Lean Six Sigma Green Belt – Six Sigma Analyze Phase Part 3

6. 6. Risk Based Analysis Introduction

Risk analysis, right? Failure mode, effect analysis, effects and analysis. We are going to look into all that now. But first let us get into the preliminaries once again, even before we get started with what is a risk, here is my question to you guys. What is the difference between risk and an issue? Risk and an issue. What is the difference between these two? You’ll know that risk is an uncertain event which has a positive or negative outcome. And risk is always going to happen in the future.

There is an element of uncertainty attached to each and every risk. If I say that this is your present now, risks would always happen in future. An issue, what is an issue? Issue is something which has already happened in the past or is 100% certain to occur. Risk has a question mark attached to it.

It is an uncertain event. Issue is something which has already occurred or which is 100% certain to occur. As we know, risk can have a positive or a negative impact. Risk can be positive. What does that mean? It can bring an opportunity for you. Risk can be negative.

What does that mean? It can be a threat to you or to your project. And there are various ways of managing these positive and negative risks, right? Your project management PMI, project Management Institute says that there is a certification called PMP. And here are the risk strategies which we have for the negative risks.

First thing, try to avoid the risk. Negative risk strategy. If you cannot avoid it, try to mitigate the risk. If you cannot mitigate the risk, then try to transfer the risk. Your insurance companies basically, if you cannot transfer the risk, then try to accept it. There’s no other go, right? Think about this example. Your wife has asked you to go and get some vegetables from the supermarket.

But there is a risk that it might rain heavily. It’s very cloudy and it might rain heavily. So what will you say? The first thing that you would say is, hey, honey, I’ll go after some time because it seems like it’s going to rain heavily.

Your wife says, no, nothing doing. I asked you to go yesterday to get the vegetables from the supermarket and you have postponed it. Now is the time that I punish you. Now you have to go bring the vegetables right away. You’ll say, okay, what else can I do? Let me go bring the vegetables. You’ll carry an umbrella or you put on a raincoat and go to the supermarket. So you’re mitigating, right? You’re trying to reduce the impact of you getting drenched in the rain.

Or you might say, I sit at home, you go bring the vegetables. You might say this to your wife, right? You transfer the risk onto your wife. The moment you say that your wife is going to kick you out of the home, be ready to accept the risk, right? And if your neighbor sees you and sees, hey, it’s raining heavily, why are you standing outside? You’ll say, I enjoy rain, so I’m enjoying these are a few of the negative risk strategies. You also have positive risk strategies, right? You try to exploit risk, or you try to enhance it, or you try to share a risk, or once again, you accept it. So the first thing is exploit.

Suppose you are constructing a villa. Say you’re constructing ten villas, but customer of a particular villa comes to you and says, hey, if you deliver me the house two months in advance, I’m going to pay you $3 million. Wow, that sounds amazing, isn’t it? I wish I got such an opportunity. Yeah. So if your customer says that it is an opportunity, all of a sudden you got that it is an uncertain event. What you would do is you will ask all your labors workers who are working on other villas to come and work on this particular villa because you want to deliver it two months in advance.

You want those $3 million. You bring in all the sophisticated latest equipment to complete the villa two months in advance. You ask your labors to work additional hours. You’ll say them that you’re going to pay them double the cost, double their hourly billing. And then you’ll say, I’ll pay you guys bonus as well if you complete the wheel two months in advance.

That is exploiting. You give 100% try to ensure that the positive risk occurs. If that is not possible, you try to enhance. What do you mean by enhance? Enhance means you’ll just give a brief try. You’ll not give you 100%. If a customer walks up to you and says, deliver me the bill two months in advance and I’m going to pay you $3 million, all you’ll say is, okay, I’ll give a try. And then you ask your labors to work additional hours. You’ll say, I’ll pay you bonus. That’s it. Are you giving your 100% in exploit? I’ve given my 100%, didn’t I? I pull out all the labors working on the other villas, and I’ve asked them to work on this particular villa. I have brought in a lot of latest state of the art equipment to complete the villa construction two months in advance.

But here in enhance, I’m not doing that. I’m just giving a brief try. That is a difference between exploit and enhance. Share is a third positive risk response strategy sharing. Right? If someone comes to you and says, hey, can you guide me to a particular training institute which provides trainings on Six Sigma? Now, if you know any, you would probably divert that person to that particular training institute, or you would say, hey, here is XLR Solutions. Seems like their training programs are amazing. Why don’t you give a shot? What are you doing? There is an opportunity. You pass it on to someone, and then probably you will say that, hey, XLR, I have referred a person to you. What is in it for me? Now we can get into what is in it for you, right? Probably we can get into a referral bonus or we can say that, hey, you take 20% of the training fee and I’m going to take 80%.

