RISK Criteria Establishment Guideline

Project
Document Number
GENERAL
KEI-GN-QS-PRC-XXXX
Discipline
Doc. Type
PSM
Kangean Energy Indonesia
Originator
PROCEDURE
Revision Date
KANGEAN ENERGY INDONESIA
RISK CRITERIA ESTABLISHMENT

GUIDELINES
APPROVAL SHEET
Name
Rev
Date
Title
Description
Date
Prep.
Signature
Review
App
Project
Document Number
GENERAL
Discipline
KEIGNQS-PRC-XXXX
Doc. Type
PSM
Originator
PROCEDURE
Revision Date
TABULATION OF REVISED PAGES

REVISIONS
SHEET
A
1
2
3
4
5
6
7
8
51
52
53
54
55
56
57
58
59
10
60
11
61
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
41
42
43
44
45
46
62
63
64
65
66
67
68
69
70
71
72
73
74
75
76
77
78
79
80
81
82
83
84
85
86
87
88
89
90
Risk Criteria Guidelines Rev.A
REVISIONS
SHEET
B
ATTACHMENT APPENDIX
1
2
3
4
5
Page 2 of 17
A
B
C
D
E
Project
Document Number
GENERAL
Discipline
KEIGNQS-PRC-XXXX
Doc. Type
PSM
Originator
PROCEDURE
Revision Date
TABLE OF CONTENTS
1.
Introduction .............................................................................................................................. 6
2.
Objective .................................................................................................................................. 6
3.
References ................................................................................................................................ 7
4.
Definitions ................................................................................................................................ 7
5.
Characteristics of Successful Risk Management Approaches ................................................. 8
6.
Risk Reporting Matrix ............................................................................................................ 11
7.
Risk Management Process...................................................... Error! Bookmark not defined.
8.
Risk assessment ...................................................................... Error! Bookmark not defined.
9.
Comparison of risk assessment techniques ............................ Error! Bookmark not defined.
10.
Related Procedures ................................................................................................................. 17
Page 3 of 17
Project
Document Number
GENERAL
Discipline
KEIGNQS-PRC-XXXX
Doc. Type
PSM
Originator
PROCEDURE
Revision Date

FIGURE LIST
Figure 1 Risk Reporting Matrix ......................................................................................................... 11
Figure 2 Level of Likelihood Criteria ................................................................................................ 12
Figure 3 Level and Type of Consequence Criteria............................................................................. 13
Figure 4 Risk Analysis and Reporting Classification ........................................................................ 14
Page 4 of 17
Project
Document Number
GENERAL
Discipline
KEIGNQS-PRC-XXXX
Doc. Type
PSM
Originator

No table of figures entries found.
Page 5 of 17
PROCEDURE
Revision Date
Project
Document Number
GENERAL
Discipline
KEIGNQS-PRC-XXXX
Doc. Type
PSM
Originator
PROCEDURE
Revision Date

1. Introduction
Kangean Energy Indonesia (KEI) Risk management Program involves establishing an
appropriate infrastructure and culture and applying a logical and systematic method of
establishing the context, identifying, analysing, evaluating, treating, monitoring against
criteria established by the KEI and communicating risks associated with any activity, function
or process in a way that will enable organizations to minimize losses and maximize gains.
To be most effective, risk management should become part of an organization's culture. It

should be embedded into the organization's philosophy, practices and business processes and
criteria relating with those practical KEI risk criteria rather than be viewed or practiced as a
separate activity. When this is achieved, everyone in the organization becomes involved in the
management of risk.
This Guidelines specifies the criteria of the risk management monitoring, but it is not the
purpose of this Standard to enforce uniformity of risk management systems. It is generic and
independent of Kangean Energy Indonesia Workplace Health and Safety Area. The design and
implementation of the risk management criteria will be influenced by the varying needs of an
organization, its particular objectives, its products and services, and the processes and specific
practices employed.
2. Objective
2.1 The objective of a well-managed risk management program is to provide a repeatable
process for balancing cost, schedule, and performance goals within program funding,
especially on programs with designs that approach or exceed the state-of-the-art or have
tightly constrained or optimistic cost, schedule, and performance goals.
2.2 Without effective risk criteria the program may find itself doing crisis management, a
resource-intensive process that is typically constrained by a restricted set of available
options.
2.3 Successful risk management depends on the knowledge gleaned from assessments of all
aspects of the program coupled with appropriate criteria to mitigation applied to the
Page 6 of 17
Project
Document Number
GENERAL
Discipline
KEIGNQS-PRC-XXXX
Doc. Type
PSM
Originator
PROCEDURE
Revision Date

