1. Week 4 – Risk Handling & Monitoring

2. Risk Handling & Monitoring Proactively handle/monitor all Medium & High risks Beneficial to handle/monitor Low risks if Low risk rating was recently assigned Considerable development activity remains Other systems/processes still in development could affect this issue Final integration & test is not complete

3. Risk Handling Process that identifies, evaluates, selects & implements options to set risk at an acceptable level Goal: Identify appropriate management activities To reduce the likelihood of an event occurring To reduce the severity of consequences if event occurs

4. Risk Handling Actions Reduce uncertainty as a result of handling actions Handling actions address Specific events schedules Success criteria

5. Handling Actions are Proactive Identify specifically Handling options for each risk event How to deal with the risks if realized When to act Who is responsible Identify cost & schedule impact of handling actions

6. Risk Handling Options Avoidance Assumption Control Transfer Select based on level of acceptable risk

7. Selecting Handling Strategy Evaluate each risk event for Feasibility of handling option Cost & schedule implications of option Potential impact to system technical performance Consider secondary risk impacts

8. Inputs to Selecting Strategy Prioritized risk list Causes of each risk Requirements, contract provisions Probabilities of achieving cost & schedule objectives Potential risk responses Trends in qualitative & quantitative risk analysis results

9. Structured Risk Handling Select risk handling strategy/option THEN determine the implementation activity Tendency to select activity without evaluating all options If high risk, may have back-up handling strategies

10. Risk Handling Tools Program risk handling audit Periodic program risk reviews Earned value analysis Technical performance measurement Additional risk handling planning

11. Risk Avoidance Eliminates sources of high risk, replaces with lower risk alternatives Approach Apply early in program Change concept, specifications, practices Re-evaluate operational requirements Remove if no strong basis Cost-effectiveness trade-studies Cost As an Independent Variable (CAIV)

12. Risk Avoidance Requires understanding of priorities & constraints May be appropriate to: Reduce scope to avoid high-risk activities Add resources or time Use familiar approach vs. untested Avoid a sub with insufficient experience Choose spiral development approach

13. Risk Avoidance Pitfalls May discourage life cycle risk management Using to reduce requirements should be a last resort

14. Risk Assumption Acknowledge existence of a specific risk & consciously accept it Risks may be inherent Residual risks - result from other control actions Best suited for low level risks

15. Successful Risk Assumption Contingency plans Identify resources & actions for overcoming if event happens Have administrative plans/contracts ready to activate Set aside schedule & cost reserve If not, may have to lower capability or cancel effort if cannot meet objectives

16. Risk Assumption Pitfalls Are declaring worst case outcome as being acceptable level of capability Difficult to set aside reserve on DoD programs Requires well-planned monitoring – cannot ignore Quick reporting of risk event and implementation of actions

17. Risk Control Seeks to reduce or mitigate risk Monitors/manages risk Reduce probability of occurrence Reduce severity of outcome Most commonly used in defense programs

18. Common Control Mechanisms Multiple development efforts Alternative designs Trade studies Prototyping Incremental development Technology maturation Reviews, walk-throughs, inspections

19. More Control Mechanisms Design of experiments Open systems Mock-ups Modeling & simulation Demonstration/test events Process proofing

20. Successful Risk Control Conduct regular risk reviews Formal agenda Review risks, ratings, prioritization Audit use of risk control mechanisms Verify risks are continuously assessed

21. Risk Control Pitfalls Control steps require commitment of resources & time Strike balance between resources req’d and benefit of reduced probability or severity May increase program costs Potential for secondary effects

22. Risk Transfer Reallocation of risk from one part of the system to another or between program entities System level requirements are still met Cannot transfer unless recipient has ability to control & manage the risk

23. Risk Transfer Consideratons Early in program Net result should be overall reduction in risk, not just reassignment Valid transfer mechanism – not vengeance Seamless assumption of delegated activity Not beyond recipient’s ability to handle

