a deterministic approach to risk management shimon zeierman rafael advanced defense systems ltd. 1...

A Deterministic Approach to A Deterministic Approach to Risk ManagementRisk Management

Shimon ZeiermanShimon ZeiermanRafael Advanced Defense Systems Ltd.Rafael Advanced Defense Systems Ltd.

1 22nd Annual INCOSE International Symposium - Rome, Italy - July 9-12, 2012

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• Project risk management is one of the project’s sub-processes implemented Project risk management is one of the project’s sub-processes implemented by the project team in order to complete their task successfully.by the project team in order to complete their task successfully.

• Risk mitigation plans are based on assessments which form a rationale for the Risk mitigation plans are based on assessments which form a rationale for the risk reduction activities planned.risk reduction activities planned.

• The plan is the outcome of a decision process which is based on:The plan is the outcome of a decision process which is based on:• Methodological identification of all risksMethodological identification of all risks• Assessment of risk likelihood (probability of occurrence)Assessment of risk likelihood (probability of occurrence)• Assessment of risk impact, if materializesAssessment of risk impact, if materializes• Planning risk mitigation activities, including their schedule and costPlanning risk mitigation activities, including their schedule and cost

Major difficulty:Major difficulty:Assessment of risk likelihood and impactAssessment of risk likelihood and impact

BackgroundBackground

22nd Annual INCOSE International Symposium - Rome, Italy - July 9-12, 2012


The need is to assess the likelihood of a The need is to assess the likelihood of a futurefuture event event

Risk mitigation activities affect, by definition, risk likelihood.Risk mitigation activities affect, by definition, risk likelihood.

One term, “Risk Likelihood”, represents conceptually polar values:One term, “Risk Likelihood”, represents conceptually polar values:100% - Failure will occur, for sure (Is it possible whereas we are going to act 100% - Failure will occur, for sure (Is it possible whereas we are going to act intensively to remove the risk?)intensively to remove the risk?)0% - Failure will not occur, for sure (Did we raise an unjustifiable risk?)0% - Failure will not occur, for sure (Did we raise an unjustifiable risk?)PMBOK – ignores these polar valuesPMBOK – ignores these polar values

•Risk likelihood assessment is needed for a future, complicated, uncertain event. Risk likelihood assessment is needed for a future, complicated, uncertain event. A task close to the task of A task close to the task of prophecyprophecy……

Risk likelihood assessment.Risk likelihood assessment.Is it a possible mission?Is it a possible mission?

Risk likelihood assessmentRisk likelihood assessment

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• Then decision making process is vulnerable to external forces: gut feelings, Then decision making process is vulnerable to external forces: gut feelings, mood, subjective assessments, external pressure, the “strong man”…mood, subjective assessments, external pressure, the “strong man”…

• Pressure to add risk reduction activities:Pressure to add risk reduction activities:• To avoid past failuresTo avoid past failures• To reproduce past successTo reproduce past success• To show extreme effort, to meet stakeholders expectationsTo show extreme effort, to meet stakeholders expectations

• And vice versa – a tendency to avoid risk reduction activities:And vice versa – a tendency to avoid risk reduction activities:• Pressure on project budgetPressure on project budget• Lack of experience and over optimismLack of experience and over optimism

Are all activities really necessary?Are all activities really necessary?Did we forget an activity?Did we forget an activity?

How will we decide on the details of the plan?How will we decide on the details of the plan?Who is going to make the decision?Who is going to make the decision?

