Risk Process - 6 Basic Fundamental Steps

RETIRE RISK

High Risk

Watch List

Note Similarity toVBLSS Black belt DMAIC Process

• Define

• Measure

• Analyze

• Improve

• Control

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Step #1 - Tailor

Generate a customized program specificRisk Register / Risk Management Plan

• Addresses program’s unique requirements & objectives

Assign Roles & Responsibilities

• Risk Board

Establish Risk Criteria (Consequence Calculation)

• Marching Army Costs, 1-Week of Schedule Impact, Hourly Rate, Supplier Rates, etc …

Educate & Empower

• Execute to Plan

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Step #2 – Identify Identify Identify

Seek out risks before they become a problem

• “All” functional areas – not just Engineering

Identified risks are captured in the following format

• IF <condition> THEN <consequence> statement

• Keep risk statements simpleIF the PTM does not meet its performance

requirements…

THEN mission impact or a redesign

will be required.IF Scott Luce does a lousy job presenting this

Risk material

THEN PMI leadership will be highly

disappointed, never inviting Scott to be a guest speaker again!

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Step #3 – Analyze

Evaluate risks & their interactions toassess range of possible outcomes

• Separate “worries” from risks

• Grouping of similar risk types (Stratify)

• Assign risk owners

Prioritize risk data into decision-making information

• Likelihood that the risk will occur

• Consequence if it occurs

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Watch List

A Watch List is nothing more than alist of potential risks that either are not “currently” significant or too early in the program to assess risk level

Note: Risk mitigation plans are not put in place for “Watch List” items

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Step #4 – Action Planning

Process to determine what to do about eachrisk assessed and documenting the plannedmitigation approach

Implementation of risk mitigationor control plans

• Mitigation Steps to be performed include:

– Modeling / Analysis

– Test Development / Execution

– Etc…

• Prepare Risk Burn-Down Plans

• Insertion of plans into Integrated Master Schedule (IMS)

• Generate Contingency Plan

– Example: Apply lean against program management reserve?

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Step #5 – Track

Monitor the Risk Indicators and Progresson the Control and Mitigation Plans

• Likelihood of occurrence specified

• Risk consequence including rationale

• Mitigation steps identified

– NOTE: Minimum of one (1) required

• Weighted risk exposure calculated

• Burn-down plan established

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Step #6 – Control

Execute Risk Management Plan

• Status reporting

– Metrics

• Risk retirement (Mitigated and Realized)

– Track risk board (program) performance

• Invoke contingency planning

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Risk Retirement

Risk that is Sufficiently Mitigated or Realized

• No longer pose a credible program threat

Mitigated

• Mitigated risks are risks that have been retired through successful avoidance

Realized

• Realized risks arerisks that have beenretired but were not successfully mitigated

• Program subjected to full / partial consequence of risk being realized

Example: GOES-R ABI Program Retirement Metric (2009)

RISK MECHANICS UNDERSTOODScott Luce

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5 X 5 Risk Matrix Defined

Classification of Program Risks

• Aids in Program Health Assessment

• Aids Resource Management

– Manpower Allocation

– Internal MR Funding

– Internal Capital Funding

Two Components

1. Y-Axis = Likelihood (%)

– Failing to achieve a particularperformance, schedule, or cost objectives

2. X-Axis = Consequence ($)

– Failing to achieve the objective

e M M H H H

d L M M H H

c L L M M H

b L L L M M

a L L L L M

1 2 3 4 5

Like

lihoo

d (%

)

Consequence ($)

Classification

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Risk Classification Quantified

Likelihood (%)90% e M M H H H

70% d L M M H H

50% c L L M M H

30% b L L L M M

10% a L L L L M

1 2 3 4 5

0-1% 2-4% 5-7% 8-10% 11-20%

$0.2

M

$1.5

M

$3.0

M

$4.5

M

$7.5

M

Classification

Like

lihoo

d (n

omin

al)

Consequence (nominal)

Consequence ($)

• Example: $50M contract

• Engineering gut feel

• Percent of contract value

Generate a customizedprogramspecificRiskRegisterandManagement Plan

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Risks are Composed of two (2) Basic Steps

“IF”• Statement

“Then”• Statement

Likelihood• Assessment

Consequence• Calculation

Mitigation Steps• Minimum of 1-Required

Step #1Identify & Quantify

Step #2Define & Execute Mitigation

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Risk Burn-Down Should Reveal3 Vital Items of Interest

1. A Plan

2. Document where you have been – Actuals

3. Forecast where you are going

Example: GOES-R ABI Program Risk Burn Down Plan (2008 - 2010)

RememberWe are striving for

Risk Credibility

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Case Study – Supplier Late Delivery

IF Supplier X is late delivering flight hardware

Then The program will be delayed integrating the module, thus delaying the test program

Likelihood Subcontract IPT estimates 70% Probability107 work days or ~5.25 months

