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1.1 Introduction about the topic
It is commonly understood that the new product development are always risky endeavors and the management of them is one of the critical task for the top management. The new product development is always a risk undertaking, business enterprises need to focus more in managing the risk by using various risk management procedures. It is viewed that the company which manages their risk with regard to new product in a better manner is less vulnerable to risk and always achieve more profit in the long run. However, it is noted that most of the new product developments have failed to a large extent like delivery time of the product, budget over run, not achieving the required outcome as intended by the management. (Patanakul, 2010). It is well stated that the new product development projects undertaken by the management are high risk endeavors and the management of risk is very vital for such projects. In most of the cases, the understanding of the risk is mainly stated in the standard operating procedure which is mainly comprised of various mechanically performed tasks. These types of process usually involve three important stages:
1.The first step is to forecast the individual risk
2.The second step is to assess the importance of each risk
3.The last step involve in identifying the appropriate risk management process to overcome them
The management of the business enterprise should involve in understanding and identifying the risk which tends to affect the new product development assignment’s overall ability in achieving the stated objectives, once this is done, the management will need to assess the overall likelihood of the happening of such risk, and the consequences which may emerge. Lastly, the management needs to employ various risk management procedure so as to provide the response in addressing the risk.
1.2 Purpose and objective of the report
The purpose of the report is to analyses the validity of the statement that new product development projects are very risky and the risk management procedures which is employed by the company will assist in reducing the risk and tend to achieve the stated mission and objective of the management. (Evans, 2009). This report tends to source various literatures and business journals to understand how the risk management procedures are employed by the organisation, with specific focus on the information system project and also identifying the advantages and disadvantages of risk management procedures. This report will analyse through various secondary sources for collating and identifying the relevant data.
1.3 Information sources uses
The information sourced which is used for this report is mainly secondary sources. The research scholar will collate data from various research reports from ProQuest, online databases, journal articles, business magazines, Harvard business review in online format etc.
The report is mainly involved in the discussion of the risk management procedures which are implemented by the organisation towards information systems project. Therefore, the data used is mainly secondary data sources. The time available to complete the assignment is very short. Therefore, only few secondary data sources are used and not all the journals are reviewed and used.
2.1 Key words definition
Project management: Project management is stated as the overall discipline which is involved in initiating the issue, planning from the management, executing the process, controlling through risk management process and completing the task so as to achieve the specific task
Risk: Risk is stated as the possibility of threat or injury or any other negative outcome due to the involvement of various internal and external factors. (Project Management Institute, 2013)
Risk management: Risk management is defined as the practice employed by the management for understanding the potential risk and take necessary steps to reduce them so as to achieve the necessary objectives.
Tools to prevent risks: The various tools which are available in the hands of the management to prevent the risk is to analyse the cause and effect analysis; failure mode analysis; six sigma technique; SWOT analysis; Predictive analysis etc.
Risks in information systems:The significant characteristic of information system developments is that they are mostly complex in nature which has many mutually connected process and stakeholders. There exist lot of ambiguity and immanency; these should be realized within the specified time schedule and in the manner in which the framework is stated by the management. Therefore the project of information system is highly complex and is liable to immense risk. (Tran, 2014).
The scholar will access various online data base like Ebscohost, Proquest, Scopus index journals, Google scholar database, Online library etc.
The scholar will also access various journals and business magazines like Harvard business review, Journal of project management, Journal of information technology, journal of information systems and transformation etc.
The first step is to create the effective risk management system through the implementation of effectual quality distinctions by understanding the various types of risk which is present in the new product development; it is identified from the different literatures the risk is categorized into three unique categories. It should be noted that the risk involved in the new product development is high and in case of information system even higher, the risk event in any form can be highly fatal to the strategy of the company.