specific root causes and consequences.improved compliance with relevant risk criteria;
and better corporate governance.
3. References
ISO/IEC 31000:2009
Risk Management - Principle and Guideline
DNV-OSS-121
Performance Criteria Determined from Risk Assessment

Methodology
4. Definitions
Consequences
are the expected effects of an event occurring
Frequency
is the number of occurrences of an event per unit time. In risk

assessment, it is usually expressed as the frequency per year
Hazard
is a source of potential harm or a situation with a potential to

cause loss (any negative consequence).
A criteria standard
is a statement, which can be expressed, in qualitative or

quantitative terms as appropriate, of the performance required
of a safety-critical element in order to ensure the safety and
integrity of the installation
Risk acceptance criteria
are standards by which the results of the risk assessment can be

measured. The acceptance criteria represent the acceptable level
of safety and integrity of the installation
Safety-critical elements
are parts of the installation, or plant, which are essential to

maintain the safety and integrity of the installation
Verification
is examination, testing, audit or review to confirm that an

activity, a product, or a service, is in accordance with specified
requirements
WBS
Work Break down Structure, part of work elements which

starting from upstream to downstream
Page 7 of 17
Project
Document Number
GENERAL
Discipline
KEIGNQS-PRC-XXXX
Doc. Type
PSM
Originator
PROCEDURE
Revision Date
5. Characteristics of Successful Risk Management Approaches

5.1 Assess the root causes of program risks and develop strategies to manage these risks
during each acquisition phase.
5.2 Identify as early as possible, and intensively manage those design parameters that
critically affect capability, readiness, design cost, or LCC.
5.3 Establish the risk criteria suitable with existing conditions on site
5.4 Use technology demonstrations, modeling and simulation, and aggressive prototyping to
reduce risks.
5.5 Include test and evaluation as part of the risk management process.
5.5.1
Include industry participation in risk management. Offerors should have a risk

approach as part of their proposals as suggested in this guide to identify root
causes and develop plans to manage those risks and should include a draft Risk
Management Plan (RMP).
5.5.2
Additionally, the offerors should identify risks as they perceive them as part of
the proposal. This not only helps the government identify risks early, but
provides additional insight into the offerors level of understanding of the
program requirements.
5.5.3
Use a proactive, structured risk assessment and analysis activity to identify and
analyze root causes.
5.6 Use the results of prior event-based systems engineering technical reviews to analyze
risks potentially associated with the successful completion of an upcoming review.
Reviews should include the status of identified risks.
5.7 Utilize risk assessment checklists (available for all event-based technical reviews) in
preparation for and during the conduct of technical reviews
6. Identification of Root Causes

This is a practical way of addressing the large and diverse number of risks that often occur in
acquisition programs. For example, a WBS level 4 or 5 element may be made up of several
Page 8 of 17
Project
Document Number
GENERAL
Discipline
KEIGNQS-PRC-XXXX
Doc. Type
PSM
Originator
PROCEDURE
Revision Date

root causes associated with a specification or function, e.g., potential failure to meet turbine
blade vibration requirements for an engine turbine design.
Root causes are identified by examining each WBS product and process element in terms of
the sources or areas of risk. Root causes are those potential events that evaluators (after
examining scenarios, WBS, or processes) determine would adversely affect the program at
any time in its life cycle.
An approach for identifying and compiling a list of root causes is to:
6.1 List WBS product or process elements,
6.2 Examine each in terms of risk sources or areas,
6.3 Determine what could go wrong, and
6.4 Ask why multiple times until the source(s) is discovered
6.5 Typical risk sources include:
6.5.1
Threat. The sensitivity of the program to uncertainty in the threat description,

