What is Risk Management?
In daily business, people face up with risk management every day. Sometimes risks can be avoided, sometimes accepted, but in most cases they must be managed.
In this post, I am going to introduce you some techniques commonly used to avoid or mitigate risks in industrial contexts.
According to Wikipedia:
“Risk Management is the identification, assessment, and prioritization of risks, followed by coordinated and economical application of resources to minimize, monitor and control the probability and/or impact of unfortunate events, or to maximize the realization of opportunities”
A risk can be assessed using two factors: impact and probability. Probability is the likelihood of an event occurring and the consequences, to which extent the project is affected by an event, are the impacts of risk. By combining the probability and impact, the Level of Risk can be determined.
Risk Management: how to avoid or mitigate risks?
- Simulation: by definition, probably the most used tool. Indeed, simulation offer a relatively cheap and safe solution where critical events can be assessed in a safe environment. Some examples are:
- Stress Analysis;
- Process Simulation;
- Discrete Event Simulation;
- Virtual Reality: this tool is becoming very popular among the Product Development community. It provides a high effective experience where it is possible to assess and therefore prevent risks associated to (but not limited to)
- Factory design and layout;
- Ergonomics assessment;
- Product design;
- Prototyping: the most popular technique is probably Additive Manufacturing. AM provides a relatively cheap solution to prevent risks associated to:
- Machining collisions;
- Concept selection;
- Product Design;
- Risk Register: according to ISO 73:2009 Risk management—Vocabulary, the risk register is a “record of information about identified risks”. A risk register is an essential Project Management tool, and if properly used, very powerful;
- Failure Mode and Effect Analysis (FMEA): typically used in Product Development, both at the Product Design and Manufacturing level. A FMEA is a prevention-based risk management tool that focuses the user or team on systematically:
- identifying and anticipating potential failures
- identifying potential causes of failures
- prioritizing failures
- taking action to reduce, mitigate, or eliminate failures
- Technology Readiness Level: a method of estimating technology maturity of Critical Technology Elements (CTE) of a program during the acquisition process. They are determined during a Technology Readiness Assessment (TRA) that examines program concepts, technology requirements, and demonstrated technology capabilities. TRL are based on a scale from 1 to 9 with 9 being the most mature technology. TRL has been in widespread use at NASA since the 1980’s where it was originally invented.
- Manufacturing Readiness Level (MRL): a measure developed by the United States Department of Defense (DOD) to assess the maturity of manufacturing readiness, similar to how technology readiness levels (TRL) are used for technology readiness. They can be used in general industry assessments, or for more specific application in assessing capabilities of possible suppliers.
In this post, a quick overview of some risk management tools has been provided. Each tool provides benefits and limitations, and the effectiveness strongly depends on choosing the right method for the right application.
Generally speaking, Risk Management implies the utilization of additional effort in terms of resources, time and cost at the early stage of a project, however it is strongly recommended to implement Risk Management in presence of high impact risks, with high rewards over the entire product life cycle.
Is your project associated to high risks?
You would like to manage risks properly, but don’t know how?
Accialini Training & Consulting can support you in this process!