2. RISK Criteria Establishment Guideline

7/25/2019 2. RISK Criteria Establishment Guideline

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KANGEAN ENERGY INDONESIA

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KEI-GN-QS-PRC-XXXX

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PSM

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RISK CRITERIA ESTABLISHMENT

GUIDELINES

APPROVAL SHEET

Name Title Date Signature

Rev Date Description Prep. Review App

Kangean Energy Indonesia


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Risk Criteria Guidelines Rev.A Page 2 of 17


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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


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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


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No table of figures entries found.


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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 theKEIand 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


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KEIGNQS-PRC-XXXX

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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


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5. Characteristics of Successful Risk Management Approaches

5.1Assess the root causes of program risks and develop strategies to manage these risks

during each acquisition phase.

5.2Identify 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

5.4Use technology demonstrations, modeling and simulation, and aggressive prototyping to

reduce risks.

5.5Include 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 analyzerisks 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


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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:

6.1List WBS product or process elements,

6.2Examine 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


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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 definedacquisition tasks. This factor includes the effects of programmatic schedule


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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


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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 akey 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.


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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 wereboth 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


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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)

8.2Schedule (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;


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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

8.3Cost (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.

8.4Assemble 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 below8.4.1 Risk Matrix


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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 Actual Score

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 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 Weighted Score

Potential for Harm 5 60% 3

Level of Non-conformances 6 15% 0.9

Ability to Detect Deviations 2 25% 0.5

Adequacy of Staffing Levels 5 10% 0.5

TOTAL SCORE (1 to 10) 4.9


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Originator Revision DateKangean Energy Indonesia

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

37, 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

2. RISK Criteria Establishment Guideline

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