the degree to which the system design would have to change if the threat's
parameters change, or the vulnerability of the program to foreign intelligence
collection efforts (sensitivity to threat countermeasure).
6.5.2
Requirements. The sensitivity of the program to uncertainty in the system

description and requirements, excluding those caused by threat uncertainty.
Requirements include operational needs, attributes, performance and readiness
parameters (including KPPs), constraints, technology, design processes, and
WBS elements.
6.5.3
Technical Baseline. The ability of the system configuration to achieve the

program's engineering objectives based on the available technology, design tools,
design maturity, etc. Program uncertainties and the processes associated with the
ilities (reliability, supportability, maintainability, etc.) must be considered. The
system configuration is an agreed-to description (an approved and released
document or a set of documents) of the attributes of a product, at a point in time,
which serves as a basis for defining change.
6.5.4
Test and Evaluation. The adequacy and capability of the test and evaluation
program to assess attainment of significant performance specifications and
Page 9 of 17
Project
Document Number
GENERAL
Discipline
KEIGNQS-PRC-XXXX
Doc. Type
PSM
Originator
PROCEDURE
Revision Date

determine whether the system is operationally effective, operationally suitable,
and interoperable.
6.5.5
Modeling and Simulation (M&S). The adequacy and capability of M&S to

support all life-cycle phases of a program using verified, validated, and
accredited models and simulations.
6.5.6
Technology. The degree to which the technology proposed for the program has
demonstrated sufficient maturity to be realistically capable of meeting all of the
program's objectives.
6.5.7
Logistics. The ability of the system configuration and associated documentation

to achieve the program's logistics objectives based on the system design,
maintenance concept, support system design, and availability of support data and
resources.
6.5.8
Production/Facilities. The ability of the system configuration to achieve the

program's production objectives based on the system design, manufacturing
processes chosen, and availability of manufacturing resources (repair resources in
the sustainment phase).
6.5.9
Concurrency. The sensitivity of the program to uncertainty resulting from the

combining or overlapping of life-cycle phases or activities.
6.5.10 Industrial Capabilities. The abilities, experience, resources, and knowledge of

the contractors to design, develop, manufacture, and support the system.
6.5.11 Cost. The ability of the system to achieve the program's life-cycle support
objectives. This includes the effects of budget and affordability decisions and the
effects of inherent errors in the cost estimating technique(s) used (given that the
technical requirements were properly defined and taking into account known and
unknown program information).
6.5.12 Management. The degree to which program plans and strategies exist and are
realistic and consistent. The governments acquisition and support team should
be qualified and sufficiently staffed to manage the program.
6.5.13 Schedule. The sufficiency of the time allocated for performing the defined
acquisition tasks. This factor includes the effects of programmatic schedule
Page 10 of 17
Project
Document Number
GENERAL
Discipline
KEIGNQS-PRC-XXXX
Doc. Type
PSM
Originator
PROCEDURE
Revision Date

decisions, the inherent errors in schedule estimating, and external physical
constraints.
6.5.14 External Factors. The availability of government resources external to the
program office that are required to support the program such as facilities,
resources, personnel, government furnished equipment, etc.
6.5.15 Budget. The sensitivity of the program to budget variations and reductions and
the resultant program turbulence.
6.5.16 Earned Value Management (EVM) System. The adequacy of the contractors
EVM process and the realism of the integrated baseline for managing the
program
7. Risk Reporting Matrix
Each undesirable event that might affect the success of the program (performance, schedule,
and cost) should be identified and assessed as to the likelihood and consequence of occurrence.
A standard format for evaluation and reporting of program risk assessment findings facilitates
common understanding of program risks at all levels of management.
7.1 The Risk Reporting Matrix below is typically used to determine the level of risks identified
within a program. The level of risk for each root cause is reported as low (green),
moderate (yellow), or high (red).
Figure 1 Risk Reporting Matrix
Page 11 of 17
Project
Document Number
GENERAL
Discipline
KEIGNQS-PRC-XXXX
Doc. Type
PSM
Originator
PROCEDURE
Revision Date

