Risk-Based Thinking Handbook

All you need to know about risk

Published: Wednesday, February 24, 2016 - 15:25

(American Quality Institute: Orlando, FL) -- Provision 6.1 of ISO 9001:2015, “Actions to address risks and opportunities,” is perhaps the biggest change in the standard. The purpose of the Risk-Based Thinking Handbook, by William A. Levinson (American Quality Institute, 2016), is to equip readers to anticipate the potential requirements, as well as to act beyond the requirements to ensure the competitiveness of their organizations. Compliance with the letter of the standard is of little comfort if a competitor exceeds the requirements by, for example, cutting its cycle time 50 percent or more. Among this book’s most important takeaways is that a risk or opportunity can hide in plain view unless the workforce knows how to identify it.

Another of this book’s key missions is to equip the reader to “grok” ISO 9001 as a synergistic framework that helps an organization achieve its goals. “Grok” is originally from Robert A. Heinlein’s Stranger in a Strange Land, and it means to understand and internalize something completely. To “grok” a skilled trade is what makes somebody a machinist rather than a tool operator, or a mechanic rather than a part changer. It’s the difference between a master of an art or science, and somebody who just goes through the prescribed motions.

When an organization just goes through the prescribed motions for ISO 9001, often with reams of its purportedly infamous documentation, the company gets little value for a lot of effort. When the organization uses ISO 9001 to achieve its purposes, and recognizes the role of documentation in standardizing the best known way to do a job, the benefits are enormous.

The book’s organization is as follows:

Chapter 1 introduces the concepts of risk and risk-based thinking. It includes the history of risk-based thinking in military applications because armies had to develop comprehensive and effective approaches to survive. The key takeaway is a thought process we can apply in modern organizations and supply chains. It also introduces ISO 31000—“Risk management principles and guidelines,” and the synergistic (and public domain) Army Techniques Publication ATP 5 19—“Risk management.” This document, which plays a central role in the Army’s risk management (RM) process, also offers an approach that is similar to failure mode and effects analysis (FMEA) that is applicable to any risk situation the organization might need to assess and evaluate. The chapter also discusses the scope of risks and opportunities, which range from internal (and therefore largely controllable by the organization) to external. The “opportunities” aspect can’t be overemphasized because of the enormous waste that hides in all but the leanest of supply chains. This waste is largely asymptomatic, and one of Henry Ford’s success secrets was his ability to recognize it on sight and empower his workforce to do the same.

Chapter 2 discusses principles of risk-based thinking, and shows how ISO 31000 corresponds to Army Technique Publication (ATP) 5 19.

Chapter 3 covers internal risks, which are largely addressed by the provisions of ISO 9001:2008. That is, organizations that are registered to ISO 9001:2008 already practice many forms of risk-based thinking. The chapter also addresses the danger of dysfunctional performance measurements, which can easily be as destructive as poor quality. Dysfunctional performance measurements can also undermine an organization’s integrity, and with catastrophic consequences.

Chapter 4 is an overview of well-established techniques with which to identify internal risks.

Chapter 5 is an explicit discussion of failure mode and effects analysis (FMEA) and its relationship to the risk management (RM) approach from the U.S. Army.

Chapter 6 covers Henry Ford’s “can't rather than don’t” principle, which we now call poka-yoke or error-proofing. It can, where applicable, make accidents and quality problems impossible. “Can’t rather than don’t” encompasses what the Army’s RM document calls “engineered solutions,” in contrast to administrative solutions that require human attention and compliance.

Chapter 7 covers opportunities to remove waste (muda), which is essentially an application of lean manufacturing. A vital takeaway is that most forms of waste (other than poor quality) are asymptomatic; they do nothing to trigger closed-loop corrective action. These wastes can hide in plain view unless the workforce knows how to identify them, which was among Henry Ford’s principal success secrets. The chapter includes techniques for identifying wastes of time, material, and energy that might otherwise hide in plain view.

Chapter 8 covers supply-chain risks, which are partially under the organization’s control.

Chapter 9 covers external risks, which include economic conditions, cultural differences, changes in technology, and changes in consumer demand.

About The Author

American Quality Institute AQI

American Quality Institute (AQI) is the leading organizer of the Lean & Six Sigma World Conference and the ISO 9000 World Conference. ISO 9000 World Conference is focused primarily on ISO 9000 and ISO 14000 families of standards being used in automotive, aerospace, biomedical, chemical, computer hardware and software, construction, education, electronics, engineering, environmental, energy, healthcare, medical devices, and metals industries. The Lean and Six Sigma World Conference covers lean and Six Sigma leadership, A3 thinking, Hoshin planning, visual management, DFSS, theory of constraints, fun with statistics, and the integration of lean Six Sigma, and project management and agile. Visit http://aqi.org.