1. Project Risk Management in New
Product Development
Amirhosein Emami
Fateme Askarzadeh
Abazar Farahani
Mahsa karimpour
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2. Introduction
NPD starts with market opportunities
and technical possibilities.
Uncertain information
Precise information
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3. Financial Risks
Interest Rates
FOREX
Credit
Liquidity & Cash Flow
Regulations
Culture
Board Composition
Operational Risks
Strategic Risks
Competition
Customer Changes
Industry Changes
Customer Demand
M & A Integration
R & D
Intellectual Capital
Contracts
Natural Events
Supplies
Environment
Hazard Risks
Recruitment
Supply Chain
Products & Services
Public Access
Employees
Properties
Accounting Controls
Information System
Internally
Driven
Some risks can
have both external
and internal
drivers. Hence,
those risks overlap
in two areas.
To combat these
risks, Risk
Management has
become a core
business process.
Risk Types
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4. The Organization's Strategic Objectives
Risk Assessment
Risk Reporting
Threats and Opportunities
Decision
Risk Treatment
Residual Risk Reporting
Monitoring
Data
Analysis
Business
Research
Risk Analysis
Risk Identification
Risk Description
Risk Estimation
Risk Evaluation
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5. Risk Management in New Product
Development
Why research and
analysis before new
product
development
New product development is linked with
very limited historical or preliminary
data. Hence, risky
Risk can be in form of market, technical, or
organizational issues. Risk analysis solves
the problem through flexible modeling,
primary and secondary research.
A good strategy is a must for evaluating
and dealing with the associated and
unavoidable risks.
Research conducted to understand
customer needs and develop a new product
is different from research required to
launch a new product.
Product development research is focused
on needs of customers while launch
research focuses on understanding the
motivation and attitudes of early adopters.
Successful targeting of early adopters
builds the fountain for new product
success.
New product have a very high failure rates.
Products fail, not because of technical
shortcomings, but due to absence of
market.
Over 60% of new product fail before entering
the market, and out of the remaining 40%
that do see the ray of light, 40% fail to yield
profit and are withdrawn from the market.
Timely and reliable knowledge about
customer preferences is most important.
Such data is obtained from business
research.
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6. Environment
Constituents of the Business
Environment
External Internal
Socio-
Economic
Regulations Technology Competition Structure Processes Culture
•Companies operate in a dynamic business environment which forces
them to adopt risk management measures.
•The business environment is both external and internal to a company
and an adverse change in any of the above mentioned constituents can
increase the risk levels for the company.
12. Schedule buffers
Critical Chain Project Management (CCPM)
CCPM helps to overcome following phenomenon:
- Parkinson’s Law: Work expands to fill the available time.
- Student Syndrome: People start to work in full fledge only when
deadline is near.
- Murphy's Law: What can go wrong will go wrong.
- Bad Multi Tasking: Bad multitasking can delay start of the
successor tasks.
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14. SCHEDULE BUFFERS
The effectiveness of the schedule buffer is
realizing that it is not mainly a calculation
device, but a tool to change attitudes.
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15. Budget contingencies
Buffer for errors in cost estimates
Budget reserve: 5 to 10% of the estimated cost
(20% in early phases)
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16. Budget contingencies
Used as an alternative to schedule buffers and
shorten the durations:
Working overtime
Adding additional or using more experienced staff
Outsourcing activities
Upgrading equipment
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18. Approaches to Project Risk
Management
PRM: formal process to manage identifiable risk factors
It consists of 4 phases:
Risk identification
Risk assessment and prioritization
Risk response planning
Documentation and learning
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