Importance Of Risk Management

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Chapter3 - Risk Based Management Thinking in NPD
Introduction to Risk Management
Definitions:
Risk:
“Effect of uncertainty on objectives”. [BIB-02]
Note1 – An effect is a deviation from the expected positive and /or negative
Note2 – Objectives can have different aspects (such as financial, health and safety, and environmental goals) and can apply at different levels (such as strategic, organization-wide, project, product and process).
Note3 – Risk is often characterized by reference to potential events and consequences, or a combination of these.
Note4 – Risk is often expressed in terms of a combination of the consequences of an event (including changes in circumstances) & the associated likelihood of occurrence.
Risk is an uncertain future …show more content…
Importance of Risk Management in NPD
Risk management has an effect on New product development cycle time.
Overlooking or Under-Managing risk leads to increased uncertainty about project completion dates, excessive cost, an increase in the estimated lead time or a total project collapse.
Over-Managing risk can lead to lost market opportunities because the longer than necessary lead-time means that market conditions have changed.
Product lead-time frequently determines whether it is market or technological risk that is important.
Products with short lead-time such as computers; calculators and computer games are less likely to attract high market risk because the market requirements have a relatively small chance of changing during new product development. The early the product release to the market increases predominantly the technological risks.
Changing market conditions are likely to be a major risk factor in long lead-time projects.
Some of the typical risks during new product development process are Pre-development, project budgeting and approval; start-up, management, product delivery and …show more content…
Technological risk is concerned with the possibilities that:
- An adequate technical solution cannot be identified for one or more of the product’s sub-systems.
- An identified technical solution turns out to be inadequate on functional, cost, time for development, or other grounds;
- A supplier of a key sub-system or component fails to provide a suitable solution.
- Most difficult problems arise from incompatibilities at the packaging interfaces between sub-systems and each of these interface should also be included as a risk element.
- Determine the probability of not being able to make the element work in the required manner by the overall system. Determine the consequences of such a failure for the project.
- In most cases the discussions about the probability of failure and consequences will be subjective. Reach decisions by informed discussions and consensus.
- Assessment must include technology incorporated into mechanical elements, electronic, electrical, difficulty of providing production systems, materials
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