7.2 The level of likelihood of each root cause is established utilizing specified criteria (Figure
1). For example, if the root cause has an estimated 50 percent probability of occurring, the
corresponding likelihood is Level 3.
Figure 2 Level of Likelihood Criteria
7.3 A single consequence scale is not appropriate for all programs, however. Continuing with
the prior example of a root cause with a 50 percent probability of occurring, if that same
root cause has no impact on performance or cost, but may likely result in a minor schedule
slippage that wont impact a key milestone, then the corresponding consequence is a Level
3 for this risk. For clarity it is also classified as a schedule risk since its root cause is
schedule related.
Page 12 of 17
Project
Document Number
GENERAL
Discipline
KEIGNQS-PRC-XXXX
Doc. Type
PSM
Originator
PROCEDURE
Revision Date
Figure 3 Level and Type of Consequence Criteria

7.4 The results for each risk are then plotted in the corresponding single square on the Risk
Reporting Matrix. In this example, since the level of likelihood and consequence were
both 3, the corresponding schedule risk is reported as yellow, as shown in Figure 4,
using a recommended display method that includes the risk title (where (S) identifies this
risk as a schedule risk), risk causal factor, and mitigation approach
Page 13 of 17
Project
Document Number
GENERAL
Discipline
KEIGNQS-PRC-XXXX
Doc. Type
PSM
Originator
PROCEDURE
Revision Date
Figure 4 Risk Analysis and Reporting Classification

8. Parameters Considerations
8.1 Performance (P) Considerations
This risk has a performance consequence. These risks generally have associated schedule
and cost impacts, but should be carried as a performance risk.
Operational (e.g., Initial Capabilities Document (ICD), Capability Development
Document (CDD), Capability Production Document (CPD), threats, suitability,
effectiveness).
Technical (e.g., Technology Readiness Levels, specifications, technical baselines,
standards, materiel readiness )
Management (e.g., organization, staffing levels, personnel qualifications/experience,
funding, management processes, planning, documentation, logistics)
8.2 Schedule (S) Considerations
The Risk Assessors should analyze impact of the risk to the IMS and the critical path(s),
to include:
Evaluating baseline schedule inputs (durations and network logic);
Incorporating technical assessment and schedule uncertainty inputs to the program
schedule model;
Evaluating impacts to program schedule based on technical team assessment;
Page 14 of 17
Project
Document Number
GENERAL
Discipline
KEIGNQS-PRC-XXXX
Doc. Type
PSM
Originator
PROCEDURE
Revision Date

Performing schedule analysis on the program IMS, incorporating the potential impact
from all contract schedules and associated government activities;
Quantifying schedule excursions reflecting the effects of cost risks, including resource
constraints;
Providing a government schedule assessment for cost analysis and fiscal year planning,
reflecting the technical foundation, activity definition, and inputs from technical and cost
areas; and
Documenting the schedule basis and risk impacts for the risk assessment.
Projecting an independent forecast of the planned completion dates for major milestones
8.3 Cost (C) Considerations
with no performance or schedule impacts, the risk is a cost risk, and may impact estimates
and assessments such as:
Building on technical and schedule assessment results;
Translating performance and schedule risks into life-cycle cost;
Deriving life-cycle cost estimates by integrating technical assessment and schedule risk
impacts on resources;
Establishing budgetary requirements consistent with fiscal year planning;
Determining if the adequacy and phasing of funding supports the technical and
acquisition approaches;
Providing program life-cycle cost excursions from near-term budget execution impacts
and external budget changes and constraints; and
Documenting the cost basis and risk impacts.
8.4 Assemble Scoring Models

