Risk Management Assignment

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

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

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