Page 20 - RMAI Bulletin July 2024

RMAI BULLETIN JULY 2024

3. Risk management principles and tech- and reviewed. Common risk mitigation strategies
niques for innovative projects include (Ahmed, 2017):

The specific risk management framework differs Risk transfer allows the risk owner to allocate
between authorities, governing bodies, and the risks to other parties such as through con-
organisations. However, the generic risk manage- tractors or indemnification firms.
ment framework that can be implemented for Risk hedging is an act of reserving and reduc-
new product development and commercialisation ing the risk of a project.
systems in any industry entails the following six Risk avoidance will involve adjusting or chang-
elements (Mazzarrol & Reboud, 2019): ing the scope of the project to avoid or elimi-
1. Establishment of context: whether the risks nate the risks.
being managed are part of a project or an Risk control is common in technology or en-
organisational impact?
gineering industries where tools and actions
2. Risk identifications: identify all the potential are undertaken to manage the risks to a re-
hazards and its causes. duced level.
3. Risk analysis: outline the likelihoods, conse- Risk acceptance is the final resort when a
quences, controls and level of residual risks. project cannot implement any of the risk miti-
4. Risk evaluation: the risks can then be quali- gation strategies above and to continue the
tatively and quantitatively evaluated, and a project, the risks have to be accepted.
decision can be made on whether the residual
level of risk is acceptable. D. Conclusion
5. Treat the risks: the suggested controls are It is evident that risk management is essential to fuel
then implemented to mitigate or eliminate innovative growth of any industries. New products,
the risk. services and digital tools are continuously entering the
6. Monitoring risks: monitoring and revision of market. These opportunities are important for firms to
risks and required actions are undertaken at grow and thrive above competitors in the market.
an appropriate interval. The main innovation risk management actions that
organisations can adopt include organisational change
There are various tools and models that can be to promote continuous improvement and ensure long-
used for risk analysis and risk evaluation to aid in term value in the chain with a risk specialist engaged
decision making. The most common method for throughout all stages; risk appetite should align with
qualitative risk analysis is the usage of risk matri- strategic objectives and senior management should set
ces where the probability or the likelihood and the these clear in the earliest stage of the innovation cycle
severity of consequences of the risks determine but also should be open to adjusting the tolerance; and
the level of risk as low, medium or high. Other finally, risk modelling should be implemented in risk
qualitative techniques include risk mapping, Fail- mitigation as it allows all variables to be identified and
ure Mode and Effects Analysis (FMEA), and more. to build trust in design where risks are expected and
As for quantitative risk analysis, statistical analy- controlled in the design already.
sis of data is required to conduct such as Monte
Carlo simulations, Null Hypothesis and Methods of Additionally, although it is common to have innovative
moment (Bowers and Khorakian, 2014). risks, SMEs face a different horizon as they are limited
in resources compared to larger corporations and a
The controls implemented as part of the risk miti- rigorous planning should be undertaken using various
gation program intend to reduce, manage, or risk management tools such as Decision Tree Analysis.
eliminate the risks. The risk register is a list of all Lastly, a generic risk management framework has been
the potential risks along with the risk mitigation discussed and the element of the framework is appli-
strategies and actions to be continually monitored cable to innovation projects of all sectors.

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