After evaluation criteria have been identified, a scoring model may be developed to
incorporate all criteria to yield a single risk score. In general, scoring models use
multiplicative or additive means to calculate risk. Very often, criteria are weighted
based on the importance of a criteria to the overall risk. Several examples of scoring
schemes are presented below
8.4.1
Risk Matrix
Page 15 of 17
Project
Document Number
GENERAL
Discipline
KEIGNQS-PRC-XXXX
Doc. Type
PSM
Originator
PROCEDURE
Revision Date

The Risk Matrix presented in Figure 1-4 is a simple scoring model that requires no
calculation. The matrix provides an excellent visual model that is easy to understand. This
matrix is effective in models where only two criteria are involved
8.4.2
+ / - Scoring Scheme
The + / - scoring scheme provides a numerical range centered on zero for various criteria.
The ranges are standardized to reflect that values on one side of zero always represent
higher risk and values on the opposite side of zero represent lower risk. Scores assigned
to each criterion are added together to yield overall risk. The table below shows a sample
scoring model using the /- scoring scheme, as below
Criteria
Scoring Range
Potential for Harm
-10 to +10
+5
Level of Non-conformances
-3 to +3
-2
Ability to Detect Deviations
-5 to +5
+3
Adequacy of Staffing Levels
-3 to +3
-1
TOTAL SCORE
(Range: -21 to +21)
+5
8.4.3
Actual Score
Weighted Scheme
The weighted scoring scheme assigns a weighting to each criteria and uses a
consistent numerical range for each criteria. The individual weighted scores
are either averaged or added. Weighting may be defined as a percentage or as
a value in a range. The table below shows a sample scoring model using the
weighted scheme
Criteria
Actual Score Weight
Potential for Harm
60%
Level of Non-conformances
15%
0.9
Ability to Detect Deviations
25%
0.5
Adequacy of Staffing Levels
10%
0.5
TOTAL SCORE
(1 to 10)
Page 16 of 17
Weighted Score
4.9
Project
Document Number
GENERAL
Discipline
KEIGNQS-PRC-XXXX
Doc. Type
PSM
Originator
PROCEDURE
Revision Date

8.4.4
Filtering
Filtering involves focusing the scope of risk management by selectively reducing risk
control for low-risk systems and increasing risk control for high-risk systems. Effectively
filtering systems requires a consensus definition of action thresholds. Using the example
of auditing manufacturing sites, a simple set of action thresholds might look as follows.
Overall Site Risk Score
Action
Greater than 7
Audit performed annually
3 7, inclusive
Audit performed once every two (2) years
Less than 3
Internal Audit not needed
9. Related Procedures
The implementation of Risk Criteria Guidelines as per DNV-OSS-102 Standard will be used
independently according to the following procedures,
KEIGNQS-PRC-XXXX
RISK Management Guidelines
KEIGNQS-PRC-XXXX
HAZID Guideline
KEIGNQS-PRC-XXXX
HAZOP Guideline
KEIGNQS-PRC-XXXX
LOPA Guideline
KEIGNQS-PRC-XXXX
SIL DETERMINATION Guideline
KEIGNQS-PRC-XXXX
SIL VERIFICATION Guideline
KEIGNQS-PRC-XXXX
FAULT TREE ANALYSIS Guideline
KEIGNQS-PRC-XXXX
EVENT TREE ANALYSIS Guideline
KEIGNQS-PRC-XXXX
CAUSE ANALYSIS Guideline
KEIGNQS-PRC-XXXX
CONSEQUENCE ANALYSIS Guideline
KEIGNQS-PRC-XXXX
BOW TIE ANALYSIS Guideline
KEIGNQS-PRC-XXXX
QUANTITIVE RISK ANALYSIS Guideline
Page 17 of 17

RISK Criteria Establishment Guideline

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

RISK Criteria Establishment Guideline

Uploaded by

Copyright:

Available Formats

Project

Kangean Energy Indonesia

KANGEAN ENERGY INDONESIA