See discussions, stats, and author profiles for this publication at: https://www.researchgate.

net/publication/337673219

MODEL BASED RISK MANAGEMENT: CASE STUDY IN INDIAN SCENARIO

Conference Paper · September 2016

CITATIONS READS

0 4,003

1 author:

Shirshendu Roy
NRI Fintech India Pvt. limited
50 PUBLICATIONS 52 CITATIONS

SEE PROFILE

All content following this page was uploaded by Shirshendu Roy on 27 December 2019.

The user has requested enhancement of the downloaded file.

Shirshendu Roy1, Sujoy Samaddar2

MODEL BASED RISK MANAGEMENT: CASE STUDY IN INDIAN SCENARIO

Abstract:In present world Risk Analysis and its estimation is highly required to manage project and process in an
effective way. Improper risk management may lead to the failure of a project or process. One of the proven Risk
Management tools is FMEA, which can be again classified into PFMEA and DFMEA. Every project and processes
faces a number of elements that may be a risk, but controlling the same in an effective way eventually leads to success.
For instance, the influencers which affects some chemical manufacturing process may be temperature, pressure, raw
material flow, qualified workmen. Attempt was made to solve an industrial issue based on the data collected from the
factory, transforming the physical problems to statistical problem, solving the problem by identifying the potential
influencers, fine tune them based on the risk assessment to make the process streamlined to increase the production by
uninterrupted operation time.
.

Keywords:Risk Management, FMEA,RPN,MTTR,MTBF

1. INTRODUCTION
"Risk Management" is the complete process of identification, assessment, and prioritization
of risks followed by economical application of resources to minimize, monitor, and control the
probability and/or impact of unfortunate events or to maximize the realization of opportunities.
Objective of "Risk management' is to assure that uncertainty does not deflect the endeavor from the
business goals. Risks can come from various sources: e.g., uncertainty in financial markets, threats
from project failures (at any phase in design, development, or production), legal liabilities, credit
risk, accidents, natural causes and disasters as well as deliberate attack from an adversary, or events
of uncertain or unpredictable root-cause.
There are two types of events i.e. negative events can be classified as risks while positive events are
classified as opportunities. Several risk management standards have been developed including
the Project Management Institute, the National Institute of Standards and Technology, actuarial
societies, and ISO standards.
On the other hand, statistical analysis is a process of inspecting, cleaning, transforming, and
modeling data with the goal of discovering useful information, suggesting conclusions, and
supporting decision-making. Data analysis has multiple facets and approaches, encompassing
diverse techniques under a variety of names, in different business, science, and social science
domains.
Predictive analytics focuses on application of statistical models for predictive forecasting or
classification, while text analytics applies statistical, linguistic, and structural techniques to extract
and classify information from textual sources, a species of unstructured data. All are varieties of
data analysis.
Generally Risk Management is highly perception driven. In order to make the risk assessment and
management data driven, attempt have been made to use the outcome of the statistical analysis as an
input for the Risk Management activity. The result shows combine use of statistical analysis and
risk management may prove to be effective.

1
Shirshendu Roy,NRIFT,6th Floor, Tower –I, Globsyn Crystals, Block-EP, Salt Lake City, Kolkata, India
Mail id: mtq0306@yahoo.com
2
Sujoy Samaddar, NRIFT, 6th Floor, Tower-I, Globsyn Crystals, Block-EP, Salt Lake City, Kolkata, India
Mail id: sujoy.samaddar@gmail.com
2. RISK MANAGEMENT PROCESS
Strategies to manage threats (uncertainties with negative consequences) typically include avoiding
the threat, reducing the negative effect or probability of the threat, transferring all or part of the
threat to another party, and even retaining some or all of the potential or actual consequences of a
particular threat, and the opposites for opportunities (uncertain future states with benefits).
The Risk Management cycle is describe in the Figure -1.

Figure 1:Risk Management Cycle

The overall Risk Management process involves of following activities;

 Planning
 Containment Actions
 Contingency Action
 Tracking
 Identification
 Analysis
The overall Risk Management process represented in the Figure-2

Figure 2:Overall Risk Management Process

The overall Risk Management activities comprises of four main sub processes as represented
decomposed diagram in Figure-3.