You’re sharing the opportunity with someone and the last thing is accept. As and how it happens. I’m going to accept it. Accept is the common risk response strategy both in your positive risks and in your negative risks. And then you have risk assessment. You try to qualitatively and quantitatively evaluate the value of the risk. If I say it’s going to rain heavily, that’s a qualitative path. Rain heavily on the other side. If I say that there’s a 50% probability that it might rain from seven to 09:00 p. m. And the intensity of the rain is going to be so much, then it’s going to make even more sense, right? It’s giving more value to the risk. So it’s qualitative risk analysis wherein you apply probability and impact to each and every risk. And once I multiply probability and impact, I’ll get the risk severity.

This will help me prioritize my list of risks. If I have say 1000 risks, are all thousand risks equally important for me? Maybe may not. But the moment I apply probability and impact to each and every risk and if I multiply that, I’m going to get risk severity. High severity risks are prioritized become high priority risks for me. Low severity risks would be low priority risks for me. Right? In this way I’m going to qualitatively evaluate. If I add some numbers, as in the previous example of rain, it becomes quantitative. What does risk analysis include? Risk analysis includes identifying the risks, applying probability and impact each and every risk, and evaluating the risks.

And then you plan for risk responses. You have separated risk responses for negative risks and you have separate risk responses for positive risks. Right? Risk evaluation is extremely important. It will help you identify what are the uses of a product or a process. How do you abuse a product or a process? Think about this washing machine. Here is a washing machine. This image, right? What is it used for? There’s something written on this. Let me read it. Lacey Lassip wash away your thirst. That is what this takes. That means washing machine is used as laci churner. Wow. You wash clothes using washing machine. You also churn laci buttermilk using washing machine. And then you say washing machine is not working properly, right? And then there’s a huge warranty cost or repair cost for the companies who manufacture washing machines.

So it’s extremely important for you to evaluate the risks properly. Think about the pen that you use for writing. What is another purpose you use pen for? You use it to clean your ears, to remove the wax from your ears. It is used as earbud, basically. And then you start claiming that your pen is not writing properly. You’re tarnishing the branding page of an organization which is manufacturing pens. Why? Because you have abused it. You have used it for a different purpose. You use your mobile phones for torch purpose during nights, don’t you? Or when there is no electricity at your home, you use your mobile phones as Torch. And then you start complaining that the battery backup has gone down.

Don’t you do that, right? We all do that. So organizations who are manufacturing the products have an increasing challenge of identifying these kind of risks. And your FMEA will help you identify these risks.

7. Risk Based Analysis – FMEA_Part 1

And let me tell you that a US army as the world’s largest Six Sigma team, right? What does it do and what is FMEA? FMEA is a structured process to identify your potential failure before they occur. Basically, we have discussed about washing machine, lusty, journal, mobile phone being used as a torch, your pen being used as earbud, right? So your failure more in effect analysis will help you identify these potential failures even before they occur. The key objective of FMEA is to eliminate the failures or minimize the severity of the risks. Now, this is most important. Risks can have multiple causes and have multiple issues. Here is an example. There is a risk that you might have a heart attack in the next five years. Unhealthy eating habits, right? Me and my wife basically looked like this. Unhealthy eating habits. Lack of exercise could be one cause.

Excessive smoking could be another cause. Sorry, tobacco companies, I’m using this example show you being impacted by a heart attack or you having a heart attack has multiple causes. Excess of smoking, lack of exercise, unhealthy eating habits, right? What could those result into? So this particular risk has multiple causes, we know that. But what could this risk result into? What is the impact that these risks might potentially have? It might paralyze you or it might also be fatal. I kept this image because it’s extremely interesting, right? Look at this skeleton head with a cross with the bones. It says, Is there life after death? Right? Trespass here and find out very softly. They are putting forward the word that if you trespass, you’ll be killed. Right? So, going back to our discussion, this is the risk which has multiple causes. It can also have multiple impacts.

