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Take smart risks with innovation

A see-saw with money on one end and a new idea on the other

Smart risk assessment requires evaluating risk to ensure steps are taken that fuel innovation and lead to growth. This can prove daunting because innovation requires risks that are financial, operational, legal and commercial. A process can help.

First, understand the risk assessment problem. I regularly encounter both the risk-averse and the risk-positive in the fenestration and glazing marketplace. While exceptions exist, neither position tends to lead to constructive innovation or growth. 

The risk-adverse remain stagnant because they avoid or unduly limit risk. The risk-positive run headlong into change, without concern for the management of the accompanying risk. Both viewpoints jeopardize companies because of their consequences. One fails to adapt to changing markets. The other leads to situations where it is impossible to realize a positive return on the risk.

Smart risk assessment does not eliminate risks. Instead, companies willingly encounter risks because they have been identified, evaluated and addressed to the extent possible. 

Here are some ways to assess risk, the smart way.

Ways to assess risk

1. Identify project risks across departments. 

The first step of smart risk assessment is to recognize the ongoing need to identify risks throughout a project’s life. This step is difficult due to the need for constant attention. Because of that, it is important that risk identification is a task assigned to those with subject matter expertise in a variety of areas. Engineers can assess the technical risks. Accountants consider financial impacts. Legal can address warnings and liability. And so on. The key is that no one department is responsible for identifying all risks. Diversification of risk identification helps bring needed viewpoints and does not overwhelm one department.

2. Assess potential harms.

When risks are identified, use the same subject matter experts to evaluate the scopes of the identifiable risks. Some risks will appear small to one expert, while mountainous to another. The key here is to see the risk and its impact on the company from multiple perspectives.

3. Control and mitigate risks. 

In this phase of risk tolerance, thresholds are considered. Some risks can be easily addressed or avoided. Others must be encountered. Developing risk-encountering assumptions allows companies to move forward in risk, but also to have considered the point at which risks get so large that stopping and reconsideration of a program is needed. The essential point here is to avoid running blindly into a growing risk.

It is important to remember that businesses need not accept all risk toward a given innovation. There are legal tools that can help mitigate and share risks needed to innovate. Joint ventures are business arrangements where separate companies work toward a common aim. The companies are still separate, but each can move forward toward a common desire for shared innovation without a single company bearing the entire risk load.

Licensing, too, can prove an effective risk mitigation tool for innovation. Often the most aggressive ideas for innovation can’t be borne by large companies because the risk to the entire corporate structure is too great. In those situations, the idea for innovation can be licensed to a smaller company or sister entity in ways that allow the flexibility for innovation, while preserving ownership of the concept itself.

Practically, sequencing innovation can also help mitigate risk. Subject matter experts often identify large, innovative projects where the risk of the whole is too great. In those situations, breaking the large project into its constituent pieces may help mitigate risk. If a new door system is innovative but its scale is too massive, consider attending to the components that make up the system. Starting with and refining smaller elements allows the risk presented by complex, broad, innovative systems to be more easily absorbed.

4. Protect the innovation. 

Regardless of the path taken to mitigate identified risks, it is essential to legally protect that innovation so the return on such investment grows. Protect ideas, processes and concepts with intellectual property rights like patents and copyrights.

Ensure new innovations are presented to an insurance broker so that the risks for future loss on new innovations are within your existing policy protections. And finally, document the risk assessment process (and its future) so you can support later attacks on the innovation when they come. 


Matt Johnson

Matt Johnson

Matt Johnson is a member of The Gary Law Group, a Portland-based firm specializing in legal and risk issues facing manufacturers of glazing products. He can be reached at