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

2. 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

3. 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

4. General Approach for Performing Risk Factor Analysis

5. 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

6. 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

7. 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

8. Example Qualitative Risk Factors

9. 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)

10. Example Qualitative Risk Ranking Criteria

11. Example Qualitative Risk Ranking Criteria

12. 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

13. Example Task Worksheet

14. 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

15. Example Risk Factor Ranking & Summation

16. Example Results from Risk Factor Analyses

17. Example Risk Factor Analysis Results

18. Example Risk Factor Analysis Results

19. Integration of RFA with Quantitative Risk Analysis

20. Integrated Qualitative and Quantitative Risk Analysis Tasks

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

22. 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

23. Example Risk Reduction Recommendations

24. 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