Systematic Risk Management Blog

Video: How Systems-Based Risk Management Sees the Full Picture

Posted by Vernon Grose on Tue, Mar 12, 2013 @ 11:03 AM

The systems approach to risk management seeks totality of understanding. Put another way, systems-based risk management means seeing the full picture.

The objective is omniscience, or unlimited knowledge of a system, its use environments, and its risks. This idealistic goal is never reached, of course, even though it is vigorously pursued.

 Video: Why Risk Management Must See the Full Picture

Two quite different kinds of understanding are combined to obtain a complete picture.

Theoreti­cal understanding is related to comprehending how all the elements in a system (for example, physical plant, products produced, personnel employed, management policies, and ac­counting methods) are intended to interact with one another. In contrast, practical understanding is knowing how these factors actually work together in a real world.

These two contrasting attempts at understanding were once dramatically illustrated while I was Director of Reliability for Litton Industries back in the early 1960s. The company had pioneered the first miniaturized inertial guidance system for fighter aircraft.

risk management montage

Inertial systems are extremely sensitive devices. Litton’s systems were built in a unique new facility where it took workers a full week just to check them out. Checkout took place on a seismicly isolated rate table (free from any vibration within the building] in a temperature-controlled “clean room” (free from any particles larger than a micron). After checkout, each system was tenderly placed in a special shockproof container and shipped to Lockheed for installation in the German Luftwaffe F-104G being assembled at Palmdale, Cali­fornia.

Early in the program, my boss had asked me to visit Palmdale to find out why we were having so many odd problems with the system. Nothing seemed to fit any pattern of failure.

As I stepped off our company aircraft on the hangar apron at Palmdale, a 110° desert wind whipped sand into my face. A yellow three-wheeled scooter with a little cargo space in back caught my attention. Its driver, obviously happy and con­tented, was whistling as he drove across the tarmac at a fair clip.

Each time he hit one of the tar strips on that huge apron, he, the scooter, and its contents bounced up in the air.

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I continued to watch him as he headed in my direction.

When he got close enough for me to see what he was transport­ing behind him, I nearly fainted. It was one of our inertial guidance systems—without its special transportation case! Each passage over a tar strip had given it an unscheduled shock test.

“If they could only see it now,” I said under my breath while thinking of all the scientists, engineers, and technicians at home—those with only theoretical understanding.

I was gain­ing practical understanding. We tried to combine the two when I got home. Litton eventually obtained a more complete (but not necessarily total) understanding of its system.


Managing Risk by Vernon Grose

Topics: systems-based risk management, risk management, systematic management of risk, Risk Extraction, classical risk management, systematic risk management