Risk Management Article

Gleb Tsipursky’s picture

By: Gleb Tsipursky

In the context of our increasingly disrupted, globalizing, and multicultural world, quality leaders greatly appreciate the security and comfort of clear-cut strategic plans for the future. After all, following our in-the-moment intuitions frequently leads to business disasters, and strategic plans help prevent such problems.

Tragically, popular strategic analyses meant to address the weaknesses of human thinking are deeply flawed. They give a false sense of comfort and security to quality professionals who use them, leading them into the exact business disasters that they seek to avoid.

Take one of the most popular of them, the SWOT analysis, where you try to figure out the strengths, weaknesses, opportunities, and threats facing your business. SWOT doesn’t account for the dangerous errors of judgement revealed by recent research in behavioral economics and cognitive neuroscience, what scholars call cognitive biases.

William A. Levinson’s picture

By: William A. Levinson

The Automotive Industry Action Group’s (AIAG’s) and German Association of the Automotive Industry’s (VDA’s) new Failure Mode and Effects Analysis Handbook (AIAG, 2019) offers significant advances over FMEA as practiced 15 or 20 years ago.The publication is definitely worth buying because the new approach includes valuable methodology; this article will cover the most important points and highlights.

New features

The new process is qualitative rather than quantitative, which overcomes a major drawback of the previous approach. The older occurrence ratings were based on the probability of a failure, and the older AIAG manuals even tabulated recommended nonconforming fraction ranges. If, for example, the failure was 50 percent or more likely, the occurrence rating was 10 (worst possible on a 1 to 10 scale), while one or fewer per 1.5 million opportunities earned a rating of 1. These probabilities can be estimated from a process capability study, assuming that one is available; otherwise, one might easily have to guess.

Michael Lueck’s picture

By: Michael Lueck

After the first crash, of Lion Air in Indonesia in October 2018, people blamed poor maintenance and insufficient pilot training. When a second airliner, an Ethiopian Air aircraft, crashed in March 2019, similarities quickly transpired. There was no apparent external influence such as poor weather. Neither was there any interference with the flight decks, as in a hijacking.

In both cases the pilots could not keep the aircraft from nose-diving. Airlines and regulators around the world started grounding the MAX indefinitely. Australia’s Civil Aviation Authority prohibited any B737 MAX aircraft in its airspace, followed by New Zealand’s Civil Aviation Authority.

Surprisingly, the last authority to clamp down was the U.S. Federal Aviation Administration, the governmental body in charge of certifying aircraft.

Anton Ovchinnikov’s picture

By: Anton Ovchinnikov

Left to their own devices, humans tend to fall prey to biases that make them poor decision makers. For instance, among other foibles, most purchasing managers routinely under-order. In fact, past research has shown that managers are typically 10 to 20 percent off the mark when it comes to ordering the optimal quantity of products.

However, somewhat surprising, the same research has also shown that this suboptimal ordering only results in a 1 to 5 percent loss in expected profit. This conundrum has left many an executive with a dilemma. As the CEO of a medium-sized online florist shop told me: “I cannot micro-manage all my people. Before I go and intervene, I need to know the impact on my business.”

Fair point. Managers who base purchasing decisions on their gut feelings—either because they have never devised a rational ordering policy or regularly choose to override it—make a lot of mistakes. But if it only costs the firm about 1 percent of extra profit, executives may be reluctant to stir the pot. In most SMEs, a CEO’s path is strewn with seemingly juicier projects in terms of ROI.

Miriam Boudreaux’s picture

By: Miriam Boudreaux

If you are wondering whether your organization could benefit from formal root cause analysis (RCA) and corrective action training, read on to see if any of these issues are present in your day-to-day operations. RCA and corrective actions are some of the most useful tools for continual improvement.

Here’s why you should include them among your company’s (and all employees’) tool set.

1. High number of NCRs in your company

It’s true that the number of nonconformance reports (NCRs) will depend on the volume of operations a specific company has. Therefore, the “number” of NCRs is a relative figure. However, if you know you have a high number of NCRs, the issue may be that you are not performing effective RCA and corrective action.

Penelope B. Prime’s picture

By: Penelope B. Prime

The United States and China have reportedly reached a so-called phase one deal in their ongoing trade war.

While few details have been disclosed, the agreement principally seems to involve the United States calling off a new round of tariffs that were slated to take effect on Dec. 15, 2019, and removing others already in place in exchange for more Chinese purchases of U.S. farm products.

Good news, right? The end of the trade war is nigh? Don’t get your hopes up.

Although business leaders in both countries will be temporarily relieved, the underlying tensions between them will not end easily.

As an economist who closely studies the U.S. relationship with China, I believe there are fundamental issues that won’t be resolved anytime soon.

Doing it in phases

Tariffs and other trade issues have received most of the attention during the trade war, but the more fundamental—and difficult—challenges are with lax intellectual property protection and China’s industrial policy.

Nathan Furr’s picture

By: Nathan Furr

Few companies and CEOs have attracted as much praise, derision, skepticism, and enthusiasm as Telsa Motors and its founder Elon Musk. Having interviewed Musk and the Tesla leadership as part of my research, one of the questions I’m asked most frequently is: How can you make sense of Tesla’s wild strategies? The latest example is the move to create a “gigafactory” for car batteries just outside Berlin.

Tesla’s many critics and observers, whose reactions range from short-selling to star worship, are part of the challenge. Many ask the wrong questions, such as why Tesla isn’t making any money—a question appropriate for a mature business but not a growth one. Although all businesses must be sustainable in the long run, Tesla is like most rapid-growth companies that eat up more cash flow than they produce while in the early growth phase.

Quality Digest’s default image

By: Quality Digest

As usual with Quality Digest’s diverse audience, this year’s top stories covered a wide range of topics applicable to quality professionals. From hardware to software, from standards to risk management, from China trade to FDA regulations. It’s always fun to see what readers gravitate to, and this year was no different.

Below are five articles that garnered a lot of interest from our readers. As you can see, the topics are quite diverse.

Improve Risk Management and Quality Across the Value Chain by Increasing Visibility
by Kelly Kuchinski

Anat Amit-Eyal’s picture

By: Anat Amit-Eyal

Eric, a 40-something married father of three, runs a successful startup. Given his demanding career, he and his wife decided she would be a stay-at-home mum. Eric believed the attention he devoted to his family was adequate, and that he had fully harmonized his work as CEO and life as a family man.

On a recent family trip, Eric continued working as much as he could, as he always did. While taking a conference call, he dropped his phone and, without hesitation, leapt to catch it at the risk of hurting himself. Seeing this, his 13-year-old son blurted out, “I don’t know if you would have jumped after me like that.” Only then did Eric realize that his son didn't think he prioritized their family. Eric had been oblivious that his family felt neglected; he had been unaware or was in denial.

Michael Millenson’s picture

By: Michael Millenson

In late November 1999, a TV producer called me about an alarming report that 44,000 to 98,000 Americans were being killed each year by preventable errors in hospitals, and another 1 million were being injured. Could that be true? Based on my research, I replied, the estimate seemed low.

The “To Err is Human” report from the Institute of Medicine has been called a “seminal moment” in the patient safety fight. The public furor sparked by the group’s assertion that medical mistakes were deadlier than breast cancer, auto accidents, or AIDS prompted new laws, as well as vows to meet the Institute of Medicine’s goal of cutting medical errors in half in five years.

Twenty years after the report’s release, how safe is our medical care?

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