Risk Management in Six Sigma – Identify, Assess, Plan, Monitor and Control Risk

Risk has two key elements

  • An uncertainty
  • An impact in terms of potential loss (if it happens).

Risk management is a continuous process. Risk management process involves following key steps: Identify risks Assess each risk Rank all risks according to their severity Plan for risk mitigation and contingency on the basis of outcome of step 3 Monitor each risk Control deviations (if any) from risk mitigation plan.

Identify

Risk identification is carried out at the beginning of every project. It is revisited during each project review on an ongoing basis for all residual risks and new risks. The identification of risk is highly project specific.

Any project has three key dimensions:

  • Cost
  • Specifications
  • Time

Assess

Risk assessment involves determining

  • Uncertainty
  • Impact
  • First risk indicator.

Uncertainty

The uncertainty is the probability of occurrence of the risk. This probability can be determined either qualitatively or quantitatively.

Qualitative Measure
Recommended to use 4 categories (to avoid middle point bias) such as 1-low, 2-medium, 3-high, and 4-very high. The quantitative measure is a normal probability scale measure from 0 to 1.

Impact

The impact can be determined in terms of its severity, preferably a value from 1 (lowest) to 4 (highest).

First Risk Indicator

The first risk indicator is earliest condition or event that signals risk turning in to a problem.

Plan

  • A mitigation approach is developed for each risk, to either avoid or reduce the impact of risk.
  • The responsibility to implement the mitigation strategy is assigned to a team member along with a target date.
  • The actual execution of the mitigation plan is called risk resolution.
  • A contingency plan is also developed to handle the situation when a risk turns in to a problem.

Monitor

It involves regular tracking of risk resolution process and first risk indicator. The deviations in the risk resolution process are recorded.

Control

Strategy to reduce deviation in the risk resolution process is developed and implemented.

Minimum Risk Documentation Format

Unique ID Unique Risk Identification Code
Classification Category according to the taxonomy
Identification Date Date on which the risk was identified
Description Clear risk definition in  “condition” and “consequence” format
Probability Qualitative or quantitative probability of occurrence
Impact Impact in terms of severity
Exposure (Probability X impact) Product of probability and Impact
First Risk Indicator Condition or event that indicates a risk turning into a problem
Mitigation Approach Approaches to avoid or reduce the impact of risk
Assigned To Person(s) responsible for risk resolution
Target Date Date by which resolution must be achieved
Contigency Plan Detailed plan to handle the situation when a risk turns into a problem.
Status Active/Resolved/Expired
Tracking Risk resolution process tracking information

Six Sigma Techniques – Internal Benchmarking, Functional Benchmarking, Competitive benchmarking, Brainstorming and Pareto Chart

Benchmarking is a standard by which something can be measured or judged. They set a benchmark by marking a point of known vertical elevation

Three Types Of Benchmarking

  • Internal Benchmarking
  • functional Benchmarking
  • Competitive benchmarking

Internal Benchmarking

It compares (critical-to-business) processes or products across the organization on key critical-to-quality parameters such as turn-around-time or cost.

Functional Benchmarking

It compares similar functions or processes with industry leaders in that area.

Competitive Benchmarking

It focuses on direct competitors in terms of their products, services, processes, and customers.

Brainstorming

Brainstorming is a technique to systematically generate ideas usually to handle a challenging situation, from a group of people by nurturing free-thinking. Some of the right challenges to address using brainstorming are problem solving, new design or new product development, and research & development.

Pareto Chart

A Pareto Chart depicts the frequency with which certain events occur. It is a bar graph where each frequency (or frequency range) is shown in a descending order of importance of data, from left to right. This is based on the Pareto Principle, also called 80-20 rule or rule of vital few.

Six Sigma Techniques – SIPOC, Operational Definition

Methods, Tools & Techniques are vital to the success of any Six Sigma project whether DFSS or DMAIC. Every stage of a Six Sigma project recipe requires a mix of these methods, tools & techniques.

Let us briefly review what do we mean by these keywords.

Method is a way of doing something in a systematic way. Here word “systematic” implies an orderly logical sequence of steps or tasks. A tool provides a mechanical or mental advantage in accomplishing a task. A technique is a specific approach to efficiently accomplish a task in a manner that may not be immediately obvious.

SIPOC

SIPOC is a high-level picture of the process that depicts how the given process is servicing the customer. Acronym for Suppliers-Inputs-Process-Outputs Customers.

Operational Definition

Operational definition is the first step towards effective management. It helps us build a clear understanding of a concept phenomenon so that it can unambiguously measured.

Working Principles of Six Sigma – DMAIC, DFSS and DFSS-IDOV

DMAIC

Scenario (a) Requires the Use of DMAIC for process improvement

Define: Process goals in terms of key critical parameters (i.e. critical to quality or critical to production) on the basis of customer requirements or Voice Of Customer (VOC)

Measure: Measure the current process performance in context of goals.

Analyze: Analyze the current scenario in terms of causes of variations and defects DMAIC

Improve: Improve the process by systematically reducing variation and eliminating defects

Control: Control future performance of the process

DFSS

Scenario (b) focuses on process design using Design For Six Sigma (DFSS) approach. DFSS Approach requires IDOV method

DFSS-IDOV

  • Identify: Process goals in terms of critical parameters, industry & competitor benchmarks, VOC
  • Design: Involves enumeration of potential solutions and selection of the best
  • Optimize:Performance by using advanced statistical modeling and simulation techniques and design refinements
  • Validate: Design works in accordance to the process goals.

Six Sigma Roles – Champions, Green Belts, Black Belts and Master Black Belts

Champions

Usually high up, who sponsors a Six Sigma project through the business. The first few Six Sigma projects may encounter some technical, political, or institutional obstacles in the business environment. It’s critical that someone is there to help the project and the project members overcome any obstacles and resistance.

Green Belts

This is a title for someone who is involved with a Six Sigma project “part-time.” They have a job with normal duties, added involvement in a Six Sigma project.

Black Belts

Does Six Sigma “full time.” Their entire work effort is focused on finding defects, wherever they might be, and eliminating them from the business processes. They move from department to department, heading Six Sigma projects.

Master Black Belts

This indicates the highest level of skill and training, sometimes designates an outside consultant who specializes in Six Sigma process improvements. These individuals provide training to others involved in process improvement develop an organizational culture that supports the implementation of Six Sigma.

Basics Of Sixsigma – Its Tools and Techniques

  • Six Sigma is about PROCESS IMPROVEMENT, emphasizes on the achieving the six-sigma performance and the use of quantitative techniques to measure the actual performance of process
  • Six Sigma is a methodology to manage process variations causing defects, defined as unacceptable deviation managing from the mean or target; and to systematically work towards variation to eliminate defects
  • Six Sigma is usually related to the magic number of 3.4 defects per million opportunities
  • Obtains an efficiency of Process  to 99.9997%

Why 6 Sigma?

Six Sigma delivers

  • business excellence
  • improves profits
  • delights customers
  • higher customer satisfaction
  • superior profits by dramatically improving every process in an enterprise from financial to operational to production.

Why the Name Six sigma

  • The figure of six was arrived statistically by looking at the current average maturity of most business enterprises
  • Sigma is a statistical term that measures process deviation from process mean or target.
  • Mean is also referred to as average in common language

Six Sigma Terminologies

Six Sigma has some unique terminology associated with it

  1. Champions
  2. Green Belts
  3. Black Belts
  4. Master Black Belts
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