Effective Risk Management for Business Innovation

The provided report focuses on the significance of innovation in the changing environment of the hardy oil and gas company. It outlines various models for innovation and emphasizes the need for proper risk management systems to minimize potential losses. The report draws from multiple sources, including books, journals, and online articles, to provide a comprehensive understanding of business innovation and risk management.

INNOVATION AND RISK
MANAGEMENT

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK...............................................................................................................................................1
CONCLUSION................................................................................................................................6
REFERENCES................................................................................................................................7

INTRODUCTION
Innovation and inventions are two different terms. Some people use these words with
reference to each other sometimes they render different meanings. Hardy oil and gas company
trying to grow the business in a better way by way using innovation and invention. Energy sector
which used to be the monopolistic but now because of new entrants in market is facing heavy
competition. Need of innovation is increasing day by day in the power sector as well as in oil &
gas industry (Dey, 2010). To make successful implementation of innovation in this industry, it is
very important to get aware of these terms. Innovation is something that ensures guaranteed
growth of any sector. Introducing new technologies, making efficient use of resources and
redesigning products are some of the specifications of innovation.
TASK
Hardy oil and gas is a big brand that is dealing in energy business since 1997. To expand and
flourish company uses the concept of bringing changes and modifications in the present working
conditions. Changes are good and increases the total productivity of an enterprise. It is an
entirely different concept than that of invention. Difference between invention and innovation
and how they relate to make business successful are given below:
Innovation: It means to make modification or alteration in an existing product. It is just
like transformation of a thought into actuality (Franks and et,al., 2014). It simply makes value
addition in a product and inserts ideas and apply them to make existing commodity more
relevant and useful so that it can fulfil the needs of customers. According to the changing trends
and technologies, needs of users are also increasing. These needs can be accomplished if
modifications are made in the existing products.
Invention: To create and design any new product that has never been in existence before
is called invention. It simply means a new scientific idea that is converted into a tangible form. If
inventor wants his invention to be protected then he will be required to register the patent. It
helps to introduce new commodities in the market so that variety of products can be found and
needs of consumers can be satisfied (Creeden and et.al., 2013).
Following are the differences between innovation and invention:
1. Innovation refers to an idea that can help an existing product to get modified but
invention means to produce a new commodity that has never been in existence.
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2. Innovation makes value addition in a commodity and increases its characteristics but in
other case, a new product is created.
3. For modification of any product, a set of technical, marketing and strategic skills is
needed but to create a new product, scientific skills are important.
4. Innovation occurs when there is requirement of improvement in any of the existing goods
but in case of invention, if any idea strikes in mind of people and it can be implemented
in reality.
5. Research and development department is involved in the creation of a new product and
whole management is responsible for alterations (Crane and Matten, 2016).
Following are implementations that can be made for the growth in energy sector:
Raise money from public to invest in research and development: Money that is raised
from public should be invested in exploring new ideas to make the innovation in energy sector .
It can help in using raw material more effectively so that quality products can be attained such as
diesel, power and petrol. All of this will be possible because of innovation.
Support grass root innovators: If innovators at initial stage get help of public and the
private sector then it will help them to rise and if innovations at high level will be made to
increase characteristics of product then automatically, it will lead to the growth of industry. For
energy sector, it is important that person who has knowledge regarding this sector with creative
ideas Should be hired so that product can be manufactured effectively.
Remove grants from fossil fuel: If subsidies provided by government from fossil fuel
will be removed then it will be used for new innovation and then it will help in the development
of energy and power sector .
Introduction of new technologies: If new technologies are innovated and introduced to
this segment then it will be helpful to implement new ideas in making products better on
affordable prices (Christopher and et.al., 2011). Formation of new technologies is a part of
innovation that will help in the sustainable development of economy.
Innovation creates competition: After innovating new ideas and making changes in
products, other competitors also try to make changes in their commodities because of which
competition increases in the market. Along with that, if there will be competition to make and
present better products then the energy sector itself will grow.
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The systematic risk management is done by way of utilizing resources in an optimum manner.
This could be achieved due to the management efficiency so that the management can attain the
objectives. The innovation in the process or technology aids in managing the risk in an effective
manner. The public procurement of the innovation related to the acquiring new project.
