Risk Management Approaches at Jet Propulsion - Case Study Example

Jet Propulsion Executive Summary This study seeks to address the different risk assessment and risk management approaches as practiced in the Jet Propulsion Laboratory (JPL). Therefore, the study focuses on evaluating the effectiveness of the approaches employed in trying to reduce the various risks associated with the space navigation activities of the institution. The analysis compares the risk management approaches enforced with the standard risk management practices recommended in industrial settings. Numerous risk management principles, tools, methods and theories are also analyzed and their relevance identified with the aim of improving the project practices employed in the institution above. From the analysis, it is evident that JPL practices fail to meet the required risk management standards of practice, especially in their general protocol of risk assessment and risk preparedness. Different theories and models are evaluated critically and either adopted or rejected based on their relevance to the task and objective of the institution in question. Numerous faults are identified that do not conform to the risk management principles and theories in place. The study, therefore, proposes the probable risk management practices that would help in enhancing the project practices, by minimizing the prevalence of uncertainties and risks while promoting creativity and intellectual freedom for the technical experts in the organization. Chapter 1. Case Brief The Jet Propulsion Laboratory is an explorations institution that engages in designing and sending of objects into the space, including other planets, and the moon for the exploration purposes. It is a center for research and development under the management and operation of the California institute of Technology, which has been contracted by the National Aeronautics and Space Administration. JPL has successfully carried out sub-orbital flights, which facilitated the launch of the first American satellite that returned the data used in the eventual discovery of the radiation belts from Van Allen found high above the surface of the earth. The major failures in the introduced systems in its operations become a major concern for the However, it is on the basis of its continual encounter with risks and uncertainties in operations that it seeks to discover the safe means of operation of its businesses. With the increased accidents that included the perishing of its personnel while on different missions of exploration of the space, the company frequently reshuffles its approaches towards risk management and risk prevention but with little success. Different management practices seem to prioritize different approaches towards this, and the company is forced into hiring better skilled individuals with the aim of implementing a new culture of risk management at the JPL that would equally increase the success rate mission of the JPL. In order to develop the new Mars architecture, NASA recalled Gentry Lee, the former JPL worker to spearhead the mission that would include risk management programs in order to increase the success rate of the JPL mission. During his reign, Lee observes that many engineers have had their brains drained away as a result of too much caution, with the need to do what is right confining their potential. There was the challenge of overcoming cultural resistance in risk taking but it was inevitable for the engineers to be accorded the deserving liberty to exercise their innovation and creativity. In this respect, therefore, the organizational management, under Lee, adopted the formation of relevant risk review board that was constituted by contractors and technical experts with sufficient experience, who were independent of the institution’s projects. The board’s major approach was an intellectual confrontation in the various operations that were risky yet required more innovation and creativity in persuit. The risk management would thus start with basically meeting the requirements as per the JPL and NASA standards and policies. Chapter 2. Introduction to Case Study Uncertainty creation is among the most common practices by human minds, but the ability to manage such uncertainties appears to be the most complex matter, as evidenced in the JPL project management. The uncertainty experienced in the project contributes significantly towards the project complexity, and this makes it a project dimension constituent. From the JPL project, for instance, uncertainty together with the structural complexity of the project result in the net messiness and difficulties encountered in the overall project. This research study is aimed at investigating the variable project management approaches employed by the JPL institution, together with the identification of the respective risk management capabilities and their cost-effectiveness and viability. The research also investigates the practices of risk management employed in the JPL project, and how their compliance with the recommended risk management standards. Since different literatures give different approaches for management of risks and uncertainties, together with the recommended processes to be considered in advance prior to the consideration of the mainstream management standards or risks, the research will also explore the use and nature of the JPL project, particularly the characteristics of high level complexity anticipated in the project. In addition to this, the research will analyze the relevant literature on risk and uncertainty management, as well as identifying the techniques and resources available for the analysis of the presented case study. The feasibility of the practices will also be evaluated alongside the existing concepts, models, theories and research findings that bear relevance to the risk management practices for the project in reference. Upon successful evaluation of the current organizational position of the project, based on the models, concepts and theories related to this, there will be an integrated assessment in order to generate alternative solutions and ideas for recommendation to the problems highlighted. Therefore, the research was aimed at answering various questions that include: a. Are the risks and uncertainties managed in a