When accurate data is unavailableWhen accurate data is unavailable


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A deterministic approach that helps planning andA deterministic approach that helps planning anddecision making processesdecision making processes

The needThe needThe project team needs a complementary approach that will offerThe project team needs a complementary approach that will offer

clear criteria for risk reduction plan decision makingclear criteria for risk reduction plan decision making(avoiding the task of assessment of probability of failure or impact of failure)(avoiding the task of assessment of probability of failure or impact of failure)

The responseThe response

The role of the probabilistic approachThe role of the probabilistic approach

• A starting point for deterministic planningA starting point for deterministic planning• Serve fast preliminary assessmentServe fast preliminary assessment• Compensate for insufficient data, knowledge and/or time needed Compensate for insufficient data, knowledge and/or time needed

by the deterministic approachby the deterministic approach


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• Project task definition:Project task definition:

A project is performed in order to supplyA project is performed in order to supplythe required the required productproduct on on timetime and within allocated and within allocated budgetbudget

• Risk mitigation plan is a subset of the project task and its goal is:Risk mitigation plan is a subset of the project task and its goal is:

To fully eliminate the risk impact, while stayingTo fully eliminate the risk impact, while stayingwithin time and budget allocated for the project.within time and budget allocated for the project.

The decisions are needed in order to build The decisions are needed in order to build a risk mitigation plan that complies with a risk mitigation plan that complies with

three three concurrentconcurrent requirements requirements


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1.1. Risk mitigation is a set of activities planned such that the sum of all activities Risk mitigation is a set of activities planned such that the sum of all activities will fully remove that risk on time and on budget.will fully remove that risk on time and on budget.

2.2. Each risk may be decomposed into a set of risk rootsEach risk may be decomposed into a set of risk roots3.3. Each risk root may be mitigated by a single activity or further decomposedEach risk root may be mitigated by a single activity or further decomposed

Principles:Principles:A) Matching risk roots and activitiesA) Matching risk roots and activities


Airborne camera should work under severe

atmospheric conditions

Airborne camera should work under severe

atmospheric conditions

It should operate in low

temperatures

It should operate in low

temperatures

It should exhibit planned

performance

It should exhibit planned

performance

It should operate in a vibrating environment

It should operate in a vibrating environment

Ensure it operates in temperature

chamber

Ensure it operates in temperature

chamber

Ensure it operates in shaker

Ensure it operates in shaker

Test it in flight and measure

performance

Test it in flight and measure

performance

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• Extreme claim and goal:Extreme claim and goal:Each risk root will materialize for sure (“100% probability”),Each risk root will materialize for sure (“100% probability”),therefore plan an activity that mitigates the risk in full (100% mitigation)therefore plan an activity that mitigates the risk in full (100% mitigation)

• In order to stay within time and budget we further require:In order to stay within time and budget we further require:Each “risk root” mitigation activity should be completed in “zero time and Each “risk root” mitigation activity should be completed in “zero time and zero budget”.zero budget”.

Additional guidelinesAdditional guidelines• Time and budget allocation for each activity is success oriented, assuming Time and budget allocation for each activity is success oriented, assuming

each activity will succeed in “first shot”.each activity will succeed in “first shot”.• Time and budget reserves (buffers) are allocated to compensate for failures of Time and budget reserves (buffers) are allocated to compensate for failures of

“first shot” and to take care of residual, nondeterministic, nonspecific “risk “first shot” and to take care of residual, nondeterministic, nonspecific “risk roots”, for which we can’t build a concrete mitigation plan.roots”, for which we can’t build a concrete mitigation plan.

Principles:Principles:B) Analyze each risk root to extremeB) Analyze each risk root to extreme


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• We aim to achieve an optimal risk mitigation plan.We aim to achieve an optimal risk mitigation plan.• The method used is iterative planning:The method used is iterative planning:

• Fix a preliminary plan (may be derived from contractual requirements)Fix a preliminary plan (may be derived from contractual requirements)• Examine plan with three questions (order of question is important):Examine plan with three questions (order of question is important):

1.1. Does the plan fully mitigate the risk?Does the plan fully mitigate the risk?2.2. If yes, does it take “zero time” which means in any case does not cause If yes, does it take “zero time” which means in any case does not cause

a drift in project schedule?a drift in project schedule?3.3. If yes, does it take “zero money” and in any case does not cause a drift If yes, does it take “zero money” and in any case does not cause a drift

in project budget?in project budget?• A negative answer for each one of the questions will call for a search for an A negative answer for each one of the questions will call for a search for an

alternative plan.alternative plan.• The alternative plan will be based on breaking up compound risk into risk The alternative plan will be based on breaking up compound risk into risk

roots and looking for alternative activities that may reduce the risk.roots and looking for alternative activities that may reduce the risk.