Figure 3:Risk Management Activities

a) RISK PLANNING
This sub process comprises of developing an organized, comprehensive and interactive strategy and
methods for identifying and tracking risk areas, developing risk handling plans, performing
continuous risk assessments to determine how risks have changed and assigning adequate resources.
This also includes the detailed documentation of each item as mentioned above. For this plan,
relevant portion of the Project management Plan template will be used. If required, separate
document may also exist.
b) RISK ASSESSMENT
This comprises of two sub processes as described below:
1) RISK IDENTIFICATION
This target to identify all the risks associated with the work along with their critical parameters. The
more critical a risk is, the greater will be the impact on the project.
2) RISK ANALYSIS
This is the process of examining each identified risk area or process to refine the description of the
risk, isolating the cause and determining the effects. It includes risk rating and prioritization in
which risk events are determined. The risks can be rated and prioritized in terms of their probability
of occurrence, severity of consequence and relationship to other risk areas or processes.
c) RISK HANDLING
This sub process identifies, evaluates, selects and implements options in order to set risk at
acceptable levels, given project constraints and objectives. This includes the specifics on what
should be accomplished, who is responsible and associated cost and schedule. The Risk Handling
process is depicted in Figure No-4.
 Figure 4:Risk Handling Process

d) RISK MONITORING
This sub process systematically tracks and evaluates the performance of risk handling actions
against established metrics throughout the acquisition process and develops further risk handling
options as appropriate.

3. CASE STUDY – INDIAN SCENARIO

A Kolkata, Indian based chemical company commissioned second plant (based on own technology)
in 2006 and started operation in 2010.The performance of the plant was not meeting the expectation
of the management since inception. The management, wish to take some fact based approach to
improve the performance of the plant. The main reason behind the unsatisfactory performance was
the long unscheduled maintenance of the plant which generally results in the production shutdown
of plant. This was ultimately affecting the business performance of the company.

a) PROBLEM STATEMENT

As discussed in the main section, the company was facing issue related to unplanned maintenance
and production shutdown, the management started risk management for controlling the production
related issues. The general risk management is experience based activity and correctness of the
outcome largely depends on level of experience. The traditional risk management activity was not
been able to deliver good result by improving the performance by predicting risk at initial stage.
The management then was curious to know whether there are some unknown risks for the
production process and also to carry out the risk management in quantitative way. The solution for
this requirement was “Analysis outcome based Risk Management”.

b) SOLUTION APPROACH
“Analysis outcome based Risk Management” is an extended version of the general risk
management. In this risk management procedure, based on the data analysis outcome, formal risk
assessment is conducted. As this risk assessment is conducted based on the data analysis, the
outcome of the risk assessment is comparatively close to the practical incident.
This type of risks management is basically comprises of following steps;
 Data collection and cleaning
 Statistical Analysis
 Failure Mode Effect Analysis (FMEA)
 Discussion on outcome
These steps are describeb in details in the subsequent sections
c) DATA COLLECTION AND CLEANING
This is the first step, where data collection is made and cleaning of the data is being done for
analysis. In this problem plant operation data was collected for one year, which include the
performance, Mean Time Between Failure (MTBF), reason behind failure.
Then data cleaning was done for following reasons;
 to remove the outlier form the data set to get the good quality of the data
 to remove the data points which do not satisfy the pre-conditions of the production processes
During this process out of 35582 data point 33342 data came to be of good for the analysis purpose.

d) STATISTICAL ANALYSIS

The objectives of the 'Statistical Analysis' were;

 To identify the parameters which have impact on the production process outcome
 To classify the impact of parameters in High, Medium and Low
 To identify the probability of occurrence of the cause of failure

This problem is a classification problem along with the identification of the impact. Hence,
Regression Analysis was done to achieve this objective over Factor and Cluster Analysis.
During the process of analysis, correlation analysis was done to identify the multicollinerity in the
dataset. Also this helped in identification of unknown risks.

Then based on the collected data of failure, Pareto Analysis was carriedout to identify and rank the
potential causes of failures with the probabilities of occurrence. These probabilities are fact based of
hence are correct and free form error due to expert judgement. Still one major component of FMEA,
detction probability left for expert's judgement.

