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National Guard
Black Belt Training
Module 49

Risk Assessment

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CPI Roadmap – Improve

8-STEP PROCESS
6. See
1.Validate 2. Identify 3. Set 4. Determine 5. Develop 7. Confirm 8. Standardize
Counter-
the Performance Improvement Root Counter- Results Successful
Measures
Problem Gaps Targets Cause Measures & Process Processes
Through

Define Measure Analyze Improve Control

TOOLS
ACTIVITIES
•Brainstorming
• Develop Potential Solutions
•Replenishment Pull/Kanban
• Develop Evaluation Criteria
•Stocking Strategy
• Select Best Solutions
•Process Flow Improvement
• Develop Future State Process Map(s)
•Process Balancing
• Develop Pilot Plan
•Standard Work
• Pilot Solution
•Quick Change Over
• Develop Full Scale Action/
•Design of Experiments (DOE)
Implementation Plan
•Solution Selection Matrix
• Complete Improve Gate
•‘To-Be’ Process Mapping
•Poka-Yoke
•6S Visual Mgt
•RIE

Note: Activities and tools vary by project. Lists provided here are not necessarily all-inclusive. UNCLASSIFIED / FOUO
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Learning Objectives
 Understand the concept of Risk Assessment and how
it impacts your project
 Understand some of the tools available to identify and
reduce risk before solutions are implemented

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Risk Defined
 Risk – The chance of loss or the perils to loss; also
the degree of probability of loss

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Risk Management
 Risk Management is a comprehensive means to
proactively
 Identify
 Assess
 Mitigate

the risks of your

proposed project changes
throughout the project

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Tools to Assess Risk

 Risk Standards Matrix
 Risk Identification Matrix
 Controls Assessment Matrix
 FMEA
 FMEA

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Risk Standards Matrix

What is a Risk Standards Matrix?
 Simple but effective tool for identifying potential
problems
 Prompts a BB to consider the ways in which the
implementation could impact:
 Users
 Cost
 Safety
 IT
 Environment
 Other Areas
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Risk Standards Matrix (Cont.)

How to Construct a Risk Standards Matrix
 Create a standardized list of potential risk areas to be used
on all projects. Think in terms of big risk and likely
probability. Consider risks arising from external sources
like:
 Supply Source Also Consider
“The 6 M’s”
 Technology changes
Man
 Economic condition
Material
 Political conditions
Machine
 Regulation Method
 National Measurement
Mother Nature

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Example

Risk Standards Matrix Example

Category Risk Score
Create Standard Risk Human Resources 3
Categories M & A Activity 6
Capacity Planning 4
Global Sourcing 3
Tactical Purchasing 7
Create Scale of Either 1-5
Scheduling 4
or 1-10 to Assess
Materials Management 2
Environment 4
Accounting 3
Hazardous Materials 3
Create Standard for Totals Community Responsibility 2
Based on Risk Tolerance Depot Management 3
Ex over 50 High, Over 40 Finance 1
Med, Over 30 Low Quality 1
Total 46

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Risk Identification Matrix

 What is a Risk Identification Matrix?
 Brainstormed list of potential project risks
 Prioritization of “pain” this would cause
 Prioritize the likelihood of occurrence
 Concentrate efforts on High Likelihood and High Pain
Items

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Risk Identification Matrix - Template

Project
 Brainstorm risks Priority
Risks Impact Probability of
Occurrence
 Rate the risk in terms of
potential damage or
cost to the organization
 Rate the risk in terms of
the likelihood that it will
occur
 Focus on risks that have
a large impact and are
most likely to occur

Date: Prepared by: Reviewed by: Next Update:

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Controls Assessment Matrix

 Helps identify the activities designed to protect you and your unit from
high priority risks identified.
 To construct a controls assessment matrix:
 List the highest priority risk from the Risk Assessment Matrix.
 List the Controls that would help mitigate or eliminate the risk.
 Does this control exist?
 Discuss the appropriateness and sufficiency of each control.
 Identify the actions that need to take place to address any control
deficiencies.

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Controls Assessment Matrix Example

Project Objective: Accurate receipt of contracts via EDI
Risk: Information is lost in transaction

Sufficiency of Control: (x = excessive, a = adequate, i = inadequate) Controls are not

Controls Existing Is it sufficient? If not, why? Next Steps always cheap or
Y/N What? Who? When? easy!
(a) Training Y Training conducted

Be sure that
System Configured to there is a
(b) Procedures not N prevent submission of balance between
specific transactions without risks to controls,
required data
and that other
(c) No process for objectives such
user master N User master verification as efficiency and
speed are not
lost.
Date: Prepared by: Reviewed by: Next Update:

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Failure Mode and Effects Analysis (FMEA)

 A preliminary FMEA was introduced earlier to help identify
potential causes of failures in the process
 As the project advances, the FMEA can be developed more
fully to address and re-evaluate potential solutions
 FMEA is a way to organize possible product or process
failures and the risks associated with these failures - from
this information action can be planned to reduce or
eliminate that risk
 Complete the FMEA in the Improve phase

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Types of Failure Mode and Effects Analysis

 Design FMEA
 Product or Service Design FMEA
 Uncover problems that may result in:
 Safety hazards
 Malfunctions
 Shortened product life or decreased service satisfaction
 Ask how can the product or service fail

 Process FMEA
 Uncover process problems that may result in:
 Safety hazards
 Defects in product or service production process
 Reduced process efficiency
 Ask how people, materials, equipment, methods, and environment
cause process problems
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Failure Mode and Effects Analysis

