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Six Sigma Training - Enterprise Risk Management Applications Part 3
Six Sigma Training - Enterprise Risk Management Applications Part 3
The fourth component of Enterprise Risk Management (ERM) applications will be explored here. Six Sigma Training is an effective tool in all areas of risk management, and there are eight basic elements to cover throughout the process. So far, it has been explained how Six Sigma Training and tools can benefit Internal Environment, Objective Setting, and Event Identification. The next principles of risk management to be explored include: Risk Assessment, Risk Response, Control Activities, Monitoring, and Information and Communication. In this article, you will learn about the effectiveness of Six Sigma Training in regards to Risk Assessment.
Risk Assessment within Enterprise Risk Management can be addressed using three basic tools of Six Sigma Training. Doing a risk assessment will allow any organization to predict and prepare for events that could affect the organization's ability to meet strategic and operational objectives. Six Sigma Training involves three tools that can quantify methods of risk assessment for an organization. The first is the Cause-and-effect matrix, which can identify critical parts of a process. It also gives numerical scores to various parts of the process to determine which create the greatest risks. The input is also scored, which refines the potential risk areas even further.
Next, the Risk matrix can be used to create a scale which quantifies the ability of an organization to identify risk sources and how able and willing they are to manage those risks. There are twelve points of risk assessed, which are numerically scored to determine which areas need to be the focus of risk management principles. The final Six Sigma Tool that can aid an organization in assessing the risks that they have is known as FMEA. Failure Mode and Effects Analysis is designed to help evaluate the actual risk of various steps within a process or plan within the organization. Potential failures and effects are noted and numerically scored based on their overall impact, and then potential causes are identified and scored to determine how likely they are to occur.
After these two events are scored, the as-is controls and processes are scored numerically to determine how well an organization can avoid, mediate, or predict these potential failures. The three scores of these Six Sigma Tools will be multiplied together, giving the organization a Risk Priority Number (RPN). The Six Sigma Training and Risk Assessment tools are much more concrete methods for determining the risks an organization has than traditional methods that provided a qualitative analysis rather than a quantitative one.