2.7.2 Risk-Handling Process
The risk-handling phase must be compatible with the
risk management plan and any additional guidance the PM provides. Paragraph 5.3 describes a
technique that concentrates on planning. A critical part planning involves
refining and selecting of the most appropriate handling options.
The IPTs that evaluate the handling options may use the following criteria
as a starting point for assessment:
- Can the option be feasibly implemented and still meet the user's
- What is the expected effectiveness of the handling option in reducing
program risk to an acceptable level?
- Is the option affordable in terms of dollars and other resources (e.g.,
use of critical materials, test facilities, etc.)?
- Is time available to develop and implement the option, and what effect
does that have on the overall program schedule?
- What effect does the option have on the system's technical
Risk-handling options can include risk control, risk
avoidance, risk assumption, and risk transfer. Although the control
risk-handling option is commonly used in defense programs, it should not
automatically be chosen. All four options should be evaluated and the best one
chosen for a given risk issue.
Risk control does not attempt to
eliminate the source of the risk but seeks to reduce or mitigate the risks. It
monitors and manages the risk in a manner that reduces the
probability/likelihood and/or consequence/impact of its occurrence or
minimizes the risk's effect on the program. This option may add to the cost of
a program; however, the selected approach should provide an optional risk
among the candidate approaches of risk reduction, cost effectiveness, and
schedule impact. A sampling is listed below of the types of risk control
actions available to the PMO. Paragraph
5.6.2 discusses them in more detail.
- Multiple Development Efforts.
Create competing systems in parallel that meet the same performance
- Alternative Design. Create a backup
design option that uses a lower risk approach.
- Trade Studies. Arrive at a balance
of engineering requirements in the design of a system.
- Early Prototyping. Build and test
prototypes early in the system development.
- Incremental Development. Design
with the intent of upgrading system parts in the future.
- Technology Maturation Efforts.
Normally, technology maturation is used when the desired technology will
replace an existing technology which is available for use in the
- Robust Design. This approach, while
it could be more costly, uses advanced design and manufacturing techniques
that promote quality through design.
- Reviews, Walk throughs, and Inspections. These three actions can be used to reduce the
probability/likelihood and potential consequences/impacts of risks through
timely assessment of actual or planned events.
- Design of Experiments. This
engineering tool identifies critical design factors that are sensitive,
therefore potentially high risk, to achieve a particular user
- Open Systems. Carefully selected
commercial specifications and standards whose use can result in lower
- Use of Standard Items/Software Reuse. Use of existing and proven hardware and software, where
applicable, can substantially reduce risks.
- Two-Phase Development.
Incorporation of formal risk reduction into System Development and
Demonstration (SDD). The first part of SDD is System Integration (SI), where
prototypes are developed and tested. In the second part, System
Demonstration (SD), Engineering Development Models (EDMs) are developed and
- Use of Mock-ups. The use of
mock-ups, especially man-machine interface mock-ups, can be used to conduct
early exploration of design options.
- Modeling/Simulation. Modeling and
simulation can be used to investigate various design options and system
- Key Parameter Control Boards. The
practice of establishing a control board for a parameter may be appropriate
when a particular feature (such as system weight) is crucial to achieving
the overall program requirements.
- Manufacturing Screening. For
programs in SDD, various manufacturing screens (including environmental
stress screening (ESS)) can be incorporated into test article production and
low rate initial production (LRIP) to identify deficient manufacturing
processes. ESS is a manufacturing process for stimulating parts and
workmanship defects in electronic assemblies and units.
As you can see, there are numerous means that can be used to actively control risks.
involves a change in the concept, requirements, specifications,
and/or practices that reduce risk to an acceptable level. Simply stated,
it eliminates the sources of high or possibly medium risk and replaces them
with a lower risk solution and may be supported by a cost/benefit
analysis. Generally, this method may be done in parallel with the up-front
requirements analysis, supported by cost/requirement trade studies, which can include
cost-as-an-independent-variable (CAIV) trades.
Risk Assumption. Risk assumption is an
acknowledgment of the existence of a particular risk situation and a conscious
decision to accept the associated level of risk, without engaging in any
special efforts to control it. However, a general cost and schedule reserve
may be set aside to deal with any problems that may occur as a result of
various risk assumption decisions. This method recognizes that not all
identified program risks warrant special handling; as such, it is most suited
for those situations that have been classified as low risk. The key to
successful risk assumption is twofold:
- Identify the resources (time, money, people, etc.) needed to overcome a
risk if it materializes. This includes identifying the specific management
actions (such as retesting, additional time for further design activities)
that may occur.
- Ensure that necessary administrative actions are taken to identify a
management reserve to accomplish those management actions.
Risk-handling options have broad cost implications. The magnitude of these costs are circumstance-dependent. The approval and funding of handling options should be part of the process that establishes the program cost and performance goals. This should normally be done by the Program-Level Risk Management IPT or Risk Management Board. The selected handling option should be included in the program's acquisition strategy.
Once the acquisition strategy includes risk-handling approaches, the PMO can derive the schedule and identify cost, schedule, and performance, impacts to the basic program.
This action may reallocate risk during the concept development and design
processes from one part of the system to another, thereby reducing the overall
system risk, or re-distributing risks between the Government and the prime
contractor or within Government agencies; or between members of the contractor
team. It is an integral part of the functional analysis process. Risk transfer
is a form of risk sharing and not risk abrogation on the part of the
Government, and it may influence cost objectives. An example is the transfer
of a function from hardware implementation to software implementation or vice
versa. The effectiveness of risk transfer depends on the use of successful
system design techniques. Modularity and functional partitioning are two
design techniques that support risk transfer. In some cases, risk transfer may
concentrate risk areas in one area of the design. This allows management to
focus attention and resources on that area.