Innovation can be emerged by the individual contractor, a consortium of supplier, etc. however,
to know and control the risk, there is a need to know about what actually risk is? As, this is the
possibility of something happening in an adverse situation that have an impact on the
accomplishment of the objectives. This covers risk as an opportunity and threats. Therefore, risk
can be defined as countable uncertainty of outcome, whether positive or negative impact,
whereby the countable uncertainty is expressed in terms of possibilities.
There are basically three main task for risk management:
 Assign and review risks and reward for partners covered at the different stages of the
procurement process, covering:- nature of risks, which might vary at the time of
different stages, causes and sources of risk, and possibilities of the risk to occur,
potential consequences of risk occurrence (Godin, 2012).
 For each risk, initiate actions to debar or limit the possibilities of the risk to materialise
and assign duties to initiate action to limit the possibilities.
 For each risk, elaborate action to mitigate the potential outcomes and assign the cost
who have the cost of mitigation and limits benefits.
Innovation Invention
It is the process of creating utility in the
existing product by adding value to same
commodity.
It is entirely different concept as new
technology or product is launched when
invention takes place.
It is a less expensive method as it does not
require much investment of resources.
On the other hand invention requires much
allocation of resources therefore it is a
comparatively expensive method.
Through the process of alteration efficiency and effectiveness of existing products gets
improved. This way the total profitability of business gets increased as more output ca be
gathered by investing less inputs.
Different dimensions of innovation in Hardy oil and gas company are discussed in detail below:
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Product – Company focus on bringing changes in the existing products so that more satisfaction
can be provided to them.
Process – Whenever a new technology is launched or discoverer it is adopted by the cited
company in order to create more effective output. The new code of conducts has more
capabilities to use the provided resource and therefore profitability gets increased.
Promise innovation – Under this commitments are made by cited company for its customers in
which they ensure clients that they will be provided with effective products.
Customer experience – changes can also be made after analysing the feedbacks from various
clients and than accordingly making the modified product or service to the market.
Supply chain – As the energy is required at distinct places, it has to be ensured that the medium
through which different products are made available to the user is selected effectively. For same
innovation is practised so that cited company can reach to maximum clients.
Communication – in order to meet the demand of market company needs to establish effective
interaction with the customers. Therefore such new mediums should be selected which are
capable of covering maximum market.
Management – Hardy oil and gas faces good competition in external market. Hence it is
necessary for it to have management system which is effective enough to take the high
responsibility. It should be of nature that it can adopt changes as and when require so that it can
compete with others in same field.
Different models of innovation and their relation to oil industry:
In the current environment, innovation is main aspect that is required to be considered as
by that, only new methods will be used by which business will be able to achieve the success of
the hardy oil and gas company. In relation to innovation, there are various models that can be
used by companies by which they will be able to achieve the objectives and attain success. There
are basically two models that will be involved in this and they are described here as:
Linear model: This is the model in which emphasis is given to reduce the risk and for that it is
required that product and services should be frozen. This is needed to be done before
implementing linear model. Under this model, it will be required that various stages will have to
be developed and for that they will have to be identified. it shall be noted that all the steps shall
be arranged in such manner by which it becomes compulsory for the organisation to complete at
initial stage (Bruder and Roncalli, 2012). It is because when one level will be completed then
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only the next step will be possible to be started. Through this, the proper check will be
established as if one step remains incomplete then the next one will not be possible to be done.
With the help of this, it will be ensured that all the steps are completed and the chances of any
task remain unattended will be removed. The person who will be required to perform each work
will be specified in advance together with the criteria that will be required to be met by them.
Under this, it will be evaluated that the objectives that have been set are achieved or not. In this
all the aspects will be covered in relation to the activities that are carried out in oil and gas
industry (Lindič and et.al., 2011). In the industry, firstly financial aspects must be checked that
will be defined as the first stage after which marketing will be needed to be tested but before this,
it is required that proper plan shall be formulated and at last, corrective measures will be taken
and commercialisation will have to taken into consideration.
This model will be successful when innovation is required in less time in comparison to
the rate at which environment is changing and also, in this high level of reliability and quality
will be required which is essential in the oil and gas industry. This is called as linear model
because set targets are required to be achieved compulsorily and for that, control is there. This
model is good but it takes time to be prepared. So, this can be used by industry as in this,
technology and market are the major criteria and in the given industry, they will be highly
competent.