This is extremely important. For a product to go wrong or for a process to go wrong, there could be multiple causes. You need to identify all those and then try to address those to eliminate the failures or minimize the severity of those risks. We have multiple FMEAs, you have FMEA design phase, you have FMEA process, you have FMA service, you also have FMEA support and all that. In the next slide, next subsequent slides, we will look into the FMEA template. And that template is just one format. There are six to seven different formats in which you can record the risks using this technique, FMEA. So do not argue with anyone saying that, hey, this is the format which I’ve learned, right? And you are using a different format for FME which is wrong. Do not argue in that way because there are six to seven formats. The person might be using a different format, we don’t know.

And by the way, FME is also used by NASA, right? National Aeronautics and Space Administration. It’s used even by NASA, by the way. All right, let us move on. What is a failure mode? We know that there could be multiple failure modes or multiple causes. It is a way in which the product, service, input or process could fail to meet the requirements of the end user. It could also cause downstream operations to fail. There is a possibility of total failure. Your entire product might feel or your entire process might feel or few steps of the process might fail. Few features of your product may not work or the features might not work as intended. It might work in a different way.

We don’t know. So these are a few of the possibilities that we have, right? If there are more than one failure which occur in tandem, then the result will be catastrophic, right? Extremely catastrophic. Your earthquakes. Think about this. If you have series of earthquakes, right, aftermath effect, right? Then the result would be extremely catastrophic.

So if there are multiple failures which occur in tandem, then the result is going to be catastrophic. And this most often than not results into total failure of your entire product or of your entire process. Then we have cost and effect analysis, right? There would be a cause which we have discussed. There also could be multiple causes for your failure mode. And once something fails, it can have an effect and it can also have multiple effects. FX are usually events that occur, drowned downstream, that affect internal or external customers. Then we have root causes which are the most basic causes within process owner’s control. Those would be within the control of the process owner causes.

And root causes are in the background. They are an input resulting in an effect. Failures are what transform a cause to an effect. Yes, there is a cause. Right. This failure is transforming this particular cause into an effect. They are often unobservable. That makes it even more tricky, even more difficult. Right? In general, the level of severity, occurrence and detection of each event in the FMEA are ranked from one to ten in the scale of one to ten. What does the scale one to ten mean? How do I infer? One for severity, one for occurrence and one for detection. How do I infer? What does ten mean for severity? What does ten mean for occurrence and what does ten mean for detection? All these things are discussed in the subsequent sections. Hold on until then to your horses. Right here is Process FMEA template. This particular template is based on AIAG Automotive Industry Action Group, Fourth Edition. It has various sections.

It has a function, it has a potential failure mode, it has potential FX or failure of failure. Basically, what is the severity, what are the potential causes of failure occurrence? What are the current controls that you have to prevent this failure from occurrence happening? Or what are the controls for detecting these failures? And then you have the detection. If you multiply severity, occurrence and detection, you’ll get risk priority number. Based on that, you prioritize the risks. You come up with the recommended actions, who would be addressing that and post taking actions? What was the severity score, what was the occurrence and detection score? And ultimately you recalculate the risk priority number and it has to be significantly less than before taking action.

Right? All these sections are explained in brief way in the subsequent slides. Here we go. There is something called a function. What do you mean by a function? It is a process step or how a product is going to function. Right. And in FME, if you have a flowchart, each component of the flowchart can be used towards identifying your function. Right. What are the potential failure modes? We know that there could be multiple causes for risk for something to fail. And potential failure modes also could be multiple in nature. Right? Potential failure mode describes the way in which the corresponding process, step or production could possibly fail to satisfy its intended purpose. Right? For example, I want to make an outgoing call and that particular function doesn’t work.

This is a call that I’m getting, but I cannot answer that because that particular option is not working. Failure mode. Right. There can be more than one potential failure for a function. Potential effect or failure. The potential effect of the failure explains about the impact of failure on the functionality of the product of the process. Suppose I’m on my way to home and it’s late night, my car breakdowns midway and I want to make a call to someone, to my home to say that don’t be afraid, don’t be concerned, it’s just car breakdown, I’ll be a little late.

Right? And assume your outgoing functionality doesn’t work. That feature doesn’t work. You try to do a text SMS and that also doesn’t work. So you have two modes of failure now. What is the impact it is going to have? Significant, isn’t it? You’ll be extremely dissatisfied as a customer, right? So those are the effects of failure. It describes what the customer or process owner will actually notice because of the components failure.

You notice that if it doesn’t work for you, if it’s a product, if it is a process, your process owner will be able to actually see that and identify that something is going wrong. What are the potential causes of the failure? Frauds of the design that may lead to the potential failure? What went wrong? Probably there was a problem with the mobile chipset which restricted me from making outgoing calls or sending text SMS.