Managing Risk at Solystic

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Managing Risk at Solystic

• Workshop

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Workshop Introduction

• Opening by Frédéric Badier
• Learning Objectives
• Workshop Overview
• Participant Introductions
• Participant Expectations

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Learning Objectives

• The purpose of this workshop is to provide
  participants with a solid understanding of Risk
  Management principles, approach, techniques and
  best practices

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Learning contents

• Develop your skills to
• Understand what is risk
• Anticipate risk before it arises
• Set up action plan to eliminate anticipated risks
• Set up action plan to recover situation when
  risks arise
• Use a common Solystic Risk Management methodology
  to be integrated into your project plan

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Why a Risk Management Methodology ?

• A Risk Management methodology
• For the Operation department to be in a better
  position to face the rapid changes in the market
  and a growing competition
• To address needs expressed by Northrop
• To be in line with strategic customers
  expectation
• To make life of Project Managers and Chargé
  dAffaires easier through better planning,
  being more proactive than reactive
• To better cope with the shortening of the overall
  production cycle

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The proposed methodology
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Learning Approach

• Diverse learning methods
• Business related case studies
• Balance between theory and practice
• Leverage knowledge and experience of participants
• Balance individual and course goals

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Workshop Overview

• Module 1 - Project Risk Management
• Module 2 - Risk Identification
• Module 3 - Risk Analysis
• Module 4 - Risk Avoidance and Mitigation
• Module 5 - Risk Monitoring and Control
• Module 6 - Risk Management Implementation
• Module 7 - Risk Management Tips and Tricks
• Module 8 - Cost Effectiveness of Risk Mgt

Day 1
Day 2
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Indicative Schedule
Day 1
Day 2
Start 8.30 am
Start 10 am
Break 10.45
Break 11.30
Lunch 13.00-14.30
Lunch 12.30-14.00
Break 16.00
Finish 16.30
Finish 18.30
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Introduction and experience sharing

• Experience in leading Risk Management and Project
  Management workshops at Nissan, Microsoft across
  Europe, Cisco, Coca-Cola, SUEZ
• Teaching Project and Risk Management at INSEAD,
  MBA EM Lyon, Milano Catholic University
• Having implemented SAP projects European-wide at
  Procter Gamble and rolled-out in North America

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Networking and experience sharing

• Further to the questionnaire you filled in
• What is your current position ?
• Which key project are you currently working on ?
• In these projects, what are, according to you,
  the Key Success Factors ?
• What kind of barriers have you identified ?
• What are the reasons for potential failures you
  have identified ?

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Project andProject Risk Management

• Project
• Project Risk
• Project Success Failures
• Risk Processes
• Risk Management
• Risk Management Planning

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Overview
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What Is A Project?

• According to you
• What is a project ?

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What Is A Project?

• A project is a temporary endeavor undertaken to
  create a unique product, service or result
• Source Project Management Institute (PMI)

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What Is A Project?

• A project is a temporary endeavor undertaken to
  create a unique product, service or result
• A project balances business financial benefits
  against risk cost
• Source Project Management Institute (PMI)

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What is sound Project Management ?

• Project management is the art to run and
  coordinate human and material resources
• All along project life cycle
• Using specific techniques
• To meet objectives of time, cost quality and
  aiming thus at total customer satisfaction

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What is sound Project Management ?

• Are we performing well?

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What is sound Project Management ?

• Are we performing well?

Scope
Scope
Scope
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Characteristics of a Project

• Clearly defined and agreed deliverables
• Set of activities performed once
• Planned stages reflecting milestones
• Active Risk management
• Approved and fixed budget
• Team assembled for the purpose
• Clearly defined Benefits to be delivered
• Clearly identified Pitfalls

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Project Risk

• Risk is a measure of a project's inability to
  achieve its objectives
• It comprises two components
• the probability of failing to achieve particular
  objectives
• the consequences of failing to achieve those
  objectives

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Project Success and Failures

• The factors influencing the outcome

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Reasons for project failures (Source Gartner
2005)
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Project Success

