Risk Assessment and Mitigation William Rutherford Associates

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					                    Risk Assessment and Mitigation
                            Serial Failures in Uncertainty Management

             e are all familiar with stories ments with advanced modeling techniques. er, the potential failures and mitigations are
             in which a series of seemingly The method provides insights to the degree not limited to the engineering discipline.
             small events lead to a large di- of risk, both likelihood and severity, of a Mitigation may involve process change,
saster. Small serial events have been found potential outcome and supports a measured documentation of procedures, organization
to be the causes of plane crashes, the Three and financially sound mitigation response. alignment or cultural transformation.
Mile Island nuclear accident, and will likely This approach explores what could be,              The events and their uncertainties
be the source of the Macondo well failure. what might happen in the future – even if it must be defined in sufficient detail as to
Unlike a Black Swan Event which describes has never happened before.                         allow for expert consideration and assess-
a single uncertain outcome, no single un-           Creating uncertainty-based risk ment. Combining these risks and outcomes
certain event was to blame for these disas- assessment and mitigation plans be- can lead to events with very small likeli-
ters. Assessing the risks for potential serial gins with a facilitated exercise of the un- hoods but huge disaster penalties. While the
events requires a special approach to evalu- certainties and their relationship to possible team may sometimes feel they are focusing
ate the uncertainties and their large nega- outcomes. On the surface, this may seem a on the minutiae, they should consider that
tive potential outcomes.                       simple task. However, to dig deeply in the recognizing the little things that add up
     Risk Assessment and Mitigation possible events that link together to create a to disasters is the key to preventing them,
activities are best performed                                                                          while following past perfor-
with the full realization of an                                                                        mance trends are the surest way
uncertain future. Statistical or
                                       Serial Failure Analysis                                         to be unpleasantly surprised.
actuarial calculations on past                                                   Yes     $ xB Loss             Once a chain is iden-
performance behavior does a                                         Yes                                tified, the mitigation may be
                                                                             Event D
good job predicting the average                         Yes                                            as simple as targeting the
                                                                Event C          No
results over a large number of             Yes                                           No Failure    link in the chain that is the
occurrences, but it does a very                    Event B           No                                least expensive to fix. The
                                                                                         No Failure
poor job predicting the extreme       Event A           No                                             team may also find that miti-
                                                                                         No Failure
possible outcomes that have yet            No                                                          gating one link will prevent
to occur. Historical analysis                                                            No Failure    an array of failures. Be care-
simply cannot foresee events                                                                           ful however, that identifying
that have never occurred in the past.          failure requires a disciplined approach that a single mitigated link which fixes all
     A Serial Uncertainty method for con- combines divergent conversation followed failures, may indicate that the team has
sidering risk and building mitigation plans by detailed logical event processing. The not explored a sufficiently broad range
involves exploring possible, though seem- process becomes recursive as new ideas for of possibilities.
ingly isolated, uncertain events. In serial failure influence or expand previous ideas.          We were all taught at a young age
event catastrophes, if the risk mitigation The analysis must also become a living to “consider before doing.” Imagining
process had explored and prevented even document as ideas for additional causes of what could happen beyond the realm of
one of the events from occurring, the disas- failure will occur over time and require in- our experience is a talent unique to humans
ter would have been prevented.                 corporation to the planning. As new tech- and should not be ignored in our business
                                               nologies and processes are deployed, ad- and work planning. Applying this talent
 “Imagination is more important than
                                               ditional possibilities for failure should be to explore possibilities beyond historical
                                               considered and mitigated.                     events is the responsibility of every com-
                      Albert Einstein
                                                    The analysis team should be a pany, organization and individual.
     Rather than let past performance dictate diverse group, representing multiple               Being diligent in the identification and
the future, this uncertainty approach exam- schools of thought across the organization. mitigation of serial events will make our
ines the relationships of uncertainty to out- It is tempting to filter all issues and solu- businesses and our lives safer and more
comes and combines expert range assess- tions through an engineering lens. Howev- successful.
    Delivering Results. Building Healthy Companies. ♦                   We’d like to speak with you via Jason Marino at 214.624.3205
                                    William W. Rutherford & Associates

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                Delivering Results. Building Healthy Companies.
                Maximize Share Price, Grow Competitiveness, Solve Leader’s Biggest Problems

W     e work with leaders to overcome their most significant issues. We know how difficult it is to make material
      improvements in Share Price and Competitive Position and in the other issues leaders regularly struggle
with, but that’s our ultimate responsibility. Without significant and measurable progress in these areas, a leader’s
continued career success is doubtful and their organizations ongoing viability is at risk.
                                                                                                       there really another option?
We understand the many factors that make these necessary improvements increasingly
                                                                                                                     Your Company
difficult in today’s world: financial uncertainty, global competition, challenging                                   S&P 500
                                                                                                                     Peer Group

internal processes and culture, organizational complexity combined with the additional

issues a troubled economy brings. We work with leaders to find business performance
improvement options that have not been considered, yet are highly material to the
achievement of the financial outcome you require.

Today’s leaders typically know those areas critical to their success. They want to do what is required to
significantly improve their organization’s performance and affect cultural change. Past efforts to design
and implement strategies to realize this vision have often been less successful than expected. Internal
organizational issues, personal agendas and inadequate skills and capabilities have been problematic. In some
cases employees lack of varied industry and “outside-their-function” experience further contribute to the
challenge of making meaningful progress.

Our Approach: We start with the leader’s vision and desired improvement, and build a customized approach
to achieve it. Working with the stakeholders, we establish goals, priorities and performance expectations, and
quantify the gap between current performance and the desired future state. We can then determine the root
causes of the deviation in performance and tailor an implementation roadmap, work streams and timeline that
will close the gaps in a manner that is achievable and sustainable, and supported by your employees. We work
with your employees at the point of execution, mentor and coach employees
                                                                                   Building a Healthy Company
at all levels, and facilitate the process. Finally, we measure results of the
corporate change to quantify performance improvements and assure results Identify                             Prioritize
are being delivered as expected.                                                          Growth

                                                                                                                           $  Strategy

We work together with leaders and their organizations to make otherwise         Technology
                                                                                            Winning Markets
difficult company, industry and market demands achievable. Experience             Culture              Organization

has shown that both tangible and intangible benefits are needed to
accomplish the new level of business performance needed to “win” in this
                                                                          Achieve                                   Design
environment. Leaders tell us that with our assistance they make faster,
more significant progress in today’s increasingly demanding world. They say that we have energized
their organizations for achievement and substantially reduced the time required to successfully attain
significant improvements in results.
3102 Maple Avenue ♦ Suite 230   |   Dallas, Texas 75201   |   call Jason Marino at 214.624.3205    |

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