In every organization, innovation and risk management are important aspects that every leader should not ignore. They are among the key pillars in ensuring the success of an organization. However, one has to take priority over the other regardless of their importance in the organization. Innovation involves the application of an improved solution to meet certain requirements, needs, or a market gap (Johnson, 2010). Thus, the organization has to accomplish it by having better products, services, technologies, and ideas. On the other hand, risk management involves the identification, evaluation and prioritizing the potential threats to an organization. The major goal of risk management is seeking maximization of the realization of opportunities. Risk Management helps to control and minimize the impact of the unforeseen occurrences (Johnson, 2010). Any uncertain event that occurs should not deter the focus of the organization. Risks can arise from various sources, and thus important to have strategies for managing them. Risk management should stimulate innovation and not deterring it. Thus, risk management takes priority over innovation.
The way an organization handles risk management determines the effectiveness of the innovation. Risk management acts as the drive to innovation by providing a conducive environment for the innovations (Ourada, 2013). The ability to identify, prioritize, and control risks is a major drive for innovation. The approach taken in risk management is not as a safety procedure but as a learning process. The business can never have a perfect model from inception. Therefore, there is continuous testing of the components and combinations as well as making adjustments depending on the underlying risks.
Risk management accelerates innovation. The concentration on the effective ways of managing risk in an organization ensures that the business has what it takes for assuring innovation. Thus, risk management takes priority over innovation since there cannot be meaningful innovation without focusing on the potential risks. In the organization, both innovation and risk management should go hand in hand. The two aspects help organizations to pursue opportunities in a better approach. Risk management accelerates innovation by revealing the hurdles and areas with potential failure (Culp, 2013).
Risk management provides visibility, the analytical insights, and proper focus that help organizations to manage and optimize their innovation plans. Every organization requires innovation to grow. Thus, there has to be an environment that allows the innovation strategies. Risk management ensures that the organization eliminates the ideas that result to negative results, and focus on the beneficial approach. Many organizations encourage innovation by applying the risk management tools and approaches in managing their innovation portfolio (Ourada, 2013).
The main focus of the business is a growth strategy that has its associated risks. It necessitates risk management capabilities for the organization to be effective. The ability to manage risks helps companies to act with confidence in the future business prospects. Without risk management, it is difficult for the companies to define the future objectives. It is likely that the organization loses track once the risks strike. In an environment with many risks without proper management strategies, no innovation can take effect. It is essential for the organization to assess the working environment, identify risks, and strategize on the executing effective risk management practices (Culp, 2013).
Risk management ensures that a company has a competitive advantage in undertaking innovations. Business takes and manages risks to ensure survival and growth. Effective risk management harness performance against the set objectives. It contributes to a more efficient use of resources, reduced waste and fraud, and better service delivery. Risk management assures the organization of low cost of capital, and better management of the effective strategies. The outlined issues are factors towards improved innovation. Innovation thrives in the environments with improved performance, efficient utilization of resources, reduced waste, and better service delivery. It is crucial for companies to have a clear strategy for risk management thereby creating a good platform for innovation (Michna, Ekmanis, Zeltins & Siemianowicz, 2011).
Every innovation cannot exist without uncertainty and a level of risk. The development of a new product through innovation cannot predict whether the product will have acceptance or not. Thus, the developers have to take a risk in the innovation. Risk management helps business executives to understand the nature of the uncertain events and plan to handle them in advance. Risk is a key feature in innovation, and hence risks management facilitates the innovation. An organization manages the risk involved in innovation by adopting flexibility and effectiveness. Innovation helps to maintain competition and attract new customers. The firms have to be aware of the changing business environment that has many associated risks. Since risks are inevitable in every innovation, the organization requires having effective risk management strategies to minimize the impacts (Kalvet & Lember, 2010).
All innovation, whether successful or not, follows a process. The process can be formal and repetitive, or phase-gate process. Regardless of the approach selected for innovation, the chances of achieving a successful innovation are indeterminate without effective risk management strategies. Risk management is an important consideration in the entire innovation process. The risks impede the successful implementation of the innovation due to the level of uncertainty. The process followed in the innovation has several stages that require unique approaches to handling their risks. Thus, before the start of the innovation process, the initial issue should be assessing the underlying risks and developing a plan of action to control them.
The aspects of innovation and risk management should operate together. Risk management is not essential if there is no innovation. On the other hand, no innovation can take effect without proper risk management. In today’s business environment, a company cannot continue to offer the same product for decades. There is increased competition that requires companies to be innovative. Companies must have methods of fostering innovation and creativity to remain relevant. Innovation creates the difference between growth and stagnation to an organization (Ourada, 2013). Since innovation is essential for remaining competitive and relevant, no organization can thrive without it. On the other hand, every innovative idea has a level of risk that can negatively affect the innovation. The innovation requires effective risk management strategies to ensure its success.
From the information presented, it is evident that risk management forms the basis for every innovation. The organizational executives must be aware of the likely threats to the innovative plans for them to establish control measures. Risk management should take a higher priority than innovation since the determining factor to successful innovation is effective risk management strategies. Innovation is key to the growth of an organization. Thus, both risk management and innovation should work hand in hand. Risk management accelerates innovation, provides the analytical insight, and determines the effectiveness of the innovation. Thus, every organization should have an appropriate risk management strategy to assure effective innovation, models.
References
Culp S. (2013) Risk Management Can Stimulate, Rather than Deter Innovation, Forbes/ Leadership,
Johnson M.W (2010) Risk Management and Innovation: Bloomberg Business,
Kalvet, T., & Lember, V. (2010) Risk management in public procurement for innovation: the case of Nordic-Baltic Sea cities. Innovation: The European Journal Of Social Sciences, 23(3), 241-262. doi:10.1080/13511610.2011.553509
Michna, J., Ekmanis, J., Zeltins, N., & Siemianowicz, J. (2011) Innovation Risk Management In The Rational Energy Use (Part 1). Latvian Journal of Physics & Technical Sciences, (6), 3
Ourada, J. (2013). What is the Purpose of Risk Management?. Mobility Forum: The Journal Of The Air Mobility Command’s Magazine, 22(3), 39.
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