24. Risk Transfer Techniques In design Modularity Functional partitioning From hardware to software – e.g., timing

25. Risk Transfer Techniques Between customer & contractor Technology Processing Cost control warranties performance incentives FFP contracts

26. Successful Risk Transfer Contractors more suited to accept risks for Technology Processes Government better able to affect Funding Schedule External impacts on program requirements

27. Risk Transfer Pitfalls New risk owner lacks ability to handle the risk Either to manage or absorb in processes Combined risk exposure is not reduced

28. Example: Handling Concurrency What strategies are being used? Insure Adequate Test Resources Are Available Rapid Corrective Action Process Established Effective Transition to Production Process Defined Phase Production to Allow for Early Testing Use Modular Designs When Retrofits Are Expected

29. Risk Handling Plan Output of risk handling phase Documents the risk actions to be taken Task descriptions of handling actions Resources required Proposed schedule & relationship to program milestones Cost impact Documents ground rules & assumptions

30. Handling Plan Schedule

31. Risk Handling Exercise Identify the process steps that should be taken to develop handling actions for the following to Peace Whey risk events. Select a different handling action for each event. You have __ minutes for this exercise. Be prepared to present your results.

32. Trade Studies Support functional analyses Allocation of performance requirements Identification of design constraints May be formal or informal Document formal decisions – e.g., at milestones Basis for informal engineering choices Cost-effectiveness is a special case trade study

33. TS Basic Principles Criteria are established as the basis for the decision Must have agreed upon approach for measuring against criteria – why? Results must be easily communicated to decision-makers

34. Basic TS Process Similar to risk management process

35. Utility Curves Normalize decision factors for comparison Relative factor value as increases across range Shows constant, continuous or stepped values

36. Decision Matrix Relative values establish weighting factors for each decision factor

37. Sensitivity Analysis Use to determine how solutions change as utility or weighting change Evaluation criteria should be sensitive to major drivers Involve entire team & customer in definition process Utility curves & decision matrices are models – verify, validate, accredit

38. Trade Study Example

39. TS Example

40. Risk Monitoring Systematically track & evaluate performance of handling plan Monitor predictors for risk events Monitor status of identified risks Track handling actions Compare predicted to achieved results Disseminate information Update plan as required

41. Successful Risk Monitoring Key – Selection of most effective metrics True state of risk events Status of handling actions On-going, proactive process Identify new risks & handling options Retire risks as project matures Keep monitoring progress visible Timely reporting of results An agenda item at management reviews Relate to cost, schedule & performance objectives

42. Possible Activities Resulting from Monitoring Documenting process work-arounds Activating contingency plans Requests for change in program scope Reassessing risks due to change in Probability Consequence Program assumptions

43. Risk Monitoring Outputs Program metrics Technical reports Earned value reports Risk tracking watch list Schedule performance report Critical risk process reports Establish a reporting frequency

44. Monitoring May define color codes for plan tasks

45. Monitoring Status of technical performance measures

46. Monitoring Status of earned value cost metrics

47. Successful Monitoring Attention to risks associated with program schedule Monitor low risks for changes to status Be aware of trends, continuously evaluate metrics Indicator system must be accurate, timely & relevant Recognize project parameters & assumptions can change

48. Monitoring Pitfalls Using as a problem solving technique Ignoring low risks Going on ‘auto-pilot’ Revisit metrics selection for accuracy, timeliness & relevance Focus on internal environment to exclusion of external & interface concerns

49. Risk Monitoring Exercise Identify the process steps that should be taken to monitor the following to Peace Whey risk events. Relate to the handling actions identified earlier. You have __ minutes for this exercise. Be prepared to present your results.

50. Next Time: Special Topics Read Risk Management Guide, sections 5.8, 5.9 Special Topics Software Risk Management Risk Management Tools Commercial vs. DoD Perspective Final exam, turn in Part II of project