In an engineering product development program, risk is the likelihood that the new product will not meet the customer's needs, be completed on time, or be completed within budget. This chapter focuses on these risks. It presents an overview of the risk assessment procedure and discusses the risk assessment questionnaire. Then it takes a detailed look at some risk factors common to engineering development programs and offers some strategies for managing them. The risk assessment questionnaire, summary sheet, and risk management strategy tables can be found in Appendix E.

PERFORMING A RISK ASSESSMENT

Advanced product development engineering programs are among the most complex activities conducted by mankind. They often involve millions of dollars of investment and thousands of hours of work by highly educated people. Risk is therefore high. Shareholders are willing to accept the risks involved in such an effort providing the potential returns are high. Yet even under the guidance of an experienced director, a program may fail because of inherent risks. By actively assessing a program's risks, however, you can reduce the likelihood of failure.

Risk assessment is a systematic method of identifying a program's risks and then determining appropriate strategies for managing them. It is also a mechanism for communicating the program risks to the customer/partner and to corporate executives. It sets the stage forworking with the customer/partner to reach agreement on risks that are acceptable and in line with the organization's tolerance.