Business Risk Assessment PDF

8/8/2019 Business Risk Assessment PDF

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Business Risk Assessment

from the Oklahoma Commercialization Model

How to Properly Identify RiskHow to Properly Identify Risk

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Table of Contents

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1) Overview

2) Investigation Stage

3) Feasibility Stage

4) Development Stage

5) Introduction Stage

6) Growth Stage

7) Maturity Stage

8) Commercialization Specialists

Resources:

The Oklahoma Commercialization Model

Angel Capital Education Foundation

Tech Coast Angels

i2E Team


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Its important to analyze your business opportunitywith respect to five areas of risk: product, market,

business, financeand execution risk.

This business risk assessment tool identifies thegeneral risk for each of the five areas with respect toeach stage of commercialization.

Ultimately this tool identifies the action items ormilestones that should be completed to mitigate

each level of risk.

Overview

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Risk Profile:

The innovator has a new product ortechnology advancement with seeminglypositive market potential.

However, the innovator lacks the financial

resources and/or business expertise tocommercialize the product.

Investigation Stage

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Risk Action ItemsProduct Risk:

Product may not be feasible or lacks unique qualitiesand cannot be protected.

Define concept

Confirm critical assumptions

Survey state of the art

Identify critical barriers

Determine technology

Market Risk:

Limited understanding or knowledge of the market cancause a misrepresentation of the growth and size of themarket.

Conduct market overview & identify:

Pricing structure

Market barriers

Risks

Distribution channels

Trends and competitors

Business Risk:

Great product or technology, but a new product ortechnology does not translate into a great business.

Estimate profit potential

Conduct self-enterprise and commercialization assessments

Identify professional needs

Identify capital needs

Finance Risk:

Proof-of-concept funding for product

prototype is difficult to identify.

Self fund

Study the capital cycle

Identify ten proof-of-concept sources

Identify ten seed sources

Execution:

Management at this stage is typically the

innovator. This lack of business skills can be

difficult to overcome.

Learn to manage people

Identify ten advisors

Study management practice

Study company formation types

INTRODUCTION GROWTHFEASIBILITY MATURITYDEVELOPMENTINVESTIGATION


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Risk Profile:

At this stage the companys managementteam is incomplete with no product revenues.

The final design of the product is complete

and an initial business plan is developed.

Feasibility Stage

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The company is focused on product innovation rather thanbusiness development. Intellectual property rights remain aconcern.

Develop working model

Test technical features

Assess preliminary production feasibility

Conduct manufacturing assessment

Assess safety & environmental features

Finalize designs

Market Risk:

Unrealistic market study results can cause misallocation ofscarce recourses.

Final product design is dependent on successful outcome of

market study.

Identify and quantify:

Market size

Customers

Volume

Prices

Distribution

Competitors

Business Risk:

Exploring business formation and the plan still lacksexpertise and business skills to commercialize.

Formulate financial assumptions

Develop pro forma

Identify seed capital

Form advisory teamFinance Risk:

Cash flow is a problem due to lack of revenues and

early proof-of-concept funding is difficult to attract.

Bootstrap

Prepare investment strategy

Prepare investment presentation

Execution:

The management team is incomplete; therefore, multiple

responsibilities fall on a few individuals. Chicken and eggsyndrome becomes evident as you need capital but capitalwont follow poor management teams.

Multi-task

Implement appropriate management structure

Pursue opportunities



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Risk Profile:

At this stage the company continues todevelop the product prototype with the goal ofcompletion.

Significant expenses are incurred at this

stage with no product related revenues. Thisstage is usually at the deepest point in the"valley of the death".

Development Stage

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Advancing the product from prototype to manufacturingor production environment requires new skill sets. Nolonger developing product revenue features.

Develop prototype

Identify materials and processes

Conduct tests

Implement development methodsMarket Risk:

Field tests are not positive and / or competitors respondmore rapidly than planned.

Identify marketing team

Define target market

Select market channels

Field test

Business Risk:If choosing a business over licensing, an experiencedprofessional management team will need to beidentified. The business needs to enter a revenue modeas opposed to the R&D mode of the past.

Decide venture or license Finalize intellectual property

Identify management team

Select organization structure

Write business plan

Finance Risk:Significant expenses and no product revenue realized.