Flexible innovation model: This model is the best in changing environment as now a days,
innovation is highly required due to fast changes taking place in the market. In this model,
various phases are there and they can be carried out in multiple number. It means that more than
one phase can be carried out at a time (Kim and et. al., 2011). In this, there is no specific format
and this is done so that any change that is taking place in between the process can also be
incorporated and there will be nothing new that will be left. This is carried out in a circular
motion and so in this, product improvement cycle will be used. This will be good for the industry
as there are various changes that take place in this and they can be included with the help of this
model. In this, customer’s need will be identified and the products will be provided to them on
the basis of same.
In order to ensure flexibility in the power industry management can make changes in the existing
process or product or placement of different items at the work place. This way the method which
is more capable of giving better results can be adopted by the management. Also when
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modification in the present placement of different units is done same my reduce the total time
taken to convert inputs into outputs.
Effective risk management reflects that the risk should be managed in a better manner by
the management of the company (Gambardella and McGahan, 2010). In procurement what is
concerned, not only the capacity to determine and have the risks but also relative attitude to risk
on behalf of the government. The risk nature and how best to deal with them will totally based
on the relative complexity of the project. The management can evaluate the systematic risk for
prosperous implementation of the business. Innovation aids in making the business sustainable
and compatible in order to assess the systematic risk. This will help out to attain the objectives
of the business in a sustainable manner. The systematic risk management in the organisation help
out to introduce the innovation in the business in a most effective manner. After implementing
the innovation, the companies are able to attain the pre- set objectives.
In case the innovation is in relation to the technology then that process will be very
complex and in this, there will be various variables that will be involved. By this, the result will
be such that will be unexpected (Huizingh, 2011). So, it will be required that there shall be
proper communication which will be established. This will be used by the industry as in that
also, there are various aspects that will be involved and so this will be used by it. In order to
implement changes successfully it is important that there associated risk is evaluated effectively
so that the degree of loss that may occur on non achievements of the desired results can be
minimised.
CONCLUSION
From the above mentioned report, it can be concluded that innovation is the main aspect
that shall be considered by the hardy oil and gas company in the changing environment. Under
this, various models have been described that can be used and will be helpful for the firm. As this
is on the basis of certain changes so there will be risk that will be involved in it. So, it has been
ascertained in the report that proper risk management system shall be established in order to deal
with same and gain maximum possible benefits.
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REFERENCES
Books and Journals
Gambardella, A. and McGahan, A.M., 2010. Business-model innovation: General purpose
technologies and their implications for industry structure. Long range planning. 43(2).
pp.262-271.
Godin, B., 2012. “Innovation Studies”: The Invention of a Specialty. Minerva, 50(4). pp.397-
421.
Huizingh, E.K., 2011. Open innovation: State of the art and future perspectives. Technovation.
31(1). pp.2-9.
Kim, S.K. And et.al., 2011. The effect of R&D, technology commercialization capabilities and
innovation performance. Technological and Economic Development of Economy. (4).
pp.563-578.
Lindič, J., and et.al., 2011. Deploying information technologies for organizational innovation:
Lessons from case studies. International Journal of Information Management. 31(2).
pp.183-188.
Bruder, B. and Roncalli, T., 2012. Managing risk exposures using the risk budgeting approach.
Christopher, M., and et.al., 2011. Approaches to managing global sourcing risk. Supply Chain
Management: An International Journal. 16(2). pp.67-81.
Crane, A. and Matten, D., 2016. Business ethics: Managing corporate citizenship and
sustainability in the age of globalization. Oxford University Press.
Creeden, D.M., and et.al., 2013. Methods and systems for managing risk management
information. U.S. Patent 8,589,273.
Dey, P.K., 2010. Managing project risk using combined analytic hierarchy process and risk map.
Applied Soft Computing. 10(4). pp.990-1000.
Franks, D.M., and et,al., 2014. Conflict translates environmental and social risk into business
costs. Proceedings of the National Academy of Sciences. 111(21). pp.7576-7581.
Online
The Importance of an Up-to-Date Business Crisis Management Plan. 2015. [Online]. Available
through:<The Importance of an Up-to-Date Business Crisis Management Plan>.
[Accessed on 4th July 2017].
Difference Between Invention and Innovation. 2016. [online]. Available
through:<http://keydifferences.com/difference-between-invention-and-
innovation.html>. [Accessed on 4th July 2017].
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