Risk Analysis for New Product Introduction
Risk Analysis: Risk is often thought of in terms of chance (or probability) of loss. The probability of a particular outcome can be defined as the proportion of times that such an outcome is observed to occur in an infinitely large number of independent events. Measures of probability thus range from 0 to 1 with both ends of the scale representing certain outcomes: a zero probability means that the particular outcome is certain not to occur, whereas a probability of 1 indicates that each event will produce that result. Therefore as the probability of an outcome approaches either end of the scale, the degree of uncertainty as to its occurrence diminishes. Whereas an individual’s attitude towards risks may be, if he is to maximize his welfare the first step must be to identify and evaluate the risks to which he is or may become exposed. One approach would be to list:
a) all those events which may bring about a deterioration in one’s present welfare in regard to :
i) physical and mental well being;
ii) current income;
iii) the value of one’s assets.
b) any other events that may frustrate the fulfillment of future welfare plans.
Risk evaluation involves two elements;
a) the probabilities of loss producing events occurring; and
b) the potential losses.
It is not sufficient just to know that an organisation owns or is responsible for property which is exposed to damage by fire, explosion, windstorm, flood, or other perils, or that it produces and/or sells products that could cause injury or damage.
Risk Control covers all those measures aimed at avoiding, eliminating or reducing the chances of loss producing events occurring, of limiting the severity of the losses that do happen. Here, one is seeking to change the conditions that bring about loss producing events or increase their severity. Though some measures call for little more than commonsense, often considerable technical knowledge...