Actually it is an optimization taskActually it is an optimization task


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• The project:The project:• Adaptation of an existing Electro-Optic airborne pod to high altitude flight Adaptation of an existing Electro-Optic airborne pod to high altitude flight

on a specific aircrafton a specific aircraft

• Required completion date:Required completion date:• 12 month ARO12 month ARO

• Main mission:Main mission:• Enlarge flight envelope of pod (verify operation and performance in high Enlarge flight envelope of pod (verify operation and performance in high

altitude flight)altitude flight)

• Risk identification:Risk identification:• Pod is in serial production, tested in medium flight altitudes. It is Pod is in serial production, tested in medium flight altitudes. It is

uncertain whether it can withstand temperature in high altitude and uncertain whether it can withstand temperature in high altitude and deliver same performance as exhibited in medium altitude flight.deliver same performance as exhibited in medium altitude flight.

Example of risk management eventExample of risk management event(based on a real project case study)(based on a real project case study)


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Contractual requirements for risk reductionContractual requirements for risk reduction

11 1212 month month ((contractcontract))

Operation and performance in Operation and performance in low temperatures (contractual)low temperatures (contractual)

Flight test with design aircraft Flight test with design aircraft (contractual)(contractual)

11,00011,000(contract)(contract)

1212 monthmonth ((contractcontract))

How should we continue?How should we continue?•Design aircraft is not available for final testing Design aircraft is not available for final testing earlier than 12 monthearlier than 12 month•Therefore we need to analyze the risk one layer Therefore we need to analyze the risk one layer deeper and add focused actions to mitigate risk deeper and add focused actions to mitigate risk roots that will be exposed during the analysis.roots that will be exposed during the analysis.

Contractual risk reduction appears to be planned too late


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Analysis of risk one layer deeperAnalysis of risk one layer deeper

11 44Operation Operation in low in low

temperatures in labtemperatures in lab Test in temperature chamberTest in temperature chamber 1,0001,000

22 6666PerformancePerformance in low in low

temperatures in test aircrafttemperatures in test aircraft Flight test using test aircraftFlight test using test aircraft 5,0005,0005,0005,000

Budget required is

too high

33Test to design aircraft gap riskTest to design aircraft gap risk

(no known risk root)(no known risk root)Flight test with design aircraft Flight test with design aircraft

(contractual)(contractual)11,00011,000

(contract)(contract)1212 month month

(contract)(contract)

How should we continue the process?How should we continue the process?•Look for alternative activities to reduce Look for alternative activities to reduce risk of performance in low temperatures, risk of performance in low temperatures, while reducing cost towards “zero”while reducing cost towards “zero”


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An alternative activity enables plan improvementAn alternative activity enables plan improvement



Is testing with test

aircraft still needed?

Risk root can be

mitigated in lab

44Test to design aircraft gap Test to design aircraft gap

riskrisk(no known risk root)(no known risk root)



12month 12month (contract)(contract)

33 66Lab to test aircraft gap riskLab to test aircraft gap risk

(no known/unique risk root)(no known/unique risk root) Flight test with test aircraftFlight test with test aircraft 5,0005,000



temperatures in test aircrafttemperatures in test aircraft

Pressure/Temperature chamber Pressure/Temperature chamber with optical window (simulating with optical window (simulating

flight conditions)flight conditions)1,0001,0001,0001,000

5,0005,000

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• When there is no known and unique risk root defined, former supportive When there is no known and unique risk root defined, former supportive arguments made by stakeholders gain power, e.g.:arguments made by stakeholders gain power, e.g.:• ““Failing in the contractual final test will risk corporate reputation”Failing in the contractual final test will risk corporate reputation”• ““We are dealing with a pioneering task, risky project….”We are dealing with a pioneering task, risky project….”