Prepare investment strategy Select investment types

Target appropriate investors

Execution:

Lack of focus and risk of losing founder(s). Lack of

flexibility in accepting new business controls.

Develop organization processes

Delegate responsibilities

Develop strategic plans

Track progress



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Risk Profile:

At this stage, the company has limitedproduct revenue and the product is being

introduced into the market.

Introduction Stage

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Demonstrating product features reveals a limited marketdriven functionality after scaling product production.

Develop production prototype

Determine production process

Select equipment

Design field support system Demo product features

Market Risk:

The reality of the market is rarely as planned. Marketacceptance and competitor response are different thananticipated. Limited repeat business can cause

uncertainty.

Establish market relationships

Conduct limited sales

Analyze sales

Survey customers

Refine marketing plan

Business Risk:

Lack of focus as the company moves from a emergingenvironment to a true business mode of operations.

Establish business function

Hire staff

Execute contracts

Secure first-stage financing

Finance Risk:

The burn rate exceeds capital and management tends

to focus on safes rather than profits.

Focus on bottom-line profits

Eliminate costs

Implement fundraising strategy

Execution:

Change in the business is accelerating and causes poor

choices of new employees. Founders can have a

difficult time adapting to new business stages.

Implement an agile organization structure

Hire talented people

Delegate

Measure performance



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Risk Profile:

At this stage the company is in full production

with the main product and expandingdistribution.

The management is in transition to a formal

organizational structure.

Growth Stage

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It becomes necessary to refine product features to staycompetitive. The demand of new product featuresdrains capital from the growing business.

Prepare commercial design

Establish quality control

Construct facilities

Conduct full Production

Finalize internal distribution system

Market Risk:

Poor distribution, customer satisfaction and productfeatures are concerns as competitors respond to yourinitial product launch.

Expand distribution

Analyze competitor response

Assess customer satisfaction

Assess distributor satisfaction

Refine product features

Business Risk:

Focus becomes an issue as the business becomesmore formal with increased demands.

Monitor enterprise position

Hire and train personnel

Execute contracts

Arrange financing

Institute vision, mission and management policies

Finance Risk:Poor finance or investment strategy can limit ability to

grow new personnel and execute new contracts.

Study sources of growth capital Implement new fund-raising strategy

Monitor cost structure

Execution:

The enthusiasm of the initial start up vanishes as a

formal organizational structure is in place. Hiring newpeople and increased focus on roles and responsibilities

causes a culture of employees reacting to their ownjobs as opposed to the overall mission.

Move from reactive to proactive management

Implement future strategic plans

Maintain innovative culture



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Risk Profile:

The company is now well established in themarketplace and must continually innovate to

stay competitive.

Maturity Stage

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Risk Action ItemsProduct Risk:Minor changes in the product features provide less ofan impact. The established product makes it difficult toaccept new innovations with the existing structure.

Maximize production

Establish after-market support, repairs and spares

Warranty service

Implement training program

Market Risk:Growth rates begin to decline as the existing line ofproducts becomes mature.

Develop market retention Establish market scan

Identify new markets

Identify new products

Business Risk:

It becomes difficult to innovate as the need to focus on

monthly, quarterly, and annual results becomes the

focus.

Establish SWOT process

Invest profits

Monitor product life cycle

Monitor business trends

Monitor management technologies

Implement innovations

Finance Risk:

Poor finance or investment strategy can limit ability to

grow new personnel and execute new contracts.

Monitor investments on new products

Explore spin-out opportunities

Review financial control systems

Increase shareholder values

Execution:

Established formal management team must now

compete to innovate. A highly structured corporateenvironment makes it difficult to motivate employees to

innovate.

Reinvent organization

Promote innovative culture

Be a team builder Focus on performance and reward culture



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Name Email

John Campbell [email protected]

Tom Francis [email protected]

Richard Gajan [email protected]

James Randall [email protected]

Jim Rogers [email protected]

David Thomison [email protected]

Tom Walker [email protected]

John Whorton [email protected]

Commercialization Specialists

Contact one of these individuals for assistance in

accessing your business risk.

2007 i2E, In

Business Risk Assessment PDF

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