• A project is successful when
• It is completed according to scope and schedule
• The costs do not exceed the project budget
• The solution fits with the needs
• Aligns with Business Strategy
• Meets Customer Business Requirements
• Realizes the Business Case
• Ensures Organizational Readiness
• Although there are varying degrees of failure, a
  project fails if any of the above criteria are
  not met

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Critical Success Factors

• Formal and smart objectives needs clearly
  defined and signed off
• A stable project scope
• Identified risks and mitigation plan
• Sponsorship and empowerment from management
• Adequate human resources, budget and logistics
• Efficient business leader-project leader
  co-management
• Strong project methodology, clear and common
  approach
• Rigorous acceptance tests
• Continuous communication detect risk and alert
  system (problems are getting worse with time !)
• Change impact has been identified and taken care
  of

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Be SMARTon Objectives

• S PECIFIC
• M EASURABLE
• A GREED
• R EALISTIC
• T IME BOUND

SMART !
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Risk Management

• Risk management is the practice of controlling
  risk, this process includes
• Identifying and tracking risk areas
• Developing Risk avoidance plan
• Developing Risk mitigation plans
• Monitoring risks i.e. performing risk assessments
  to determine how risks have changed

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Risk Management

• Effective Risk Management is an on going process
• Effective risk management is a critical
  component of any winning management strategy in
  the market
• If properly designed, effective risk management
  allows an organization to actually take on some
  additional risks, provided they are carefully
  managed and balanced with extra-value

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Risk Management Process
3. Qualitative Risk Analysis
2. Risk Identification
1. Risk Management Planning
4. Quantitative Risk Analysis
Risk Management Process
6. Risk Monitoring and Control
5. Risk Avoidance Planning
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The IPECC Process Groups based on PMI
Process Groups
Initiating
Planning
Executing
Controlling
Closing
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The IPECC Process Groups Sequence
The process groups help to manage the project
lifecycle
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Initiating Projects
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Project Initiation System View
Input

• Objectives
• Description of project deliverables
• Information/learning from prior projects
• Identification of key users and stakeholders

Output
End Results

• Project proposal
• Preliminary Project
• Scope Statement
• Risk Management Plan
• Rough cost/benefits
• assessment
• Assumptions/constraints

• Go/No go review with Management
• Formal agreement
• to go
• Budget released or CER approved
• Project team appointed

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Project Initiation

• Getting started
• Defining rough scope and objectives
• Checking alignment with overall strategy and
  organisation or department priorities
• Designing a statement of work
• Identifying all key players and stakeholders

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Project Initiation

• At Macro-level i.e. roughly
• Assess feasibility based on clients requirements
• Prepare a rough schedule and preliminary scope
• Prepare a first Risk Management Planning
• Run a rough Cost Benefit

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Defining Preliminary Scope Statement

• An important step in the Initiation phase is to
  define the Scope of the project
• In the methodology you will find the terms SOW
  i.e. Statement Of Work

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Scope Statement Tip

• The Scope
• Defines the project boundaries
• What is IN and what is OUT
• Remember to be SMART

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Define Scope Carefully

• How many modules?
• How many legacy systems ?
• How much legacy data conversion ?
• How many systems to interfaces ?

Pan European ERP Project
What you don't know hurts you!
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Project Proposal Go or No Go ?

• The Project Proposal is submitted to Management
  for approval
• The end result is
• a Go or No Go

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Exercise on Risk Identification Reasons for
failure

• Work in teams
• Subject Replacement of Mechanized Letter
  Sorting Systems in Hong Kong
• Identify Risk Areas and link them with potential
  reason for failures
• Prepare the exercise in team (30 min)
• Elect a presenter (s) to feedback to the main
  group (10 min. max)

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Risk Management Planning

• Within the Project Management methodology, we
  will now focus on Risk Management Planning
• In the context of Solystic, we start from T0 i.e.
  at the beginning of the Execution phase

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Risk Management Lifecycle
Stage Initiation
Project Initiation
Throughout Stage
3
Identification Documentation
1
2
6
7
4
Establish Strategy
Initiate Risk Log
Tracking Reporting
Closing
Assignment Review
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Analysis Mitigation
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Risk Management Planning