different manner by the JPL project managers from the recommended management approach? b. To what level are the prescribed general standards for industrial risk management implemented at JPL by the project managers? c. What risk and uncertainty management techniques and processes are regarded as in advance of the prescribed general standards of risk management in a high complex project? d. In regard to the high complexity project, does the approach employed in risk and uncertainty management affect the perceived success of the project? Chapter 3. Problem Statement and Plan of Analysis Risk can be classically defined as the probability of realizing what is considered negative and unwanted consequences of any event, and it is determined by certain basic elements that include the negative effect of an occurrence to the project, as well as the degree of uncertainty associated with the problem occurrence1. The loss magnitude is termed as the risk impact, and this can be realized in numerous ways that include low quality, extra expenditures, failed functionality, long lead-times, as well as the total project failure. Risk management essentially involves four aspects and practices, namely risk assessment, risk control, risk monitoring, and risk evaluation. Risk Assessment This entails determination of threats to the proposed project. A risk assessment would thus involve risk identification, which is inclusive of all tasks aimed at finding the risks that could influence the project. Considering the potential problems together with the diversity of their origins, it is important that all project parties are involved to facilitate the identification of the risks2. Another important practice for risk assessment is risk analysis, whose major goal is the identification of risk exposure for all the identified risks. Significant attention is also paid to the mutual interactions between risks that could result in greater risks, or as a result of the underlying factors. The techniques to be employed should thus involve the expert judgment as well as the consensus technique of the expert group, the use of data from past occurrences, analogy, together with the probability distribution samples3. The risk assessment practice should be carried out repeatedly with the project practices conforming to the safest approach as informed by the assessment. Risk items are bound to disappear with the varnishing of their threats, while new risks will be continuously identified, and the exposures to risk will also change over time. Risk Control This is inclusive of all actions meant to minimize risk so that the project can be run in a way that is risk tolerant or risk-free in order to trigger more actions of defence should there be an occurrence of an eventuality4. There is the need for monitoring actions for verification of the risk resolution or recommend the application of additional risk reduction measures. Risk control is particularly important in determination of the most suitable methods for reduction of significant risks. In instances where there is little information on a certain risk, the ideal actions would include acquisition of information through spending on simulations, prototyping, benchmarking, surveying, and reference checking among others5. Numerous counter measures could be envisaged while dealing with assessed known risks, and they include risk reduction, risk elimination, risk transfer and risk compensation. Production of the risk management plan is another important practice, and it is majorly concerned with the reduction of risks that are specific to the project 6. When there is adequate assessment and reduction of risks in the initial stages of the project, then the plans that follow thereafter have the desired effect towards risk mitigation 7. Risk Monitoring Regular risk monitoring is important in finding out if the risks are under a successful control, as well as for identification of the risks that have grown into problems yet have not been detected yet 8. Risk reporting to the senior management is also important,and it is usually based evaluation of the most threatening risks of the time. This is followed by risk reassessment, which must be done on a continuous basis in the project 9. Risk Evaluation This focuses on two objects among which is the finished project that will be looked into to ascertain its rightful execution, as well as the consolidation of the new experience gathered in the process10. Economic Principles, Theories and Methods Expected Utility Theory The theory is an important aspect of decision making in the theoretical economic framework. According to this theory, the decision alternative that has the greatest anticipated utility is regarded the ideal alternative11. The expected utility technique is lucrative since it offers the recommendations that are founded on a logical basis. For instance, if an individual is coherent in his or her preferences amongst the consequences, together with his or her opinions regarding the uncertain quantities, it is proven that maximizing on the expected utility is the sole sensible approach for proceeding. Cost-benefit and Cost-effectiveness Analysis This approach is designed for measurement of costs and benefits of a project by application of a common scale12. The major principle in transforming goods into the monetary values is through finding out the highest amount that the entire society could be willing to pay towards the project. It is very difficult to determine the society’s willingness to pay for the non-market services or goods13. Risk Aversion and Safety Management The risk aversion concept is used widely in the description of an attitude towards uncertainty and risk. By this, it is evident that people dislike negative outcomes and consequences so much that they give the outcomes too much weight than the value that would be given by a statistical approach14. Portfolio Theory This theory brings into perspective, both systematic and unsystematic risk concepts, as well as justifying why the unsystematic risks ought be ignored while the systematic risk is embraced for application in project processes15. Risk Aversion and Safety Management The risk aversion concept is mostly applied in describing an attitude towards uncertainty and risk. This concept gives a description as opposed to