Risk assessments Six Sigma style: internal auditors at Textron used modern process development methods to enhance the way they assess the organization's risks.

Author:Jolin, Joseph J.
 
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OVER THE PAST SEVERAL YEARS Textron Inc.'s Audit Services Group has been engaged in a transformation effort to better align its products and services to meet the needs of its various customers. Like most companies, Textron is being challenged to respond to the rapid velocity of change, and its associated risks, on an ongoing basis. The Providence R.I.-based company operates in the aerospace, defense and intelligence, industrial, and financial sectors, and has 35,000 employees in 28 countries with 2008 revenues of US $14.2 billion.

In the changing environment, senior management and the audit committee look to the Audit Services Group to provide assessment and assurance on a broad range of risks. To meet the demands of this changing environment and to ensure stakeholder requirements are consistently being met, Audit Services used the Textron Design for Six Sigma (DFSS) methodology to create an optimum risk assessment process for the company.

Textron DFSS is a seven-phase process with specific gate review requirements. It includes a set of tools that provides an opportunity to fully explore a new process design--or a redesign of an existing process, product, or program--by constantly balancing customer requirements, business requirements, diversity of feedback, process feasibility, change management, and potential design concepts to provide the optimal solution. The Six Sigma tool set provides process owners with data and concrete methods to evaluate the different options and document reasons for decisions made along the way. This data-driven approach to decision-making removes the subjectivity while also providing a means to directly compare and contrast conflicting opinions or requirements. The documentation of the design thought process also provides a solid foundation for monitoring progress over time and for future improvement efforts.

REDESIGNING ASSESSMENTS

The first phase of the DFSS risk assessment project focused on gaining a solid understanding of customer and business requirements. During this phase, a project team was created that not only included Audit Services staff members, but also business unit and corporate participants. Broad participation allowed Audit Services to understand value drivers from an audit client's perspective, which was a critical early step, as there were multiple customer groups with many different opinions. The project team took advantage of Six Sigma screening tools to synthesize and prioritize responses, gleaning the most important customer wants:

* Reduce cost of audit.

* Identify risks that matter most to management.

* Incorporate the broadest set of facts in a risk assessment.

* Make the audit plan transparent.

In the second and third phases of the project--conceptual design and feasibility and preliminary design--the team developed the functional requirements of the risk assessment process necessary to achieve what was critical to client satisfaction. These functional requirements helped to organize the pieces of the puzzle into manageable activities and...

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