• Each warning made by any stakeholder should be taken care of:Each warning made by any stakeholder should be taken care of:• Mitigate reputation risk by making the customer a partner to the Mitigate reputation risk by making the customer a partner to the

process and its risksprocess and its risks• Keep close control of project risk developmentKeep close control of project risk development• ““General” yet non-specific risks should be taken care of by making General” yet non-specific risks should be taken care of by making

allowance and managing the project using time and budget buffersallowance and managing the project using time and budget buffers

Removing a planned test out of an approved Removing a planned test out of an approved work plan needs caution, sensitivity and work plan needs caution, sensitivity and

determinationdetermination


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Pressure/Temperature chamber with optical window is selected.Pressure/Temperature chamber with optical window is selected.No known/unique risk roots to be mitigated in test aircraft are No known/unique risk roots to be mitigated in test aircraft are

leftleft

Decisions are based on precisely defined criteriaDecisions are based on precisely defined criteria

11Operation Operation in low in low





flight conditions)flight conditions)1,0001,000

33 66Lab to test aircraft gap riskLab to test aircraft gap risk

(no known/unique risk root)(no known/unique risk root) 5,0005,000Flight test with test aircraftFlight test with test aircraft

1,0001,000

5,0005,000

44 12month 12month (contract)(contract)

Test to design aircraft riskTest to design aircraft risk(no known risk root)(no known risk root)



Pres/Temp chamber to flight test Pres/Temp chamber to flight test gap risk (no known risk root)gap risk (no known risk root)


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Presentation format emphasizes opportunitiesPresentation format emphasizes opportunities







Opportunity!One common activity

to reduce two risks






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Risk reduction plan – the deterministic wayRisk reduction plan – the deterministic way





22 44Operation and Performance Operation and Performance in low temperatures in labin low temperatures in lab



The plan:The plan:Mitigates all risks (up to the unknown residual risk)Mitigates all risks (up to the unknown residual risk)

Within project contractual scheduleWithin project contractual scheduleAnd a minimal risk reduction budgetAnd a minimal risk reduction budget

1111Operation in low temp. risk Operation in low temp. risk will be reduced with risk 2will be reduced with risk 2

Operation in low temp. risk Operation in low temp. risk will be reduced with risk 2will be reduced with risk 2

Temp. chamber test merged Temp. chamber test merged with pres/temp chamber testwith pres/temp chamber test

800800 (savings)(savings)


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• A deterministic approach to the construction and management of a risk A deterministic approach to the construction and management of a risk mitigation plan was presented.mitigation plan was presented.

• The approach is based on a logical analysis of the risks and the risk mitigation The approach is based on a logical analysis of the risks and the risk mitigation activities and suggests precise criteria for programmatic decision making.activities and suggests precise criteria for programmatic decision making.

• The approach avoids relying on assessments for the likelihood and impact of The approach avoids relying on assessments for the likelihood and impact of risk.risk.

• The approach is intrinsically flexible. It enables a systematic build-up of risk The approach is intrinsically flexible. It enables a systematic build-up of risk reduction plan from scratch, improvement of an existing plan built by other reduction plan from scratch, improvement of an existing plan built by other methods, as well as management and update of plans following methods, as well as management and update of plans following developments in project course.developments in project course.

• The approach has been successfully implemented in several projects.The approach has been successfully implemented in several projects.

SummarySummary


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Thank YouThank You

Continously Improved PowerPoint version of this presentation may be obtained on the web: Continously Improved PowerPoint version of this presentation may be obtained on the web: http://www.zeierman.co.ilhttp://www.zeierman.co.il


a deterministic approach to risk management shimon zeierman rafael advanced defense systems ltd. 1...

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