In this problem out of 60 parameters, 37 parameters came out to be significant i.e. those factors
have impact on the preformance of the process and 22 parameters came out to have negative impact
on the performance i.e. these parameter related events are candidate for nect step i.e. Failure Mode
Effect Analysis(FMEA).

e) RISK MANAGEMENT WITH FAILURE MODE EFFECT ANALYSIS (FMEA)

Failure Mode Effect Analysis (FMEA), is a tool for the risk management. Also an FMEA is often
the first step of a system reliability study. It involves reviewing as many components, assemblies,
and subsystems as possible to identify failure modes, and their causes and effects. For each
component, the failure modes and their resulting effects on the rest of the system are recorded in a
specific FMEA procedures. An FMEA can be a qualitative analysis, but may be put on a
quantitative basis when mathematical failure rate models are combined with a statistical failure
mode ratio database.
A few different types of FMEA analyses exist, such as

 Functional
 Design
 Process FMEA.

A successful FMEA activity helps to identify potential failure modes based on experience with
similar products and processes—or based on common physics of failure logic. It is widely used in
development and manufacturing industries in various phases of the product life cycle. Effects
analysis refers to studying the consequences of those failures on different system levels.

There are three different components of an FMEA. These are;

 Severity (S)
 Probability of occurrence (P)
 Detection Probability(D)

Based on these Risk Pririty Number (RPN) are calculated, (RPN = S*P*D). The risk priority
numbers are the quantitative values of risk associated with particular parameters.

The same procedure was applied here to identify the parameteres with potential risks. Based on the
hiher RPN values the top parameters were idetified, incase of tie, the parameter with 'Low value of
Detection Probaility' was put in top. By applying this technique, 15 potential high risk negative
parameters were identified. Based on the privious experience, technical and process expertise, some
corrective and preventive measures were take to address the issue.
In this was data driven FMEA was carried out to address the burnig issue.

f) RESULTS AND DISCUSSION

Data was collected after three months of the implementation of corrective actions. The results is
summarized as;
Key Process Performance Indicator Before After
Average Run Time (ART) in Hrs 7 9
Median of MTBF in hrs 8 11
Median of MTTR in hrs 32 27

The data shows that there is a positive trend in the proformance of the process outcome and
performance of the machine. This is due to the effective FMEA implementation driven by data.
CONCLUSION
This paper describes how fact based analytical approach was used to solve a classical statistical
problem to identify the key influencers who have positive and negative impact on the production
process. Regression analysis was found to be most appropriate method to analyze the data to find
out the significance and classify the parameters of influence. The Outcome of the analysis was used
to identify the potential risk of the production process with the help of FMEA.The identified risks
View publication stats

were then managed using FMEA and the potential risks were addressedwhich eventually improve
the overall performance.
This data driven risk management activity have several advantages over the traditional experience
based risk management activity. With the help of data driven risk management, the issue of
biasnessarisning out of traditional risk management can be addressed. Also some unknown risks can
be identified and resolved with the data driven risk management.

REFERENCES
[1] Rawlings, John O.; Pantula, Sastry G.; Dickey, David A., eds. (1998). Applied Regression
Analysis. Springer Texts in Statistics. doi:10.1007/b98890. ISBN 0-387-98454-2
[2] Maravelias CT, Sung C (2009) Integration of production planning and scheduling:
overview challenges and opportunities. Computers Chemical Engineering
33:1919–1930
[3] Hatzikonstantinou O, Athanasiou E, Pandelis DG (2012) Real-time production
scheduling in a multi-grade PET resin plant under demand uncertainty.
Computers and Chemical Engineering 40:191–201
[4] Jahangirian M, Eldabi T, Naseer A, Stergioulas LK, Young T (2010) Simulation in
manufacturing and business: a review. European Journal of Operational Research 203:1–
13S
[5] Rolo M, Martinez E (2012) Agent-based modeling and simulation of an
autonomic manufacturing execution system. Computers in Industry 63:53–78
[6] D.C. Montgomery and E.A. Peck. Introduction to linear regression analysis. Wiley, New
York, NY, 2014.
[7] Fadlovich, Erik (December 31, 2007). "Performing Failure Mode and Effect Analysis".
Embedded Technology
[8] "Failure Mode Effects Analysis (FMEA)". ASQ. Retrieved 2012-02-15
[9] AE (2008). Potential Failure Mode and Effects Analysis in Design (Design FMEA) and
Potential Failure Mode and Effects Analysis in Manufacturing and Assembly Processes
(Process FMEA) and Effects Analysis for Machinery (Machinery FMEA). SAE
International