Internal Information Services

Risk Management Working Group

Gay InfantiNorthrop Grumman

15 August 2006

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Agenda

• Review charter• Summarize recent activities and

accomplishments• Summarize recommended changes to EVMS

Application Guide to incorporate RM/EVM integration

• Summarize next steps and future plans• Discussion

3

Charter

• Develop and recommend policy, process guidance, and training to support the integration of risk management with earned value management. Work with the risk management community to achieve process integration.

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Recent Activities

• PMI-CPM Spring Conference• Working Group meetings with primary focus

on insertion of RM/EVM integrating guidance into NDIA EVMS Application Guide• Telecon on 5/12• Several rounds of document edits/comments via

email• Meeting on 8/4

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8/4 Meeting Participants

• Wayne Abba• Dick Coleman• John Driessnack• Gay Infanti• Meredith Murphy

• Susan Meyer• Craig Peterson• Susan Reed• Gary Robinson• Dennis White

Legend:

EVM Experts

RM Experts

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8/4 Meeting Results• Completed review of proposed changes to EVMS

Application Guide; submitted to EVMS Application Guide authors on 8/9

• Agreed to sponsor practice symposia at fall IPM Conference; submitted abstract/bios on 8/8 to reserve two, back-to-back PS slots

• Briefly discussed expected date for receipt of APM working group’s RM/EVM Interface Guide for review in September timeframe

• Discussed and, again, decided against developing a separate NDIA guide for RM/EVM Integration but still want to provide contract-level process guidance, share techniques and best practices for process integration

• Discussed potential next steps

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Major Change Recommendations – 1 of 3(EVMS Application Guide)

• Modify MR definition to include reserve for anticipated cost & schedule impacts based on overall risk assessment

• Insert new definitions associated with RM process (used PMI Risk SIG terminology)

• Add two new sub-sections to Sec 3, Acquisition Process and EVM (consider new section title)• Risk Management Process (brief explanation of process objectives

and figure 3-1 to illustrate the process)

• Risk Management and Earned Value Management Integration (brief overview of process integration and figure 3-2 to illustrate)

• Identify and reference risk to WBS elements in the planning phase to ensure adequate budget and schedule for risk handling (risk adjusted baselines)

• Assign responsibility for RM to the PM with support from a risk manager; list responsibilities

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Major Change Recommendations – 2 of 3

• Establish MR at appropriate levels based on risk tolerance

• Allocate budgets to PMB based on confidence levels that provide challenging but achievable targets and provide resources for risk handling activities

• Use EVM to monitor risk handling plans, uncover new risks/opportunities, identify adjustments to risk handling plans, i.e., corrective actions, and trigger updates to EAC

• Conduct program reviews where both EV and RM data are reviewed, variances discussed, and corrective actions are agreed upon to achieve program objectives

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Major Change Recommendations – 3 of 3

• Monitor and update the risk register throughout the program life cycle to provide a forecast of risks/opportunities and their potential cost/schedule impacts after risk handling plans are complete• Allocate MR for planning a risk handling activity resulting

from the identification of a new risk or risk whose consequence or impact has become elevated

• When issuing MR to plan new risk handling activities, use the EVM system’s formal change control process to ensure baseline integrity

• Reflect impacts in EAC when it becomes known that risk impacts will be realized

• Replan future work to recover excess budget resulting from opportunity capture; replenish MR

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Figure 3-1

CustomerRequirements & Concerns

(including Technical,Schedule, & Cost

Program Plan(including Schedule)

Risk ManagementTools & Methods

Define / PlanRisk

ManagementApproach

Identify Risks

Develop andImplement

Risk Handling Approaches

Assess &Prioritize

Risks

Track and ReportRisks

RiskManagement

Plan

Program PlanAdjustments

(including Schedule)

Risk Status Reports

RisksClosed

MitigatedRisks

Risk List /Register

INITIAL PHASEINITIAL PHASE ONGOING CYCLEONGOING CYCLE

Scope ChangeNew Risk

Risk Change

WatchlIst

Risk Mitigation/Contingency Plans

& Metrics

CustomerRequirements & Concerns

(including Technical,Schedule, & Cost

Program Plan(including Schedule)

Risk ManagementTools & Methods

Define / PlanRisk

ManagementApproach

Identify Risks

Develop andImplement

Risk Handling Approaches

Assess &Prioritize

Risks

Track and ReportRisks

RiskManagement

Plan

Program PlanAdjustments

(including Schedule)

Risk Status Reports

RisksClosed

MitigatedRisks

Risk List /Register

Risk List /Register

INITIAL PHASEINITIAL PHASE ONGOING CYCLEONGOING CYCLE

Scope ChangeNew Risk

Risk Change

WatchlIst

Risk Mitigation/Contingency Plans

& Metrics

Risk Mitigation/Contingency Plans

& Metrics

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Figure 3-2

Earned Value Management:

Risk Management:

Integrating Guidance:

DEFINE & ORGANIZE WORK

· PLAN PROGRAM· SCHEDULE · ESTABLISH PMB

· AUTHORIZE WORK· STATUS SCHEDULES· MEASURE PERFORMANCE· COMPUTE VARIANCES

· ANALYZE RESULTS· PLAN CORRECTIVE

ACTION· UPDATE EAC

· ESTABLISH MR· ISSUE TARGET

BUDGETS· AUTHORIZE

PLANNING

REVISIONS & CHANGE CONTROL

ASSIGNRESPONSIBILITY

EXECUTE RISKHANDLING PLANS

MONITOR &COMMUNICATE RISKS &

OPPORTUNITIES

PLAN RISKMANAGEMENTACTIVITIES

PERFORM RISKASSESSMENT

ID & ANALYZE RISK DETERMINE RISK

EXPOSURE

UPDATE RISK REGISTER

DEVELOP RISK HANDLING or RESPONSE PLANS

USE RISKS TO ESTABLISHSUITABLE MR

ENSURE MR SUFFICIENTTO HANDLE IMPACTS OF HIGH-PROBABILITY RISKS

USE EV TO MONITORPERFORMANCE OF RISKMITIGATION PLANS

ID NEWLY-DEVELOPING RISKS& OPPORTUNITIES

INCORPORATE RISKHANDLING PLANSINTO PROGRAMSCHEDULES &BUDGETS

INCORPORATEQUANTIFIED RISKIMPACTS INTO EAC

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Next Steps

• Based on John Driessnack’s suggestion, we’re making a request to DAU to dedicate an issue of Acquisition Review Quarterly to our topic

• Working group will contribute an overview, lead-in article

• Solicit contribution of a series of 7-8 other articles from individuals with integrating methods and best practices to share

• This effort would take approximately a year to complete

• We may also consider articles in other publications, e.g., the NDIA publication, the Risk SIG’s publication, and the Measurable News

• Will review OSD Risk Management Guide, which is reported to be pending release

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Future Plans

• Determine training approach for RM/EVM integration and develop action plan

• Continue IPM advocacy role• Foster established working relationships with

APM, RM SIG, and others• Continue to provide a forum for discussion

and discovery of new ideas• Promote new ideas that further or improve

IPM to NDIA PMSC to obtain action or sponsorship