determining the attitudes. It should be understood, therefore, that investment in safety, does not solely mean the avertion of risk, but the virtue that there is always the desire to offer protection to certain values when faced with uncertainty, the thought is always cautionary16. Just like any other project, JPL investment in safety should be meant to minimize uncertainties while providing assurance in case a hazardous situation occurred. Chapter 4. Analysis and Findings There is a need to understand the association between project management and risk management. In the traditional project management practice, which is evident in the JPL project execution, the practice is aimed at controlling pervasive risks through the use of systematic procedures for use in estimation and planning of the work, directing and leading the staff, monitoring the process, as well as controlling the project through the reassignment and replanting of the resources17. This is still the primary basis in project management and cannot be invalidated by any risk management considerations. However, by itself, this can be seen as an essential recipe for problem management, since difficult decisions have to be considered and actions put in place only after the rise of a problem, and this is particularly apparent in the management level of the JPL project18. Despite the long existence of the institution and the different levels of operation witnessed within it, there was barely no in advance mechanisms of risk management, and this only happened following the subsequent tragedies that befell the respective projects. According to the American phrase ‘A problem is a risk whose time has come’, risk management entails control of risks through taking action before the risks turn into problems19. However, the safety and risk management operation in the JPL project failed to show readiness for the eventualities to come, apart from when they had already occurred, when they took measures to ensure it never recurred. In JPL, the management fails to distinguish between risk management and project management. The two practices are neither synonymous nor interchangeable, but not absolutely separate20. However, it is a general extension of the project management practice traditionally applied, but with a close mix with gathering of information and making of decisions. The project management goal is that which meets the set target., and the success of a project does not indicate lack of problems in its execution but rather shows that the eventualities were overcome successfully21. On the other hand, risk management does not by itself a guarantee project success, but holds the basic identity goal and response to the possible problems with befitting lead time with the aim of avoiding crisis, thus enabling the achievement of the project management goal. Risk Management Design In the constitution of the risk management strategy, the choices for the suitable design would be considered in order to suit the respective organizational goals and objectives. Among these designs are the obvious or trivial designs22. The JPL risk management design does not reflect the standard design for use in addressing the industrial risks that are bound to arise from their project. For instance, the Mars Biological Explorer risk review board is made up of members that are highly experienced and with renowned technical expertise in the field. These experts were believed to offer significant input towards the success of the mission without their direct involvement in the project23. However, the omission of the personnel from the organization, who are directly part of the problem, in the problem resolution makes the boar less effective. Lack or participation by the parties to the project in the risk management team reduces the commitment of the staff as well as decreasing the professional acceptance of the project. Similarly, there is a lot of information required in the management of uncertainties within the project and the lack of project party involvement make it difficult for the board to have a comprehensive overview to enable them perform sufficiently in analysis of the risks. A comprehensive risk and uncertainty management requires rigorous quantitative methods, that include benchmarking, probabilistic, and the non-probabilistic approaches, all of which are essential in assessment of risks with the availability of more data through internal event tracking and the tracking of the external events24. The approach employed by the JPL project management does not facilitate sufficient amount of data and information for use. This means that the eventual data collected does not enable a comprehensive analysis of the potential exposures to risk25. On the other hand, the insufficient level of data could result in inefficiency in analyzing of developed relevant indicators which should be tracked on a regular basis, as well as providing low support for efficient and rapid responses towards the risky situations. The loss-event data, risk category, as well as the major risk indicators is mostly refined by means of interactive efforts in order to support the analysis of issues and trend. Sufficient quantitative and qualitative assessment could be important in enabling benchmarking so that comparison of risk information with other organizations in the similar industry can be done. Substantial and meaningful analysis of the risks and uncertainties for the project would require the presence of timely and relevant data from the peer organizations upon which the project could be weighed for analysis26. However, the constitution and operations of the JPL risk management do not have a wide base of data upon which comparisons and analysis can be conducted thus compromising the quality and effectiveness of the project risk management. Analysis ought to be enriched with various techniques of modeling by use of assumptions concerning distribution27. The probabilistic models for instance, amongst which are the at risk models, backtesting, and the loss-event assessment, evaluate both the impact and the likelihood of occurrences, while the non-probabilistic models, which include scenario analysis, sensitivity analysis, and stress testing only measure the impact and need separate measurement of probability by using different methods28. The