Tag Archives: risk management

Business Process Improvement Involves Tremendous Risk Management

PMBOK (the project management book of knowledge) gives us a wonderful (and comprehensive) outline for managing risk in any project. Now more than ever, you and I have a lot of risk to manage and mitigate – especially if we are managing a portfolio of business processes and/or are expected to treat our process improvement initiatives as though they are full-fledged projects (which I believe they are).

Here’s the basic outline and a few tools (credit goes to PMBOK). As you read, notice how much emphasis there is on access to information, data and analysis. Risk management is a series of actions and exercises. It is very much a verb! Those of us who are tasked with improving workflow and business processes need to be mindful of the risks involved in our work and bright ideas as much as we need to be aware of the broader environment we are working in. Be vigilant for risks inherent in your inputs, process, outputs (deliverables) as well as your assumptions.  Nobody wants to make a mess of something they were asked to improve.

Risk Management Outline

1. Risk Management Planning – approach to and plan for risk management as well as the approach an organization takes to execution of plans

2. Risk Identification – determining risks and identifying the characteristics of those risks

3. Qualitative Risk Analysis – prioritizing risks responses based on probability of occurrence and impact

4. Quantitative Risk Analysis – analyzing effect of risks should they come to fruition

5. Risk Response Planning – developing options and actions to minimize risks and their effects

6. Risk Monitoring & Control – tracking risks, monitoring residual risks, identifying new risks, executing risk response plans and evaluating effects of those plans

Note: PMBOK states some risks are positive and refers to them as Opportunities. Some risks are negative and are commonly  referred to as Threats. I think it is a stretch to call a risk an “opportunity.”  I prefer that you conduct a SWOT analysis.

I  am including a couple of simple tools (since its Thanksgiving!)

Impact

Very Low

Moderately Low

Neutral

Moderately High

Very High

Cost

Time

Scope

Quality

Measuring Probability

Probability

Threats

Opportunities

Very High

Moderately High

Neutral

Moderately Low

Very Low

Risk Assessment Tool

Dimension

Risk

Technical

· Requirements

· Technology

· Complexity & interfaces

· Performance & reliability

· Quality

External

· Subcontractors & suppliers

· Regulatory

· Market

· Customer

· Weather

Organizational

· Project dependencies

· Resources

· Funding

· Prioritization

Project Mgmt

· Estimating

· Planning

· Controlling

· Communication

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Key Performance Indicators: Before, During & After Your Business Process

I want to make a special case tonight for the reasoned approach to Key Performance Indicators (KPIs) that involves what happens before, during and after your process. This field (business process management and analysis (and on and on with the jargon)) makes the very most sense when we stop seeing processes as discrete “events” much the same way we advocate for “seeing” tasks in relation to one another when strung together to form a process. That was a mouthful but I hope you get the point. The more holistically we see these phenomena unfolding, the better we can manage them.

We’ve Seen This Movie Before

This is rather basic no matter how “new age” it might still sound to some people. My process can be viewed and considered in relation to the process prior (which constitutes the “triggering event” and the processes immediately following it. We’ve approached the physical sciences in this fashion for a pretty long time and it works very well. Smaller phenomena are nested inside larger phenomena. They are included in yet transcended by larger phenomena. It also helps to understand that the larger has more inherent value than the sum of its smaller parts.

By studying my triggering events and measuring them accordingly, I inform the process I am analyzing. By measuring what happens downstream, I similarly inform my analysis. Suddenly, if I have metrics for Input and Output that tell me something important which translates in favor of my goals and objectives, I will know precisely how to calibrate my process in terms of its productivity, efficiency, quality, volume, throughput and so on.

I know this is going to sound remedial to some of you and I also know that others will find this concept and practice confusing. The best I can do is point you in the direction of BPMS solutions that include simulators. There are also simulation engines from ProModel that are very good.

