Risk Management with Lean Methodology

Abstract

In this paper, we propose to use the Lean Methodology to reduce losses due to the uncertainty of possible solutions during the execution of a process that results in a valuable product. According to the Lean principle of amplify learning, risk management is implemented using feedback from process participants in short time intervals. Each such interval is represented by a cycle with stages build-measure-learn; the reaction of process participants in the learning stage improves the build stage in the next iteration. We propose to perform a hierarchical decomposition of risks and introduce two categories of risks: final risk, which corresponds to losses due to uncertainty in the outcome of decisions and indicated risk, which means the deviation of process characteristics from the planned normative values. Two types of characteristics are considered: observable characteristics, which can be directly measured when the increment is reached, and unobservable characteristics related to consumers’ perception of the increment and can be evaluated through surveys. The mechanism for evaluating individual characteristics of the process iteration, aggregating the critical values for all characteristics, and obtaining the indicated risk level based on them is proposed. Options for determining the final risks based on the obtained levels of indicated risks are proposed.