RISK QUOTE: You got to be careful if you don’t know where you’re
going, because you might not get there.
—YOGI BERRA, BASEBALL PLAYER
RISK QUOTE: I could tell that my parents hated me. My bath toys
were a toaster and a radio.
—RODNEY DANGERFIELD, COMEDIAN
Establishing a hierarchical ERM system gives us a tool to address projects using the same philosophy as we would with a key initiative. The visual risk cluster tool of Riskonnect™ shows us that ERM is quite flexible. To demonstrate such capability, in this chapter we apply ERM to a product launch evaluation. The discussion builds on a December 2007 Harvard Business Review article titled “Managing Risk and Reward in an Innovation Portfolio.”
The launch of a new product or service can be a high-risk venture. One exposure lies in the development of the product. A second involves the identification or creation of a market. A third occurs from the capital needed to support the product until cash flow turns positive. A fourth lies in the possibility of theft of intellectual property. These separate risks can be brought together in an ERM analysis. Figure 11–1 shows them visually.