non-probabilistic model could be instrumental especially when the data being used is limited. Both model types are majorly based on the assumptions in regard to the manner in which potential risks play out. Chapter 5. Proposed Solution to the Problems In order to enhance the risk assessment and management practices in the project, there is a need that JPL conducts the risk management practices at various organizational levels. The events and objectives to be considered are used in the determination of the risk assessment scope to be initiated. In this case, JPL should undertake among other practices, the strategic risk assessment, which is the risk evaluation related to the strategic objectives and mission of the organization, and this should be conducted by the senior management during the strategic planning meetings. Additionally, there should be an operational risk assessment in which there is a comprehensive evaluation of the loss risk, including the risks to project financial performances, which result from failed or inadequate systems, processes or people. Like in most other industries, it would be expected that JPL regulators impose the requirement for the company to have a regular identification and quantification of exposures to certain risks. The institution should also perform frequent compliance risk assessments, which is an evaluation of the risk factors that relate to the compliance obligation of the organization, consideration of the regulations and laws, procedures and policies, business and ethical conduct standards, together with the voluntary strategic standards. In addition to this, there should be an internal risk assessment audit that facilitates the evaluation of the risks associated with the organization’s value drivers, and covering the financial, strategic, compliance, and operational objectives. The assessment focuses on the impact of the risks in defining the monitoring of key risks and audit plans. In this case, therefore, a top-down technique would enable sufficient coverage of the activities for internal auditing to be influenced by issues that have a direct impact on the stakeholders in the project. Finaincial risk assessment is another important practice that should be fully adopted by the JPL management, in which there would be the evaluation of the risks associated with material misstatement especially the financial statement of the organization through the input provided by numerous parties. risk assessment cannot be solely be conducted in the form of a checklist or as a process with little connection to the decision making of the project. In this case, it is recommended that the JPL risk review board incorporates the input of other parties in the institution, in order to facilitate comprehensive and relevant execution of the deliberations of the board regarding risk management and assessment.in order to make the risk assessment practice a continuous process, there must be ownership of the same by the business and must be embedded in the business cycle, among which is the strategic planning, the project processes and execution, as well as the evaluation of the project success. The JPL management also needs to have a clear establishment of governance of the process of risk assessment and management. Accountability and oversight of the process of risk management are critical towards ensuring that sufficient resources and commitments are secured, and that the process of risk assessment takes place at the befitting organizational levels. Similarly, this ensures that there is a full range consideration of relevant risks, which are evaluated by continuous and rigorous processes, and appropriate actions taken in good time. Whereas line management is tasked with risk management, the JPL should establish the facilitator roles as well as processes that enable the analysis and timely discussion of emerging and new risks. There should be specific objectives in the risk assessment practices of the JPL. In this case, the risks should be identified and measured as per the objectives of the organization, with particular specificity to the objectives in the risk assessment scope. The objectives should also be specific and measurable at various organizational levels. The evaluation of risks related to such objectives enables resource reallocation in the most effective way for risk management and facilitate best achievement of the objectives stated. As the organization defines the objectives, it should equally put forward the risk appetite, as well as the acceptable levels of risk for the organization in its project mission persuit. If JPL fails to define the risk appetite, there is the danger of taking excessive risk in the achievement of its objectives, or fail to take enough risk for seizure of crucial opportunities. The risk appetite, therefore, defines the risk tolerance of the project, and this could sufficiently facilitate both innovation and caution within reasonable levels for the institution. Recommendation The JPL should also have the scales for risk rating conform to the objective scope of the organization. Risks are measured based on the likelihood and impact of their occurrence. The risk impact scales should reflect the measure units that are applied in organizational objectives. This may give a reflection of different impacts that include the reputation, financial and people. on the other hand, the horizon employed in the assessment of the risk occurrence likelihood must have consistence like that of the time horizon of the objectives. The JPL management should also form a risk portfolio view to offer support to decision making. Although risks are rated at individual levels together with their relation to the impacted objectives, there is a need to pool the risks together within a portfolio view that singles out the relationship among between the risks in the organization. There could be the existence of correlations that could result in eventual exposure of the project to a risk while increasing or decreasing the other. JPL could also make use of the leading indicators in providing an insight into the potential risks. The risk reports are more relevant and meaningful if they can draw out both the past occurrences and the analysis of the future events. 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