Risk Control: Program Manager’s Perspective
In last month’s article, we described the importance and benefits of performing risk analysis on the schedule, and as such, the cost of a program. This enables a Program Management team to foresee the best and worst case cost and schedule impacts that could occur if the risks are realized before they can be mitigated, and make data-driven decisions on where to invest program dollars on mitigation activities. This is most important on R&D and Development Programs with advanced technology that has not been proven for the intended mission, or production programs where advanced or automated production tooling and test equipment are being integrated into the production line. We’ve all worked these types of programs over the last three decades and successful execution of the programs relies on how well risk is controlled and mitigated.
For successful execution of these programs, it is a management imperative that risk management is integrated and correlated at every level of planning. Most program teams do a remarkable job of identifying the risks, establishing the likelihood and consequence of risk realization, and developing a rational mitigation plan for each risk using some standard risk management tool. That said, the consequences in terms of cost are rarely accounted for in the program budget, the effort to mitigate the risk is not funded in the budget baseline and a realistic assessment of the risk impact on schedule is not built into the Integrated Master Schedule (IMS). The end result is that risk management and control is performed as an independent effort, with the resources performing the tasks in their spare time. Moreover, since the risk mitigation activities are not linked or correlated with the Integrated Master Schedule and Baseline Budget, there is poor visibility into the overall progress and the current forecast of program cost and completion date at critical weekly, monthly or quarterly review intervals.
Below are some recommendations to improve the integration and correlation of risk into the program cost and schedule:
1. Prior to developing the integrated program plan, get with the customer and develop a strategy for managing risk, integrating mitigation into the program plan and funding the cost of mitigation or contingency activities.
2. Develop the risk register and mitigation plans. Take great care in quantifying the cost and duration of each mitigation task as well as the true reduction of likelihood and/or impact of completing the task.
3. Develop the IMS with the risk register in hand. Ensure that risk mitigation activities are tied to the appropriate tasks or work elements in the IMS and that significant thought is given to the task linkage, early start, likely start, early completion and late completion dates based on the status of each risk at the appropriate times. Consider the impact on suppliers and partners as well as how they can help reduce the risk. At the end of this exercise, reassess the risk register and add any new risks identified in IMS development.
4. Apply the costs and resources to the efforts in the IMS, and separately develop a contingency or mitigation budget applied to the risk mitigation efforts over and above management reserve. This has been proven as a successful method to gain visibility into risk management and account for the cost to perform mitigation, as well as track the impacts to the program IMS.
5. Using the appropriate tools (e.g. Barbecana’s Full Monte, Palisade’s @RISK), perform a risk analysis of the program prior to establishing the formal cost accounting. Repeat steps 2 through 5 until repeatable results are obtained.
6. Apply the appropriate management reserve based upon the guidelines for the type of program.
7. Work risk analysis and control into the program cost and schedule review operating rhythm monthly to ensure visibility, up-to-date knowledge of the impacts and identify opportunities to improve or take corrective action in the mitigation of each risk.
Intra Management Solutions specializes in the execution of this process on multiple platforms. If you need guidance, support or a team to come on site to assist in this process, please call or email us.