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Key Risk Of Financial Product Innovation Based On A Comprehensive Risk Management Framework

Posted on:2009-11-24Degree:DoctorType:Dissertation
Country:ChinaCandidate:H YongFull Text:PDF
GTID:1119360275969942Subject:Management Science and Engineering
Abstract/Summary:PDF Full Text Request
For financial institutions,product innovation entails both opportunity and risk. Opportunities are numerous and include,for example:providing better service offerings to respond to increasingly dynamic markets,deregulation and shifting industry boundaries to eliminate the traditional barriers of market entry;and learning new ways to narrow the gap to the world leading competitors.At the same time, product innovation is extremely risky.Unfortunately,the rate of success tends to be low,and the outcome tends to be poor.The risk of innovation is additionally magnified by the own risk attribute of financial services industry.To control the risk and achieve better performance of product innovation,financial institutions should identify the critical risks and enrich the methods of risk management.Although the academic study of financial innovation and risk management have become increasingly active,the systematic and in-depth study and empirical analysis is rare on the topic of critical risks in financial product innovation.However,relevant research results can not meet the requirements of risk management for product innovation,in the respect of research goals,research methods and research conclusions,for they are either aimed at the objectives for financial risk management or manufacturing product innovation,or just made a brief analysis of the success and failure of financial product innovation.On the basis of research literature review,this article innovatively provides a model of risk management for financial product innovation on the basis of Enterprise-Wide Risk Management(ERM) framework.By collecting various risk factors of financial product innovation,the research assumptions and concept model are designed to reveal the context and relationships of relative risk factors and results. Then,on the basis of questionnaire design and data collection,the research assumptions and concept model are verified,by the ways of factor analysis, correlation analysis,structural equation model analysis of sample data.At last,the concepts and effects of these cirtical risk factors,as well as the method of risk controll, are discussed on the management focus.The main conculsions of the paper are as followings:First,a model of risk management for financial product innovation on the basis of ERM framework is provided,with the results of four key stages such as risk colletion,risk identification,risk assessment and risk control of financial product innovation.Second,fiveteen risk factors are extracted from the various risks,which can be classified as five categories,that is,the product offerings(including credit risk, technology risk,technology protection risk),development process(including innovation model risk,project management risk),marketing support(including markeing network risk,marketing method risk),organizational environment (including risk management environment,human resources risk,department of risk management,innovation strategy risk,communication risk),and risk management (including risk management methods,risk management techniques,risk assessment methods). Third,five critical risk factors are identified,that is,marketing methods risk, project management risk,marketing network risk,risk management methods and human resources risk.Both marketing method risk and project management risk are highly correlated with both financial performance indicators and non-financial performance indicators of financial product innovation.Fourth,the risk effect paths of risk factors to risk results are revealed.The risk facots in the fields of project management,marketing network and marketing methods, have significant impact on the innovation performance directly.On the other hand,the risk factors of human resoures and risk management methods have significant impact on the innovation performance indirectly.Fifth,the best practices of the control of critical factors are put forward,that is, how to control the five critical risks and the including 27 risk variables.The summary and refining of industry best practices provide a reference for financial firms to adopt benchmarking method.The main innovations of the paper are as followings:First,a risk analysis framework is built from the perspective of ERM,to ensure comprehensiveness of the potential risk factors assumptions.Not only it can cover the full range of innovative development process,but also systematically consider full participation and cross-functional collaboration,as well as facing different types of risks,so as to ensure that the study of the potential risk factors assumptions are comprehensive,and have laid a reliable basis for the following analysis of refining critical risk factors.Second,through the refining of risk factors,it's revealed that the risk management system in Chinese financial frims in the process of product innovation is lack or weak,and the the impact of market competition to product innovation performance is not so obvious.This reflects that the foundation for risk management in Chinese financial firms is far behind the intense market competition.Thus,it reveals the necessity and urgency of Chinese financial firms to improve product innovation and risk management capacities.Third,through the identification of critial risk factors,the five critical risk factors are identified to be the focus of risk management,that is,project management risks, marketing methods risks,marketing network risks,risk management methods and human resources risks.Through empirical study,it is found that these critial risk factors have leverage effect to innovation performance.Therefore,they should become the focus of risk control during product innovation in financial firms.Fourth,by analyzing the effect paths of critical risk factors to risk results,it is found that the marketing network risks have the largest effect on the innovation performance.They can directly affect the innovation performance of innovation,but also indirectly affect the innovation performance through the impact of marketing methods risks.
Keywords/Search Tags:Financial product innovation, Key risk factors, Risk indetification, Risk effect path
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