• The purpose of Risk Management is to assure that
  the risks to the success of the project are
  identified and avoidance and mitigation plans are
  developed
• The Risk Management Plan includes
• Risk Identification Assessment
• Risk Avoidance Plan
• Risk Mitigation Plan execution
• Monitoring Risk Assessments

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Risk Management Planning

• The 5 fundamental questions to be
  asked/addressed in both Project AND Risk
  Management Planning are
• WHAT / WHY?
• HOW?
• WHO?
• WHEN?
• HOW MUCH?

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Inputs to Risk Management Planning

• Project Proposal
• Organizational Policies
• Analysis of Stakeholder Tolerances
• Planning Meetings and Agenda

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Outputs of Risk Management Planning

• Risk Management Plan
• Scope
• Schedule
• Deliverables
• Activities
• Team
• Cost

RISK
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Risk Identification

• Risk Identification
• Risk Categories
• Risk Statements

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Inputs for Risk Identification

• Project and Risk Management plans
• Performance/Quality issues
• Technical issues
• Organizational environment
• Business environment
• Financial constraints
• Regulatory issues
• Historical information

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Techniques

• Interviews
• Brainstorming
• Programmatic Dependency Analysis
• SWOT Analysis
• Nominal Group Technique
• Pert Estimating
• Checklists

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Programmatic Dependency Analysis
QA / QC
Upper Management
Project Requestor/ End-User
Project Manager
Vendors/ Contractors
Legal
Marketing
R D
Team
Production
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Risk Identification Outputs

• Risk Statements
• Sources of Risk
• Risk Situation
• Risk Description
• Risk Triggers/Events

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Stating a Risk
Risk
Impact
Situation

• Describe cause and effect relationship
• Understand the nature of impact
• Consider the audience
• Avoid using might, may, or could
• Consider multiple effects
• Do not quantify/qualify severity of Risk

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Risk Categories

• Business Imperative
• Technical
• External environment
• Environmental
• Organizational
• Regulatory
• Project Structure and Management
• People

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Important Project Risks
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Linking Risk Management and Project Planning

• IPECC
• Risk Focus Areas

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Risk Management PM Methodology

• A solid Risk Management needs to be fully
  integrated into the Project Life Cycle
• Link the different steps in Managing your Risks
  to the IPECC stages

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Linking Risk with IPECC stages

• Initiating stage Risk focus areas
• Stakeholders, especially customers, expectations
• as per TC
• Feasibility of technical expected performance
  objectives
• Assessment on rough cost vs. benefit study
• Feasibility to meet final deadline
• and deliver milestones on time
• Reaction of competition on prices technology

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Linking Risk with IPECC stages

• Planning stage Risk focus areas
• Assessment of the feasibility of your
  plan/schedule
• Assessment of different alternative scenarios
• Check on regulatory constraints or
• deregulation opportunities
• Likelihood of total cost of your plan
• Likelihood of getting or not getting the required
  resources (people technology)

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Linking Risk with IPECC stages

• Executing stage Risk focus areas
• Identification of remaining execution risks
• Assessment of impact from change in the Plan
• during Execution
• Overspending vs. original cost budget estimates
• in the course of the Execution

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Linking Risk with IPECC stages

• Controlling stage Risk focus areas
• Assessment of potential problems in technical
  solution prior to Site Acceptance Test
• Time slippage in in the course of Controlling
  stage
• and impact on final completion deadline
• Diagnose any difficulty or unrealistic
  commitment leading for change in the original
  Plan. Better act now than in the Closing stage

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Linking Risk with IPECC stages

• Closing stage Risk focus areas
• Feasibility of final delivery schedule
• Feasibility in fulfilling Key Performance
  Indicators expected by the client
• Likelihood of fast response if emerging
  difficulty in the Site Acceptance Test and final
  delivery
• Reliability of Site Acceptance Test in reflecting
  the on going reality
• Assessment of potential need for future
  liabilities and post installation support to the
  client
• Reliability in assessment of final profit
  delivered in the overall project taking the full
  cost picture

