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Monika Rehman R. No 10 Risk Management and Insurance
Monika Rehman R. No 10 Risk Management and Insurance
PRINCIPLES OF RISK
MANAGEMENT AND
INSURANCE
MONIKA REHMAN
RISK MANAGEMENT IN PRODUCT INNOVATION
Product Innovation:
Importance:
Innovation is one of the most important concerns of each organization and its role in the
development and coordination of the market is inalienable Innovation is a process that begins
with the introduction to a plan of an idea and will become a new function and so it differs from
creation
By implementing a risk management plan and considering the various potential risks or events
before they occur, an organization can save money and protect their future. This is because a
robust risk management plan will help a company establish procedures to avoid potential
threats, minimize their impact should they occur, and cope with the results. This ability to
understand and control risk enables organizations to be more confident in their business
decisions. Furthermore, strong corporate governance principles that focus specifically on risk
management can help a company reach its goals.
Creates a safe and secure work environment for all staff and customers.
Increases the stability of business operations while also decreasing legal liability.
Provides protection from events that are detrimental to both the company and the
environment.
Protects all involved people and assets from potential harm.
Helps establish the organization's insurance needs in order to save on unnecessary
premiums.
Risk Management Tools & Techniques:
The brainstorming process, you must assess the risks that could impact your project. ...
Root Cause Analysis.
SWOT. Strengths, weakness, opportunities, threats.
Risk Assessment Template for IT.
Risk Register.
Probability and Impact Matrix.
Risk Data Quality Assessment.
.
Managing Product Innovation Risks:
A product innovation may not attract enough customers. It may fail requirements for quality or
delivery. Profit margins may be too slim or cash flow unsustainable. Too many opportunities
may be lost when other projects are not given support.
Risks of innovation
Innovation isn’t a guaranteed success. There are several factors that may prevent innovation
from being successful, and you have to keep them in mind before taking the leap:
Expense:
New technology, specialized employees, huge shifts in your business’s identity
innovation can be an extremely expensive undertaking, and because increased profits
aren’t guaranteed, it can be risky. During the innovation process, you have to think
about the costs weighed against the potential profits and make the best decision. Ask
yourself the question: Will this create value?
Scheduling:
Innovation takes time, and the time that you spend innovating is time that you’re not
using to focus on your current products, marketing, and sales. If you can’t implement
your innovations quickly and efficiently, you can risk failing to meet your quotas and
falling behind on your schedule losing profits and the trust of your customers and
investors.
Instability:
Innovative idea generation can be exciting, but if businesses are constantly making
huge innovations, they may never find a stable identity or market and it will be hard
for customers, investors, and 3employees to keep up with their changes. It’s all about
innovation management; a stable business identity is important for generating profits,
so it’s vital that you choose your new innovations carefully and deliberately, rather
than saying yes to every new thing that comes your way.
When it comes to the relationship between innovations and risk, these two seem to go hand in
hand. Every innovation faces a lot of risk throughout the whole innovations process. The time
factor plays a big role since risk can directly be related to the length of the innovation
process/project. The more time passes between the idea, its development, and the final launch,
the more risk elements may emerge, and more things can go wrong. Looking at this innovation-
risk relationship, we can approach it from two different aspects:
Risk of Failure:
Of course, the risk of failure is obvious. Innovation without success doesn’t benefit your
business, now does it? First things first, make sure that your innovations are in line with
your business vision and mission as well as with your business strategy. Next, define
your innovation strategy and scan for all risk factors. Let’s make one thing clear, it is
impossible to take all of the risk factors into consideration, but at least try and list the
main ones, and keep track of them. Types of risk that can impact the success of your
innovation are market risk, credit risk, operational risk, strategic risk, liquidity risk,
regulatory risk, reputational risk, political risk... They can be internal, external, you
name it. Risk is everywhere. But even if you have an aversion towards risk, and a low
tolerance level, keep in mind that there are two sides to risk, not just the negative one.
With it, risk also brings a chance for success. The Chinese character for risk perhaps
best illustrates its true meaning. It is combined with two characters, one to symbolize
danger and the other an opportunity.
After the company's specific risks are identified and the risk management process has been
implemented, there are several different strategies companies can take in regard to different
types of risk:
Risk Avoidance:
While the complete elimination of all risk is rarely possible, a risk avoidance
strategy is designed to deflect as many threats as possible in order to avoid the
costly and disruptive consequences of a damaging event.
Risk Reduction:
Companies are sometimes able to reduce the amount of damage certain risks can
have on company processes. This is achieved by adjusting certain aspects of an
overall project plan or company process, or by reducing its scope.
Risk Sharing:
Risk Retaining:
Sometimes, companies decide a risk is worth it from a business standpoint, and
decide to keep the risk and deal with any potential fallout. Companies will often
retain a certain level of risk if a project's anticipated profit is greater than the costs
of its potential risk
All risk management plans follow the same steps that combine to make up the overall risk
management process:
Establish Context:
Understand the circumstances in which the rest of the process will take place. The
criteria that will be used to evaluate risk should also be established and the structure of
the analysis should be defined.
Risk Identification:
The company identifies and defines potential risks that may negatively influence a
specific company process or project.
Risk Analysis:
Once specific types of risk are identified, the company then determines the odds of them
occurring, as well as their consequences. The goal of risk analysis is to further
understand each specific instance of risk, and how it could influence the company's
projects and objectives.
Risk Assessment and Evaluation:
The risk is then further evaluated after determining the risk's overall likelihood of
occurrence combined with its overall consequence. The company can then make
decisions on whether the risk is acceptable and whether the company is willing to take it
on based on its risk appetite.
Risk Mitigation:
During this step, companies assess their highest-ranked risks and develop a plan to
alleviate them using specific risk controls. These plans include risk mitigation
processes, risk prevention tactics and contingency plans in the event the risk comes to
fruition.
Risk Monitoring:
Part of the mitigation plan includes following up on both the risks and the overall plan
to continuously monitor and track new and existing risks. The overall risk management
process should also be reviewed and updated accordingly.