2.2 Category I: Preventable risks.
The preventable risks are mainly internal in nature and they are mainly arising from inside the organisation. These types of risk are always controllable and they can be eliminated if planned carefully. For example, risk arising from the employees unauthorized access or operations performed, risk from breakdown during the operational process etc. Therefore, the company needs to focus on implementing severe procedures like creating tolerance levels, identifying the possible errors and taking proactive steps to mitigate them. (Hubbard, 2009). The management need to incorporate various internal controls in order to mitigate such risk. In general the management should always divert their attention in completely eliminating the risk as it will create more problems if left unattended. It is identified that such risk can be better management only through the incorporation of active prevention methods. This involves the management to constantly monitor the entire activities, providing proper training and guidance to the individuals so that their behaviors can be properly channelized and enable them to act based on the organisational policies and procedures. (Chang, 2010).
2.3 Category II: Strategy risks.
This type of risk is accepted by the organisation on a voluntary basis in order to achieve huge returns on the new product which they have created. The implementation of information system project is considered as a strategic risk, because the companies tend to take such risk in order to protect the data and information which is available and also to create a unique competitive advantage. It should be noted that these types of risk are highly unique and they are completely different from the preventable risk which was stated above. Usually company focuses in creating unique strategy for gaining huge profits, higher market share, large customer base etc. this requires the management to take some significant amount of risk and taking steps to manage those risk is one of the key aspect. The strategy risk cannot be managed through rule based control model. (Cerpa, 2009). Therefore, the management always focuses in implementing unique risk management procedure which will enable them to deduce the probability of failure of implementing such strategy. Also, this will enable them to enhance their ability to manage the risk events which may occur. Such system will enable the companies to take more risky ventures and also focus in understanding the risk involves in such ventures and enable them to match the risk reward aspect which could facilitate them to out beat competition.
2.4 Category III: External risks.
The third category of risk is the external risk which arises from the events which is outside the purview of the beyond and their control. The major factors of such risk are the natural disasters, major shift in the macroeconomic aspects, political changes, credit crisis etc. The management needs a different approach in order to manage such risk, because the firms cannot able to predict such risk all the event, they need to focus in the identification and mitigation of such risk and reduce such impact in the new product development process. The management needs to implement a tailor made risk management process based on the different categories of risk which were stated earlier. It is widely stated that the compliance based approach is considered as the effective means of preventing the risk, but the business practitioners have stated that such things are said easier than done. (Nelson, 2007)
On a general parlance, the project team and the management may lack the knowledge and expertise to identify the risk which is involved in the new product development projects and therefore they may not take suitable steps to respond to such challenges. Therefore, researchers have stated that there are various stages in the risk evaluation procedures.
The Identification Stage:
This stage is mainly involved in understanding the type of risk which will impact the overall performance of the new product development project. In the information systems, the project managers tend to identify the risk which are more relevant and likely enough in affecting the project. Most of the managers tend to state the risk and concentrate on them which are perceived to be very close, like the manager in the technology division will look for risk which is related to technology and other aspect of risk is usually overseen. (Khan, 2009). Therefore, the critical analysis on the managers point of view states that the project heads tend to focus on the risk which is commonly recognized and the risk areas which they are more familiar and exposed with and they tend to ignore other aspects to which it may be difficult for them to realize.
The Assessment Stage
Once the risk are identified the next step is to assess them in order to determine whether the risk is considered as important, significant, less significant and requires management attention. Usually project management will place colors for various risk assessment. For example, green is provided for the risk which is already mitigated, amber is given for moderate risk and red is given for high risk and which possess greater impact on the profitability of the business. (Cooper, 2008). The project managers tend to provide more weightage, credible and more focus for such risk which is considered as more ambiguous and which needs more management attention. In the information system project, the rollout of various software products or hardware peripherals may cause delays due to compatibility issues, bugs and virus which may not be noticed during the checking time. Therefore, these risks are very high as it may enable the consumers in not buying the product. The risk assessment in such areas may be very weak and the risk which was omitted may cause huge trouble to the company. (Patanakul, 2010)
So it can be stated that the risk management is usually rest upon the management and the project managers in applying their intelligence and logic to understand the risk, the project managers usually tend to attune to risk where the probability of the occurrence of such risk and the impact can be analyzed easily using the available risk identification procedures and mitigating the risk can be achieved with less cost.