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Exercise on Risk Management Planning

• Work in teams
• Subject iLSM supply to Royal Mail and/or Flats
  Automation Program Phase II
• Identify - Risk Output
• - Risk Categories
• - Cause and effect relationship
• Prepare the exercise in team (30 min)
• Elect a presenter (s) to feedback to the main
  group (10 min. max)

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Risk Analysis

• Qualitative and Quantitative Risk Analysis
• Risk Scoring
• Risk Register
• Risk Profile
• Decision Matrix

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Estimating Risk Probability
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Severity of Impact
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Risk Impact

• Critical an event that, if it occurred, would
  cause program failure (inability to achieve
  minimum acceptable requirements).
• Serious an event that, if it occurred, would
  cause major cost and schedule increases.
  Secondary requirements may not be achieved.
• Moderate an event that, if it occurred, would
  cause moderate cost and schedule increases, but
  important requirements would still be met.
• Minor an event that, if it occurred, would cause
  only a small cost and schedule increase.
  Requirements would still be achieved.
• Negligible an event that, if it occurred, would
  have no effect on program.

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Inputs for Qualitative Risk Analysis
For Characterizing Probability
For Characterizing Severity

• Estimates from individual contributors
• Project plans
• Lessons-learned files

• Range estimating for cost
• PERT estimating
• Resource constraints
• Complexity of the project

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Decision Matrix
PROBABILITY
High
Medium
Low
Catastrophic
High
SEVERITY
Medium
Low
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Decision Matrix Solystic perspective
PROBABILITY
High
Medium
Low
Catastrophic
Direct impact on Customer contract e.g Site
Acceptance Test issue
High
SEVERITY
Technical Risk with unlikely solution e.g.
Validation for roll-out
Medium
Technical Risk with solution e.g. Mock-up Design
Low
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What Can Be Measured?
Quantity how many?
Quality how well?
Cost how much?
Time how long?
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Risk Assessment

• In terms of Impact (what is the potential for
  harm) and Probability (how likely is it to occur)

High
IMPACT
Medium
Low
Low
Medium
High
PROBABILITY
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Risk Scoring
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Exercise on Risk Analysis

• Work in teams
• Subject iLSM supply to Royal Mail and/or Flats
  Automation Program Phase II
• Run a full Risk analysis, by Risk category
• - Assess Probability
• - Assess Severity
• - Prepare a decision matrix
• Prepare the exercise in team
• (40 min)
• Elect a presenter (s) to feedback to the main
  group

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Reminder on Project Planning Link with Risk
Management

• WBS
• OBS
• RACI Matrix

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Risk Management Project Planning

• A solid Risk Management cannot stand alone
• But needs to be part of an integrated Project
  Management methodology

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Planning tasks using Work Breakdown Structure
tool
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Work Breakdown Structure WBS

• Based on the agreed scope
• A method to decompose the tasks down to the level
  of execution

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Work Breakdown Structure

• The Work Breakdown Structure (WBS) is a way to
  graphically present the project using
  flowcharting
• The WBS represents the project in terms of the
  hierarchy of tasks and deliverables it will
  produce
• The WBS starts with a single box at the top which
  represents the whole project

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Decomposition

• The project is then broken down into its
  components with lower level boxes
• Level 1 Project Name
• Level 2 Key Deliverables or Work Packages
• Level 3 Tasks
• Level 4 Subtasks

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Work Breakdown Structure WBS
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Guidelines to build a WBS

• Start from the agreed Scope
• Start with a heading box at Level 1 indicating
  the Project Name
• Identify the major deliverables which will be
  form the basis of the Level 2 i.e. Key
  Deliverables or Work Package

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Guidelines to build a WBS

• Drill down your Scope design vertically for each
  Key Deliverable to a Level 3 i.e. Tasks level
• If necessary, drill further down at a Level 4
  i.e. Subtasks level, until all the subtasks can
  be costed and scheduled

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WBS Types

• There are many types of WBS, including
• phase organized
• component oriented
• functional
• contractual