Consequence Supplier $3.94M $750K month X 5.25 months

Program IPT $0.90M 107 days X 11 heads X 7 hr/day X $109 per/hr

Marching Army $1.88M 107 days X 2 heads X 7 hr/day X $109 per/hr

Calculated $6.72M $3.94M + $0.90M + $1.88M

Weighted $4.70M $6.72M X 70% Likelihood

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5 X 5 Matrix Rating

Likelihood 70%

Weighted Consequence $4.7M

5X5 Rating

90% e M M H H H

70% d L M M H H

50% c L L M M H

30% b L L L M M

10% a L L L L M

1 2 3 4 5

0-1% 2-4% 5-7% 8-10% 11-20%

$0.2

M

$1.5

M

$3.0

M

$4.5

M

$7.5

M

Classification

Like

lihoo

d (n

omin

al)


0

D4

Example:$50M Program

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Burn-Down ThroughActive MitigationInitial

0) Weighted Risk

$4.70M $6.72M X 70% Likelihood

90% e M M H H H

70% d L M M H H

50% c L L M M H

30% b L L L M M

10% a L L L L M

1 2 3 4 5

0-1% 2-4% 5-7% 8-10% 11-20%

$0.2

M

$1.5

M

$3.0

M

$4.5

M

$7.5

M

Classification

Like

lihoo

d (n

omin

al)


012

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Mitigation Steps1) Increase IPT staff and assign DPM as lead

Plan Likelihood Reduction 10%Deadline for Mitigation Step June 15, 2005

2) Conduct black belt Lien 6-sigma value streammapping exercise to drive into supplier’s critical path

Plan Likelihood Reduction 15%Deadline for Mitigation Step July 15, 2005

4) Evaluate / relax customer instrument design specification base upon proto-type lessons learned

Plan Likelihood Reduction 25%Deadline for Mitigation Step September 15, 2005

3) Evaluate / relax supplier module design specification based upon proto-type lessons learned

Plan Likelihood Reduction 20%Deadline for Mitigation Step August 15, 2005

5) Retire Risk!Removal from Register

Weighted Impact($) = Likelihood of (%) x Consequence ($) Occurrence

D4

C4

C3

B2

A1

GOES-R LESSONS LEARNED SHAREDScott Luce

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Credibility was the Key to Successful Risk Management on GOES-R ABI

Problem

• EXELIS’ GOES-R ABI program development supports the most advanced Weather Imaging GEO satellite in the world. Key Word: development (development = RISK)

Risk Manager

• EXELIS Leadership and NASA customer assigned / directed to actively pursue Risk identification, Risk mitigation, and Funding to drive execution

Customer(s)

• Internal and external chartered to aggressively attack Program Risks with EXELIS

Risk Board

• Tasked to create a program “Bottoms-up Register” via all functions vs. traditional Engineering / Management top-down

Net Results

• Significant Reduction in program Surprises

• EXELIS increased revenue to actively pursue risk mitigation

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EXELIS Risk Process enhanced over-time!Aggressive Risk Reduction Pushing

Down Program Risk ExposureAggressive Risk Reduction Pushing

Down Program Risk Exposure

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What is Missing?

• Is the DataQuantifiable?

• How are we doingagainst the Plan?

• What does theForecast look like?

Has Credibility in Risk Management Program been established?

PAST

PRESENT

RMIS DELIVERS AUTOMATIONRyan Crum

EXELIS Systems Analyst

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RMIS Delivers AutomationRisk Management Information System

Automated Risk Management Software Tool• Web Based Tool that aids in organizing, tracking, reporting,

and controlling risk

• Enables Focus on Risk Management vs. Risk Maintenance

– We NOW own the tool; the tool does not own us

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RMIS migrates to RAD Delivering AutomationRAD built on Microsoft Technologies• Microsoft .NET 4.0, MVC3, SQL Server 2008 R2, NHibernate, K2 blackpearl 4.6

4-Phase Software Release Plan1. Automate Program Excel Workbook

2. Incorporation of Roles / Access Privileges in the Software

3. Full configurability for Users

4. Addition of Opportunity Tracking

Software Demonstration1.0 Risks

o Creation - Risko Addition - Mitigation Stepo Completion - Mitigation Stepo Change - Likelihoodo Change - Consequence

2.0 Charts and Graphso Cost Performanceo Schedule Performanceo Register Activityo Cost Distribution by Categoryo Mitigated versus Realized

3.0 Opportunitieso Creation - Opportunityo Addition - Exploitation Stepo Completion - Exploitation Stepo Change - Likelihoodo Change - Benefit

CONCLUSIONScott Luce

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Wrap-Up

Thank you for the opportunity to present Risk Management• Ron Ehmer, VP of Programs NEIC-PMI

• Kim Gorman, EXELIS IT PMO & Governance

Questions & Answers• ?>?

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