Risk Management in Product Design: Current State, Conceptual Model and Future Research

Risk management is an important element of product design. It helps to minimize the projectand product-related risks such as project budget and schedule overrun, or missing product cost and quality targets. Risk management is especially important for complex, international product design projects that involve a high degree of novel technology. This paper reviews the literature on risk management in product design. It examines the newly released international standard ISO 31000 “Risk management – Principles and guidelines” and explores its applicability to product design. The new standard consists of the seven process steps communication and consultation; establishing the context; risk identification; risk analysis; risk evaluation; risk treatment; and monitoring and review. A literature review reveals, among other findings, that the general ISO 31000 process model seems applicable to risk management in product design; the literature addresses different process elements to varying degrees, but none fully according to ISO recommendations; and that the integration of product design risk management with risk management of other disciplines, or between project and portfolio level in product design, is not well developed. INTRODUCTION Product design (PD) is a complex task, as it integrates technical challenges and the preferences of a multitude of stakeholders from both inside and outside the organization to devise one overall optimal set of specifications. The task is becoming more challenging as companies focus on their core competencies. This leads to a lower degree of internal value creation and increases the importance of partners along the value chain, be it in marketing, the outsourcing of parts of the design or manufacturing, the supply chain management, distribution, service or recycling of a product. The fact that most companies and partners in a value chain act globally presents additional complexity, as the communication and coordination now also has to bridge significant geographic and cultural distance. For this paper, we follow the definition of risk as the “effect of uncertainty on objectives” [1]. Assuming that the overall objectives of PD are to achieve high product quality, low product cost, short development time and low development cost (see e.g. [2]), these objectives also constitute the main categories of PD risks. Possible sources of uncertainty, i.e. risk causes, are the company itself with its processes, people and technological resources; its partners and supply chain, such as suppliers, customers and service providers; as well as external factors, such as competitors and political, social or environmental forces. There are numerous examples