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WBS Example (Phased)
Level 1
Make Dinner
Level 2
Prepare Food
Wine
Cook Food
Lay Table
Serve Dinner
Select Wines
Level 3
Prepare
Cook
Serve
Starter
Starter
Starter
Open bottles
Prepare Main
Cook
Serve Main
Course
Main Course
Course
Prepare
Serve
Dessert
Dessert
Level 4
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WBS Example (Component)
 
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WBS Example (Functional) en annexe
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Planning organisation structure Organisation
Breakdown Structure tool
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Organisation Breakdown Structure (OBS)

• The Organisation Breakdown Structure
• A functionally oriented structure indicating
  organizational relationships and used as the
  framework for the assignment of work
  responsibilities
• A project organization arranged so as to relate
  Key Deliverables or Work Packages to
  organizational units

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Guidelines to build an OBS

• Start from your WBS chart
• Assign names at the Level 2 i.e. Key Deliverables
  or Work Packages level
• Assign names further down at the Tasks level and
  at the Subtasks level

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RACI Matrix
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Assigning responsibility and accountability

• Roles and responsibilities assignment to
• Project team members
• Users
• Stakeholders
• Sponsors

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Project Management Governance rules

• It is critical to have clearly identified
• Who will be responsible for what
• Who will be accountable for what

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The RACI Matrix A tool for clear roles
assignment

• R who is responsible for doing the task
• A who is accountable for approving the task
• C who should be consulted about the task
• I who should be informed about the task

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The RACI Matrix An illustration

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Risk Avoidance and Mitigation

• Proactive and Reactive Risk Response Planning
• Risk Register
• Risk Aversion
• Risk Symptoms
• Contingency Planning

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Risk Retention

• The organization expects that taking the risk,
  value will exceed costs
• The exposure ("potential loss") is too small
• The odds of success are more than 50-50
• There appears to be a small number of
  alternatives
• A contingency plan for recovery is in place

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Expected Value

• EXPECTED VALUE REWARD x PROBABILITY OF SUCCESS
  LOSS x PROBABILITY OF FAILURE

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Risk Response Planning

• Developing options and determining actions to
  enhance opportunities and reduce threats to the
  project objectives

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Risk Response Plans Include

• The strategy applied to address the Risk
• Specific steps to be carried out
• Schedule for when these steps will be carried out
• Assignment of responsibilities
• Additional resources or outside assistance, if
  required

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Proactive Risk Reduction

• Avoidance
• When feasible, this approach consists in taking
  action step ahead of the identified risk to have
  it eliminated

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Other Risk Reduction approach

• Mitigation
• Reduce Probability of Occurrence
• And
• Reduce Severity of Impact

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Risk Symptoms
A trigger should be

• Objectiveclear to everyone
• Appropriaterelated to key causes of Risk
• Timelyprovide clear early warning that steps
  need to taken

• Document/distribute risk response plans
• Inform parties if its necessary to employ
  reactive strategies
• Add cost of strategies to project cost

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An existing application at Solystic the NSC
Program

• Under the NSC program for Belgium
• (New Sorting Centers)
• An effective Risk Management methodology has been
  set up from beginning to completion
• Very interesting learning can be drawn from this
  experience
• The Risk Management methodology used for NSC is a
  positive application, with room for flexibility
  in adaptation to larger project

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Exercise on Risk Analysis

• Work in teams
• Subject iLSM supply to Royal Mail and/or Flats
  Automation Program Phase II
• Design a Risk management log based on the NSC
  methodology
• Feel free, in each team, to simplify the template
• Keeping the items your team regards as critical
• Prepare the exercise in team
• (45 min)
• Elect a presenter (s) to feedback to the main
  group

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Risk Monitoring and Control

• Risk Watch List
• Risk Response Plan Execution
• Effectiveness Assessment
• Post-mortem Lessons Learned
• Triggers for Contingency Activation

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Risk Monitoring and Control

• Keeping track of identified risks, monitoring
  residual risks, and identifying new risks

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Why Reassess Risks?

