Risk Management

In terms of my focus over the last few weeks of getting organisations and individuals to take action to innovate, the issues of taking chances, failing, tolerance of failure and self-belief (self-efficacy) have been dealt with. The purpose of all these topics has been to demystify innovation and instigate action amongst individuals and organisations.  Taking action to innovate, unavoidably means taking risks. However, taking risks to innovate does not mean jumping out of an aeroplane without a parachute; it is something that can be planned for and dealt with systemically.

Risk Management
Let me first define “Risk Management”.  As always, there are many definitions, but a concise, simple definition that speaks to the essence of the field is as follows: “The identification, analysis, assessment, control, and avoidance, minimization, or elimination of unacceptable risks”.  The field of risk management also have different meanings and different applications in different industries, e.g. the “science” is approached differently in an investment-, legal-, healthcare- or project management environment. In layman ’s terms, it means that you do not just close your eyes and hope for the best, rather you have a proactive approach to identify possible risks that might occur and plan ahead what to do if these risks should become a reality, i.e. it can be as simple as taking an umbrella on a cloudy day!  
Risk management is a business discipline that has been developed and studied conclusively and there are many tools, processes and frameworks available for performing risk management.
The dichotomy with regards to risk management and innovation, is the fact that creativity is a distinctive characteristic of the innovation process, and whereas you want people to generate creative or radical ideas without deliberating about limitations, risk management may be seen as deterring radical suggestions in the creative stage of innovation.  
So, let me clarify that I am not advocating a strategy of total risk avoidance here, but rather an approach to perform better project risk diagnosis and management, which might help adjust the balance between success and failure of innovation projects. More extensive use of explicit risk management techniques might reduce expenditure on failed innovations and also accelerate projects.  
Many organisations integrate risk management tools within the project management space, but this practice is rarely explicit in innovation management.  So my question is why not, and can innovation benefit from risk management strategies and tools?
The statistics of the success rate of new products is very low, and even more so for developing countries. So, efficient innovation management should identify the unacceptable risks as early as possible but often they only become apparent in the later stages, at great expense. However, a fear of failure would be detrimental to innovation – as I have advocated over the last few weeks – and indeed accepting the possibility of failure as an everyday reality is one of the defining characteristics of an innovation project.
Any model of the innovation process needs to incorporate failure as a likely outcome. In many other projects abandoning the venture is a theoretical but remote option whereas in the innovation project it is integral to good management. I argue that structured risk management that is deployed selectively through the different stages of an innovation project, can help managers make the critical decision to abandon a project, providing an effective filter of the good and poor prospects and helping direct the continuing research that is fundamental in innovation projects.