Manage Project Risk Right

Failure Mode Effect Analysis can provide insights about unexpected events.

By Adnan Siddiqui, ConcepSys Solutions LLC

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Successful project management requires identifying and planning for events that can impede the undertaking. Each event poses different potential consequences. Some risks can impact cost, others can affect schedule, and still others can alter the facility's operating parameters. While you can easily identify some risk events such as delays in equipment fabrication, others aren't obvious without the benefit of hindsight.

So, use of a formal risk-management tool and process is essential during project planning to avoid project failure due to anticipated or unanticipated events. Failure Mode Effect Analysis (FMEA), a flexible yet powerful tool, is a good option where risks are diverse.

FMEA Basics
Originally developed for the military aerospace program in the 1940s, FMEA has spread to other industries and areas as a risk management tool. It often serves as an integral part of formal quality systems such as QS-9000. While specialized software programs are available for conducting and documenting results of a FMEA, you needn't use them. Indeed, a simple spreadsheet program can suffice for conducting a FMEA.

A FMEA-based risk management process consists of two phases: completion of a FMEA matrix and then integration of the FMEA matrix results into the project execution and control plan.

The first phase has three steps; each involves completing various columns in the FEMA matrix (Table 1).

The first step is failure mode identification. In the project management context, failure modes are equivalent to project risk events. During this step, you list all possible failure modes in the FMEA table and assign each a severity rating that reflects its impact on project success.

In the second step, you estimate probability of occurrence of each risk. This involves identifying its causes and their probability.

The final step is to determine how to detect occurrence of risks. It's critical to ensure that early detection is possible.

Once you've completed the analysis, you can begin the second phase of the FMEA process. Here, you calculate a risk priority number (RPN) for each risk and document mitigation actions. RPNs enable sorting risks in terms of impact and thus allow the project risk management team to focus on highest impact risks first.