• Changes in personnel
• Changes in the project environment
  (organizational climate)
• Changes in customer requirements
• Technological developments
• Business factor fluctuations
• Corrections

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Risk Watch List
Responsible Party ______ ______ ______ ______ ____
__
Current Status _______ _______ _______ _______ ___
____
Previous Priority ______ ______ ______ ______ ____
__
Risk ________ ________ ________ ________ ________
Priority 1 2 3 4 5
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Before Leaving the Project

• Did the tasks performed produce the desired
  deliverable on time and within the allotted
  budget?
• Was this the best (i.e., most efficient,
  effective and/or least expensive) way to produce
  that deliverable?
• Did the deliverable fulfill the needs for which
  it was designed? (And, if not, why not?)
• What lessons did we learn?

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Risk Management Implementation

• Implementation Strategy and Approach
• Roles and Responsibilities
• Risk Management Maturity Stages

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Maturity Stages
Strategy
Culture
Policy
Repeatable
Ad Hoc
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Implementation Approach

• Obtain Senior Management support for the
  initiative
• Develop a Risk Profile
• Integrate Risk Management into Existing Project
  Management Processes
• Practice Integrated Risk Management
• Enable Continuous Risk Management Learning

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Risk Profile
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Roles

• Risk Owner
• Risk Action Manager

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Risk Management Tips and Tricks

• Project Risk Wheel
• Supporting Tools and Templates
• Best Practices

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Risk Wheel

• Formalized project charter and roll-out planning
• Procedures for progress tracking and scope
  management
• Benefits Realization Tracking
• Communications program
• Knowledge Transfer to Competence Center

Clear Objectives

• Use of accelerators and productivity tools
• Backfilling
• System testing standards procedures
• Post go-live support
• Clear roles responsibilities

Minimal Business Disruption
Joint IT Business Ownership

• Involve global process owners
• Involve business representatives
• Executive alignment
• Communication to the organization

• Address the needs of different stakeholder groups
  
• Assess change impact
• on current organization
• Early end-user involvement
• Job specific training
• HR process alignment

Ongoing ChangeManagement
Flexible Approach

• Multicultural, experienced teams
• Clear procedures and policies
• Adherence to industry standards
• Alignment Corporate
• strategy with Regional/Local
• requirements

Capable Project Team
Strong Project Management

• Tracking of progress against plan
• Effective methodologies and tools
• Quality, risk and issue management
• Governance model / decision making process
• Validation after each phase of the project

• Experienced implementation partners
• High standards for team
• Right balance team members
• Key project roles full-time
• Team on-boarding and training programs
• Team incentives

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Tools and Templates

• Brainstorming
• SWOT Analysis
• Sample Risk List
• Risk Template
• PERT Estimating
• Prioritized Risk Ranking
• Risk Response Form
• Program Risk Management Evaluation
• Procedure Risk Management
• Procedure Risk Prioritization

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Best Practice

• Set Goals for Risk Management Maturity
• Promote Risk Management Culture and Attitude
• Set up a Risk Management Function
• Track Risk Management Performance
• Provide Risk Management Training
• Adopt unified Approaches, Tools and Metrics

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Cost effectiveness of Risk Management

• Cost of Risk Response Plans
• Probability of Attaining Project Objectives
• Cost Effectiveness Assessment

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Cost of Risk Response

• Acquisition cost
• Development cost
• Testing cost
• Deployment cost
• Training cost
• Communication cost
• Monitoring cost
• Support cost

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Benefits

• Achievement of Objectives
• Anticipation of problems
• Reduced problem solving/trouble shooting
• Learning from errors of the past
• Strengthening of Project Management
• Increased accountability
• Improved overall Management capability
• Higher value creation

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Budget Control
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Budget Baseline (S-Curve)
The budgeted cost of the work scheduled is known
as the Planned Value or PV for short
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Budget Burndown Chart
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Cost Effectiveness

• Disproportionality Rule
• (cost of incidents and recovery)
• (cost of proactive risk response)

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Conclusion

• Dont forget that Risk Management is above all
  a search for further opportunities

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THANKS TO ALL OF YOU !