Use Of Cause And Effect Diagram For Risk Management
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1 Use Of Cause And Effect Diagram For Management Use Of Cause And Effect Diagram For Management Michael Stefanovic, P.Eng., PMP, MBA Outline Management basics What is Cause and effect Diagram? How can it be used for Management? What are the benefits of using it for Management?
2 Use Of Cause And Effect Diagram For Management Management Basics Management Process: Management Qualitative Analysis Quantitative Analysis Response Monitoring And Control How to approach and conduct risk management on a project. Determining which risks might affect the project and documenting their Characteristics Prioritizing risks for subsequent further analysis or action Numerically analysing the effect of identified risks on overall project objectives Developing options and actions to enhance opportunities and to reduce threats to project objectives Tracking identified risks, monitoring residual risks, identifying new risks, executing risk response plans and evaluating their effectiveness. Adopted from PMBOK 2004 What is Cause and effect Diagram? History What does it look like? How is it used?
3 Use Of Cause And Effect Diagram For Management What Does It Look Like? Alarm Clock Power failure Kids Kid sick Spouse Wants to converse Alarm set for PM Kid missed Is sick school bus Snow storm Alarm set for Kid lost his Forgot her birthday wrong time homework Train late Alarm not loud Does not want Can not start her car enough to go to school Transportation Car does not Hole in the soc Toilet clogged Toaster smoking start Road Pants wrinkled Daughter taking shower No clean cups accident Dog hid one shoe Light bulb burnt Out of coffee Late for Work No clean shirts Clothing Town turns water off Bathroom Out of eggs Breakfast Use For Management Management Helps by organizing risk events by their causes Provides another form of Breakdown Structure Provides a hierarchy of risk events Can be used to: o Evaluate competing proposals o Prioritize competing projects o Organize risk historical data base o management reporting
4 Use Of Cause And Effect Diagram For Management By focusing on one cause of risk (bathroom) we can easier identify risk events that result from that one cause Toilet clogged Late for Work Daughter taking shower Town turns water off Light bulb burnt Bathroom Statement Cause: Definite events or sets of circumstances that exist in the project of its environment, and which give rise to uncertainty. s: Uncertain events or sets of circumstances that, if they occur, would affect the project objectives. Effect: Unplanned variations from project objectives, either positive or negative, which arise as a result of risks occurring. Project s, Hillson, PM Network September 2000
5 Use Of Cause And Effect Diagram For Management Statement As a result of a <definite cause>, an <uncertain event> may occur, which could lead to an <effect on the objective>. Project s, Hillson, PM Network September 2000 Breakdown Structure
6 Use Of Cause And Effect Diagram For Management Hierarchy Of s Soap dropped in Too much toilet paper Someone threw garbage in Daughter came late last night Has to go to school early Bulb too old Bulb defective Toilet clogged Daughter taking shower Bathroom Delay Late for Work Repairs by the town Dry summer Unpaid water bill Town turns water off Light bulb burnt Evaluate Competing Proposals Response 1. Construct Cause and Effect Diagram for each proposal 2. Assess probability and impact for risk events at the ends of branches 3. Multiply probability with impact for each risk event (Expected Monetary Value) 4. Add all expected monetary values for each proposal 5. Rank proposals in order of risk expected monetary values
7 Use Of Cause And Effect Diagram For Management Prioritize Competing Projects Response Construct Cause and Effect Diagram for each project Assess probability and impact for risk events at the ends of branches Multiply probability with impact for each risk event (Expected Monetary Value) Add all expected monetary values for each project Rank projects in order of risk expected monetary values Organize Historical Database Management 1. Group projects by type 2. Create risk causes categories 3. Store risk factors information by cause 4. Retrieve risk information only from applicable causes for a new project
8 Use Of Cause And Effect Diagram For Management Management Reporting Monitoring And Control Report different levels of detail to different hierarchical levels in the organization using the cause and effect risk diagram to create different levels of detail. Conclusion Cause and Effect Diagram can be effective in: identification Replacing Breakdown Structure where advantageous Hierarchically organizing risk events Evaluating competing proposals on the basis of their risk levels Prioritizing competing projects on the basis of their risk levels Organizing risk historical data base management reporting
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