Page 19 - RMAI Bulletin July 2024

RMAI BULLETIN JULY 2024

vation projects and introduction of innovative Risk modelling:
products or services in any organisations. Today, Risk models exist for the purpose to incorpo-
it has been widely accepted that risk management rate variables, predict possible outcomes, and
should be embedded in all stages of product de- giving guidelines to judge the risk (Harvard
velopment and throughout the value chain (Ivell, Business Review, 2013). It is without a doubt
2021; Brachio, 2020). The core actions identified that innovation and risk models have limita-
to be effective in driving innovation and prepar- tions and are not expected to forecast all the
ing organisations managing the risks are: possible scenarios. However, risk manage-
Continuous improvement ment can be made explicit in the innovation
Agile working method is a productivity method project by incorporating these models to
that IT professionals commonly adopt where evaluate the risk levels and exposure qualita-
the institution or the project is in a constant tively and quantitatively. This leads to what
state of development. This working method essentially is known as a safer design. This al-
can engage a risk manager that can be engaged lows project teams and risk managers to work
throughout the whole process to support the together and embed risk controls into the
growth of an innovation project or product. A product or service design. Hence, this is a
risk manager's role in the team is not to deter proactive approach to managing risks as po-
creativity but to their expertise lies in identify- tential risks are predicted in advance and con-
ing the right solutions to promote long-term trols are built into the design to mitigate or
value (Brachio, 2020). Risk managers can con- eliminate the risks entirely.
tinuously engage in development, testing, vali-
dation, and implementation as well as continu- 2. Innovation risk management in differ-
ous review and improvement of product. How- ent sectors and organisations
ever, this ties in with preparation of infrastruc- Innovation risk management can vary between
ture as organisations aim for long-term value different sectors and within that, between differ-
creation. Businesses should ensure that infra- ent sizes of organisation. Small and medium sized
structure is available for future process im- enterprises (SMEs) including new start-ups or en-
provement and enhance user's experience. trepreneurial ventures. Due to limited access to
Risk management should then be continuously talent, finance, and information, these firms face
monitored, and product should be reviewed as a higher multitude of risk for the same innovation
part of the agile working method to maintain in comparison to larger corporations (Brown,
the asset.
1997). Risk investment in SMEs are also limited to
financial factors as that is major source of failure
Risk appetite: (Mazzarrol & Reboud, 2019). However, SMEs are
A risk appetite should be explicit and align adept to deal with these risks and are typically
with strategic goals of the institution. To man- dealt with through formal planning. Tools that are
age innovation risks effectively, it should be available to smaller firms including audit frame-
clear what the project or the institution's tol- works and organisational change to focus continu-
erance to risks is to ensure that creativity is ous improvement. In an investment-based envi-
not deterred but encouraged (PwC, 2018). ronment with a high degree of uncertainty such
Senior management including risk executives as that of ventures, a risk management tool known
should also be opened to frequently adjust as Real Options Reasoning which allows investors
their risk appetite and tolerances with mem- to reserve an option to make future investments.
bers of the board. Important questions to ask Similar techniques to Real Options are the First
including, but are not limited to, what risks Chicago Method and the Decision Tree Analysis
can be negotiable? What is the institution's which are considered more useful as it is able to
budget for risk management? When should quantify the risk of the venture.
red lines be drawn?

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