Simulation allows you tweak your Inputs and imagine what your Outputs will look like under different conditions. This is a practice that involves rigor and discipline. Everybody around you will find it boring. That is, until you point out the impact a process design change can have on suppliers at the point of Input or the impact on customers at Output. There are top-line sales and bottom-line inventory considerations here so do make sure your teams understand that it isn’t enough to see tasks strung together as processes but they must also see processes strung together – end-to-end – to form your entire enterprise. From this vantage point, you will all make your best business decisions and manage your risks effectively along the way.

Key A Good Fit

One final note relating to the title of this post: this practice of looking downstream and upstream for metrics is what makes your measures “key”. They describe critical indicators at critical junctures. If I screw up upstream, you can bet it will ripple through your process and screw things up downstream. One critical “key” performance indicator depends on others in its “ecosystem”. Again, I know it sounds a little cheeky for some of you but others of need to keep your eyes on all of these variables throughout your analysis. This is how you manage Unintended Consequences.

Do you have any horror stories you’d like to share? Any unintended consequences in making radical process changes? We’d love to hear from you.

State Of The Economy A Powerful Reminder For Us All: Plan For & Make Business Process Changes With Help Of A Comprehensive Business Case

Kapalign’s Business Case Assessment Tool: Print Me!

News of Washington Mutual folding and Congress stalling on bailout plans is not the sort of thing you expect to discuss on a blog dedicated to smart business practices. Wait a minute…aren’t business practices, business rules and business process at the heart of the mess our financial institutions are in? They certainly are! It’s for this very reason that I keep telling those who’ll listen: “BPM is NOT an IT project!”

What is it?

What we do – those of us who design and analyze business processes, rules, decisions, metrics and logic – is attempt to capture and improve the manner in which tasks are deployed in relation to one another and many other interdependent variables from suppliers to information to material resources and people. We also evaluate all of those variables in light of strategy and business goals. Further, we do all of this in concert with people from operations, HR, marketing, service, R&D, production, manufacturing, administration and IT. By virtue of this being about process and system dynamics, we are all in this together. The challenge, my friends, is that the territory we map has values and is subject to ethics and many other business and legal principles. Our banks lost sight of that and the customers followed suit.

Putting the “Business” Back in Business Process Management: Building a Good Business Case

One of the most intriguing and frustrating aspects of this work is the difficulty with which people view and understand BPM in light of the gestalt of business conditions. To that end, I want to offer another list of business case factors to remember. Many of these will help you establish and maintain a collaborative and ethical business process environment and orientation:

  • A Business Case is a proposal for some manner of business improvement, innovation, product development or other initiative that serves to help decision-makers make their decision regarding the viability of the proposal. It includes:
  • a problem statement and a purpose statement
  • an analysis of current performance against your vision, benchmarks and industry standards
  • specific goals and objectives including a value proposition
  • alternatives and options
  • discussion of constraints and risks
  • review of political, economic, socio-cultural and technological factors
  • disclosure of assumptions
  • review of what you’re going to measure and how you’ll measure
  • and a cost-benefit analysis

One of the over-arching ideas in building the business case for your project ought to be: “If we are going to commit to spending money and other resources, then what you are doing must be in support of and a benefit to the business.” What you do must have value and be important in terms of serving the highest-value opportunities. We shouldn’t be making changes in process design just because we can and we shouldn’t allow process to reflect risky propositions and immoral behaviors. Neither will produce an outcome to be proud of. You can see why an executive sponsor is both critical to your success and potentially your worst nightmare. You can also see why risk management is so crucial.

Be Careful What You Ask For

I’ve discussed unintended consequences before and this week those words are more prescient than ever. Be thoughtful about change. Solicit input from a wide cast of characters and think long-term. Wide and long for span and asking the difficult questions concerning purpose and vision for depth. Always aim for depth and span.

The Bottom-Line

It may seem far-fetched to you now but I believe we all play a part in designing business processes that avoid the kind of risk facing us today. If you apply yourself with great depth and span and challenge your business practices and processes to live up to your vision and mission, you’ll be alright