Worksheet

Identify failure modes Determine and assess

Identify causes of the Prioritize
and their effects actions
failure modes
and controls

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How to Complete an FMEA

How-to

1. Review the product, service or process

2. Brainstorm and group possible failure modes
3. List one or more potential effects for each failure mode
• Answer the question: If the failure occurs, what are the consequences?
4. Assign severity rating for each effect
5. Assign an occurrence rating for each failure cause
6. Assign a detection rating for each failure mode
7. Calculate risk priority number (RPN) for each effect
8. Use the RPNs to select high priority failure modes
9. Plan to reduce or eliminate the risk associated with high priority failure modes
10. Carry out the plans
11. Recompute RPN

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Calculating Risk Priority

Risk Priority = Severity Scale
Bad Rating Criteria: A Failure Could
10 Injure a customer or employee
9 Be illegal
8 Render product or service unfit for use
7 Cause extreme customer dissatisfaction
6 Result in partial malfunction
Severity 5
4
Cause a loss of performance which is likely to result in a complaint
Cause minor performance loss
3 Cause a minor nuisance but can be overcome with no performance loss
2 Be unnoticed and have only minor effect on performance
x Good
1 Be unnoticed and not affect the performance

Occurrence Scale
Occurrence Bad Rating
10
Time Period
More than once per day
Probability
>30%
9 Once every 3-4 days 30%
x 8
7
Once every week
Once per month
5%
1%
6 Once every 3 months .03%
5 Once every 6 months 1 per 10,000
Detection 4
3
Once per year
Once every 1-3 years
6 per 100,000
6 per million
2 Once every 3-6 years 3 per 10 million
1 Once every 6-9 years 2 per billion
Good
Detection Scale
Bad Rating Definition
10 Defect causes by failure is not detectable
9 Occasional units are checked for defects
8 Units are systematically sampled and inspected
7 All units are manually inspected
6 Manual inspection with mistake-proofing modifications
5 Process is monitored (SPC) and manually inspected
4 SPC is used with an immediate reaction to out of control conditions
3 SPC is above 100% inspection surrounding out of control conditions
2 All units are automatically inspected
1 Defect is obvious and can be kept from affecting the customer
Good

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Example

Appeal Process Example

Appeal Process

BB: E. Jones 1 6
Appeals Process Team 3/01/01

Application Incomplete Delay 5 Sales Rep Rushed 8 Clerk Checks 1 40

Application Incorrect Bad Decision 7 Sales Rep Mistake 5 Review by Mgr 9 315 Identify error types JG 3/12/01

Committee Members Absent Bad Decision 5 Illness/Bus Trips 10 Clerk Checks 1 50

Identify failure modes Identify causes of the Prioritize Determine and assess
and their effects failure modes actions
and controls

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Failure Mode Effects Analysis (FMEA)

O O
Process Step / Potential Failure Potential Failure Potential Root D Actions D
S C Current Controls Resp. Actions Taken S C
Input Mode (X) Effects (Y) Causes E Recommended E
E C E C
T T
What is the In what ways does What is the impact V What causes the Key U What are the existing What are the What are the V U
E E R
process step the Key Input go on the Key Output E Input to go wrong? R controls and procedures actions for reducing completed actions E R
C RPN C P
and Input wrong? Variables (Customer R R (inspection and test) that the occurrence of taken with the R R
T T N
under Requirements)? I E prevent either the cause the cause, or recalculated I E
I I
investigation? T N or the Failure Mode? improving RPN? T N
O O
Y C detection? Y C
N N
E E
Updating Ineffective Discrepancies: POI vs Adjust templates to
Ineffective reviews 5 4 None 5 100 PMO 5 2 2 20
Tollgates templates Templates match POI
Users and leaders Slide purposes not Adjust slide titles
4 None 4 80 PMO 1 2 10
don't buy-in to LSS clear and notes
Redundant and NVA Eliminate NVA
3 None 4 60 PMO 1 2 10
slides slides
Incomplete SOP or Develop "read me"
3 None 5 75 PMO 1 2 10
"Help" within PS slides

Updating Too many steps to Link templates to

Inefficient updating 3 NVA steps 5 None 4 60 PMO 3 3 2 18
Tollgates build/update PS Phase
Users get frustrated Too many choices Eliminate NVA;
4 None 4 48 PMO 2 2 12
and delay projects between templates group in folders
Inconsistent file Simple names;
3 None 4 36 PMO 1 2 6
names and locations group in folders

LSS Tool Not all LSS tools & User cannot find Not all tools available Revise list of tools
4 5 None 4 80 PMO 4 2 2 16
Access refs in PS tools & references in PS and joggers
Project completion is Poor explanation in Develop direct
3 None 3 36 PMO 2 2 16
delayed some references access pdf file

LSS Tool Too many steps to Inefficient retrieval of Multiple means for "Read me" file; one
2 3 None 5 30 PMO 2 2 2 8
Access retrieve tools LSS tools/refs accessing tools folder
Eliminate NVA
NVA steps 3 None 5 30 PMO 2 2 8
steps

- Example -
Required Deliverable
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Takeaways
 Many tools exist to help identify project risks
 Risk Standards Matrix
 Controls Matrix
 FMEA
 Identify risks early – evaluate their likelihood and
impact
 Create a comprehensive plan to reduce risk exposure

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What other comments or questions

do you have?

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