Risk Test: 7 Answers You Need to Know | Big Fat Finance Blog

This blog post has an interesting Risk Test: 7 Answers You Need to Know.  The questions are posed for finance/CFO risks, but are equally valid for R&D risk management as well:

The science of risk management continues to evolve. Lessons learned from past failures are being leveraged to ensure that a company’s risk management is built on the right foundation and evolving in the right direction.

Without further ado, here are the questions:

1. What is our risk taxonomy?
2. How do we quantify risk?
3. What is our risk appetite?
4. What return are we generating for the risks we take?
5. How do we separate responsibility for risk-taking from responsibility for risk management?
6. How do we include risk when we compensate risk-takers?
7. How do we ensure that our risk management is performing well?

Historically, R&D risk management is somewhat fragmented.  Some informal risk management during R&D and a lot in quality control at the end of the process.  However, the process sometimes lacks rigor and is not comprehensive.  A taxonomy for R&D risks will go a long way in helping.  As the author points out, no taxonomy is perfect.  But any disciplined use of a taxonomy will help answer the remaining questions as well.

More on this later…