Risk Factor Analysis - A New Qualitative Risk Management Tool PMI Connections 2000 Project Management Institute Seminar & Symposium September 12, 2000 - Houston, TX John Kindinger Probabilistic Risk and Hazard Analysis Group (TSA-11) Los Alamos National Laboratory LA-UR 00-3444 Approved for public release; distribution is unlimited 1

Presentation Topics Background and Objectives for Risk Factor Analysis (RFA) General Approach for Performing RFA Example RFA Results Integration of RFA with Quantitative Risk Analysis

Objectives for the Development of RFA Capable of evaluating technical risks in conceptual design, before schedule & cost baselines are available Easy to perform and adaptable to different projects & programs Systematic, objective and sufficiently comprehensive to produce meaningful specific insights Useable to support quantitative risk analysis

General Approach for Performing Risk Factor Analysis

Tasks for Risk Factor Analysis List activities, tasks or other elements that make up the project Identify the applicable risk factors Develop risk-ranking criteria for each risk factor Evaluate each activity and rank risk for each risk factor Sum results across risk factors for each activity

Activity Identification Follow the logical progression of tasks or process steps being used by the project team Define tasks at the level of detail needed to reveal unique risk issues and important dependencies between tasks Document results with a simple flow chart

Identifying Risk Factors Risk factors are the drivers that will ultimately determine performance measure results Risk factors need to be relevant to the specific activities to be examined For LANL facility projects, we have developed a generic set of risk factors and grouped them into four categories

Example Qualitative Risk Factors

Risk Ranking Criteria The assessments of risk for a given risk factor need to be made consistently across differing types of activities Therefore, for each risk factor, qualitative criteria are needed that define risk in each category (low, medium, high)

Example Qualitative Risk Ranking Criteria

Example Qualitative Risk Ranking Criteria

Risk Evaluation Evaluate each task or activity against each risk factor using the ranking criteria and assess the risk level appropriately All risk factors may not be applicable for any specific activity Record the results on a worksheet, including justification for the assessment

Example Task Worksheet

Risk Summation Also, record the risk rankings in a table format using numbers (0-3) to represent the risk rankings Then sum across the risk factors for each task to get risk category and the total task score All risk factors are weighted equally in this process

Example Risk Factor Ranking & Summation

Example Results from Risk Factor Analyses

Example Risk Factor Analysis Results

Example Risk Factor Analysis Results

Integration of RFA with Quantitative Risk Analysis

Integrated Qualitative and Quantitative Risk Analysis Tasks

Input Distribution Development Risk Factor Analysis results provide a basis for the development of distributions used in the quantitative risk model.

Format of Quantitative Risk Assessment Results Cumulative probability distributions provide a complete picture of uncertainty, it is not ignored or assumed to take on extreme values. Results provide a basis for setting risk-based performance targets and contingencies. Sensitivity analyses identify contributors to risk

Example Risk Reduction Recommendations

Conclusions Risk factor analysis is a qualitative risk analysis technique aimed at identifying and assessing the drivers that will determine overall project performance RFA has been used at Los Alamos for the early assessment of technical risks in conceptual design and later as part of integrated qualitative and quantitative risk analyses