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Block 3, Sessions 9 & 10 -
Quality and Improvement
& Operational…
Block 3, Sessions 9 & 10 -
Quality and Improvement
& Operational Risk
What?
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Identify and critique improvement methodologies through looking at the chronology of methods developed in the last few decades
Some problems and uncontrollable events occur less frequently but when they do they can have a major impact on the operation or even threaten the organisation’s viability. We refer to these types of problem as operational risk.
concept of operational risk, how organisations identify it and what can be done to manage it.
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Quality
Quality is important because, simply put, any organisation that has ongoing issues with quality will ultimately suffer in a range of ways
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Many organisations target quality issues and defects in an effort to reduce them to a minute level, often using techniques such as ‘Six Sigma’
Define as a measure that compares the intended or expected outcome of a process with the actual outcome
Quality management
organisations need to look at internal measurements and improvements, but when considering the quality of the product or service the customer experience or perception also matters
This customer-focused definition is very different to the more technical and process-driven view of quality, which might include such terms as ‘right first time’ and ‘defects per thousand’
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must consider quality from the perspective of the customer and define what quality means in terms of what the customer needs
Cost of quality
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One approach to delivering quality products or services is to aim for perfection - Lean manufacturing techniques take the view that it is less expensive to meet the needs of customers than to not meet them
The general message is that the prevention of failure is almost always significantly less expensive than allowing the failures to occur.
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Quality systems
Developing suitable strategies to deal with quality can be costly and requires expertise. As such it is common for an organisation to utilise an externally designed and approved quality system.
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Strategic improvement
One of the best tools to do this is the importance-performance matrix (Slack, 1994), which is a powerful method (diagnostic tool) of bringing together market requirements and operations capabilities so that gaps can be identified and addressed.
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Larger-scale improvement activity needs to closely match the operations improvement activity with the market requirements
Improving the quality of products or services is important to organisations because it can, for example, significantly leverage cost and positively influence other aspects of performance, such as the ability to deliver quickly or reliably
Stage 1: Judge the importance of performance measures to customers
Stage 2: Judge the performance against competitors
Stage 3: Match performance against characteristics
Stage 4: Develop improvement plans
Operational Risk
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When considering the potential impact of possible hazards, organisations need to consider different areas of the operation that may be affected - impact matrix
Estimating the chance or likelihood that something will happen is difficult to do with any accuracy - likelihood matrix
• Resilience is the ability at an individual and organisational level to respond to and withstand unwanted events (Burnard and Bhamra, 2011).
Despite the complexity of accurately assessing risk there are only three broad approaches for managing it:
- reduce impact
- reduce likelihood
- plan to recover
• Risk can be thought of as the potential for an event to result in an unwanted/negative consequence. (extent and likelihood)
Sources of operational risk
- Supply failures
- Failures within the operation or process
- Product/service design failures
- Customer failures
- Environmental disruption
Organisations need to understand what could occur in order to work out how to prevent or reduce their likelihood of happening and mitigate their impact if they do.
Assessing risk
The accuracy of the evaluation will depend on those undertaking the assessment possessing a high level of understanding of the operation and the things that can affect it.
Regardless of the type or focus of the risk you are assessing, the process is essentially the same:
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Despite being a relatively simple process to understand, implementing a risk assessment can become complex and involved. Many organisations apply tight guidelines to how risk should be assessed.
One of the challenges organisations face in assessing operational risk is ensuring that their evaluations of the likelihood and impact of hazards are produced to a high quality - accurately and objectively
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Operational risk is the potential for an issue or event to result in unwanted or negative consequences for an organisation (Moore, 2017)
Operational resilience
operational resilience management (ORM) programme designed to ensure an organisation can, ‘in the face of realized risk, … [maintain] continuity of essential operations of high-value services and their associated assets’ (Allen, 2017, p. 2)
Julia Allen (2011)'s research focused on three simple questions:
- How resilient is my org?
- Have our processes made us more resilient?
- What should we measure to determine if our performance objectives for operational resilience are being achieved?
To manage the program, Allen outlined five objectives and 10 measures that support the objectives.
The program is seen as important and critical because it is supporting or protecting the organisation’s strategy.
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The program focuses on the most important elements of the business, and the different services and assets are treated differently according to their importance, not the level of risk
In short, if the worst thing happens, the elements of the operation considered high value will have detailed plans to ensure they can carry on, even at the expense of other elements.
Operational resilience is the ability of an organisation to respond to and withstand unwanted events (Moore, 2017).
The inferences here are clear, not all risk is equal. It asks, which parts of the operation are essential to keep things moving? The program then tests the systems and procedures in place to make sure the essential services and assets are protected and, where a weakness is found, it creates a plan to deal with the potential impact.
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