From the above analysis of various literature reviews, it can be stated that the risk response stage is highly vital. The risk identification possesses inopportune collision on the overall new product development project outcomes as they may affect the outcome of the project. In order to support the management to identify and mitigate the risk in a better manner, we can state that the project risk management team should possess cross functional representation from various teams. (Morris, 2011). Furthermore, at the early stage the team members should consciously enable in identifying the risk so that determining the subset of each risk will be very effective. Also, in order to overcome the lure of measurable challenge will need the support of the management in estimating the real number of probability. Risk management requires complete focus in identifying the probability for the given number of risk, immaterial of the type of risk. By providing and allocating the correct estimate of the probability will enable the risk management team to forecast the correct risk and take proper actions in mitigating them. The risk management team should focus in providing a quantitative forecast for measuring difficult category of risk. (Cerpa, 2009)
Furthermore, the project managers must be challenging themselves in order to look beyond what is more comfortable to them and they need to find way to come out of their comfort zone. Also, the managers need to assess the risk to apply their intuition in recognizing the risk, despite the difficulty of analyzing the probability. The managers must consider the extreme futures using predictive analytics tool for addressing the outcomes during unforeseen situations. (Hubbard, 2009). Sometimes, the manager must address the lures of optimism and indecisiveness in addressing broader organisational change in introducing the new product development, mainly in the information systems. It should be further noted that risk should not be seen as normal and expected, rather unexpected and unforeseen situations. Also, the managers must involve in taking proactive approach for responding to the risk before such issues kills the project. Managers should not ignore risk which does not materialize, because such risk may affect the business projects in an unforeseen manner. Therefore care should be given for analyzing the responses for such risk and how to categories them. (Khan, 2009)
The recognition is a matter of weakness in the organization. Project managers should be able to make significant activities such replies risk. This form of state sources represents the latitude of mind to act or organizing principle, and supports the action. The first step to tackle and bait obstacles to realize that part of a group or individual project. We have created a tool to help managers to assess the strength of the environmental release of attraction, help and guide role grazing disputes and maintain the Group's risk management process. As studies have standardized tools does not seem to harm the project leaders to exclude known risks in the risk management process. (Morris, 2011). Minimize the role of the family and containment - in order to reduce the risk difference - requires a broader approach with traditional tools and methods. One such device is scenario planning, which can also be beneficial to think beyond the familiar and measurability. The scenario planning exercise, participants are encouraged to identify and consider various possible and reasonable terms, which constructively challenge. (Patanakul, 2010). Compared with the traditional risk management process, this approach is not intended to increase awareness of the unique and specific risk can be managed separately; Instead, more and more abstract approach forecasts extend and help to reduce the effects of the five families. But as many noted, rules and procedures of project management - the waterfall method, called little attention to the potential benefits of creative tools, programming scenarios - including risk management.
Also a further aspect is that the project manages willingness in order to engage with the risk which posse’s greater impact on the business projects. The manager needs to exercise greater control so that the mission and vision of the company, the project manager tend to assume that they lack power and responsibility in responding to such risk, however, it should be noted that they are the one who need to identify and quantify the risk, collate them in a orderly manner and present it to the management.
In our study of critical incidents of large projects, it is found that project managers tend to focus on relevant and measurable, but also to some extent, do not respond to these risks. The analysis of risk management practices, these strains suggests that it is necessary to question the risk management practices. While maintaining the family and described to explain the difference in risk management requirements and actual results may not provide a full explanation. (Williams, 2005) Obstacles are dependent upon active risk management, to a certain extent, the critical context and should be evaluated in all areas. However, our work and the ideas offered, trigger a broader debate about the difference in the risk of existence and trapped. The event generates critical events in a two conditions: either there is a lack of awareness that there is a risk that the known risks, but the decision makers do not act. Often based on risk management, which one can easily count - called maybe buy a major organizational change, to change concepts related to risk management, "attraction, which can be measured.
This assignment has enabled me in understanding the various literatures which has been concentrated in providing detailed information on the risk aspect which the organizations undertake in the new product development projects. Through this assignment, it is evident that the identification and categorizing of the risk is highly important in order to exhibit greater control on such aspects. The main challenges which is faced is the collation of data from various sources, because most of the reports were concentrated from product perspective and less information were available from the information system projects.
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