Risk Management Working Group Gay Infanti Northrop Grumman

Risk Management Working Group Gay Infanti Northrop Grumman 15 August 2006 Internal Information Services

Agenda • Review charter • Summarize recent activities and accomplishments • Summarize recommended changes to EVMS Application Guide to incorporate RM/EVM integration • Summarize next steps and future plans • Discussion 2

Charter • Develop and recommend policy, process guidance, and training to support the integration of risk management with earned value management. Work with the risk management community to achieve process integration. 3

Recent Activities • PMI-CPM Spring Conference • Working Group meetings with primary focus on insertion of RM/EVM integrating guidance into NDIA EVMS Application Guide • Telecon on 5/12 • Several rounds of document edits/comments via email • Meeting on 8/4 4

8/4 Meeting Participants • • • Wayne Abba Dick Coleman John Driessnack Gay Infanti Meredith Murphy • • • Susan Meyer Craig Peterson Susan Reed Gary Robinson Dennis White Legend: EVM Experts RM Experts 5

8/4 Meeting Results • Completed review of proposed changes to EVMS Application Guide; submitted to EVMS Application Guide authors on 8/9 • Agreed to sponsor practice symposia at fall IPM Conference; submitted abstract/bios on 8/8 to reserve two, back-to-back PS slots • Briefly discussed expected date for receipt of APM working group’s RM/EVM Interface Guide for review in September timeframe • Discussed and, again, decided against developing a separate NDIA guide for RM/EVM Integration but still want to provide contract-level process guidance, share techniques and best practices for process integration • Discussed potential next steps 6

Major Change Recommendations – 1 of 3 (EVMS Application Guide) • Modify MR definition to include reserve for anticipated cost & schedule impacts based on overall risk assessment • Insert new definitions associated with RM process (used PMI Risk SIG terminology) • Add two new sub-sections to Sec 3, Acquisition Process and EVM (consider new section title) • Risk Management Process (brief explanation of process objectives and figure 3 -1 to illustrate the process) • Risk Management and Earned Value Management Integration (brief overview of process integration and figure 3 -2 to illustrate) • Identify and reference risk to WBS elements in the planning phase to ensure adequate budget and schedule for risk handling (risk adjusted baselines) • Assign responsibility for RM to the PM with support from a risk manager; list responsibilities 7

Major Change Recommendations – 2 of 3 • Establish MR at appropriate levels based on risk tolerance • Allocate budgets to PMB based on confidence levels that provide challenging but achievable targets and provide resources for risk handling activities • Use EVM to monitor risk handling plans, uncover new risks/opportunities, identify adjustments to risk handling plans, i. e. , corrective actions, and trigger updates to EAC • Conduct program reviews where both EV and RM data are reviewed, variances discussed, and corrective actions are agreed upon to achieve program objectives 8

Major Change Recommendations – 3 of 3 • Monitor and update the risk register throughout the program life cycle to provide a forecast of risks/opportunities and their potential cost/schedule impacts after risk handling plans are complete • Allocate MR for planning a risk handling activity resulting from the identification of a new risk or risk whose consequence or impact has become elevated • When issuing MR to plan new risk handling activities, use the EVM system’s formal change control process to ensure baseline integrity • Reflect impacts in EAC when it becomes known that risk impacts will be realized • Replan future work to recover excess budget resulting from opportunity capture; replenish MR 9

Figure 3 -1 10

Figure 3 -2 11

Next Steps • Based on John Driessnack’s suggestion, we’re making a request to DAU to dedicate an issue of Acquisition Review Quarterly to our topic • Working group will contribute an overview, lead-in article • Solicit contribution of a series of 7 -8 other articles from individuals with integrating methods and best practices to share • This effort would take approximately a year to complete • We may also consider articles in other publications, e. g. , the NDIA publication, the Risk SIG’s publication, and the Measurable News • Will review OSD Risk Management Guide, which is reported to be pending release 12

Future Plans • Determine training approach for RM/EVM integration and develop action plan • Continue IPM advocacy role • Foster established working relationships with APM, RM SIG, and others • Continue to provide a forum for discussion and discovery of new ideas • Promote new ideas that further or improve IPM to NDIA PMSC to obtain action or sponsorship 13