Indian Journal of Science and Technology, Vol 9(28), DOI: 10.17485/ijst/2016/v9i28/97659, July 2016
ISSN (Print) : 0974-6846
ISSN (Online) : 0974-5645
The Methodology and Mathematical Tools to Assess
and Mitigate the Risk of Creating High-Tech Products
Aleksandr Mikhaylovich Batkovskiy1*, Elena Georgievna Semenova2, Alena Vladimirovna
Fomina1, Еvgenii Iur'evich Khrustalev3 and Oleg Еvgen'evich Khrustalev3
Joint Stock Company, Central Research Institute of Economy, Management and Information Systems, Electronics,
Moscow, Russia; [email protected], [email protected]
2
Institute of Innovation and Basic Postgraduate Training, St. Petersburg State University of Aerospace
Instrumentation, St. Petersburg, Russia; [email protected]
3
Central Economics and Mathematics Institute of the Russian Academy of Sciences, Moscow, Russia;
[email protected], [email protected]
1
Abstract
Background/Objectives: This article deals with financial and economic methods for risk neutralization, with risk
mitigation, acceptance or transfer being of particular attention. Methods/Statistical Analysis: A management procedure
comprised of two stages has been proposed as the principal methodological approach to solve this challenge. At the first
stage, an alternative project implementation plan is selected, based on the cost-effectiveness criterion, and risk indicators
are considered quality indicators. At the second stage, the risk management procedure that has been proposed by the
authors is implemented, using a dedicated financial and production provision. Findings: To account for increasing
uncertainty of sci-tech and economic support processes of implementation of programs, plans and projects aiming at
developing a knowledge-intensive and high-tech product, principles of forming a new concept of acceptable risk have been
justified. This concept exploits capabilities of the new tools to mitigate and compensate any risks arising from financial
and economic, scientific and technical, and engineering and manufacturing factors. To assess acceptable innovative project
implementation alternatives, an economic and mathematical model has been built up, based on the concept of acceptable
risk. The authors have hereby proposed a method of multi-version program or project implementation plan management.
This method relies on versions that have been justified and prepared in the course of long-term plan development and are
supplemented by potential deviations from the established program path, which occur as a result of various risk conditions.
To improve assessment accuracy, risks should be considered at the stage of forming a knowledge-intensive and high tech
product development plan a priori or a posteriori. Application/Improvements: The main advantage of the methodology
and tools proposed is an ability to develop a new managerial decision-making frame that allows for qualitative synthesis
of multiple event scenarios and quantitative analysis of effects.
Keywords: Financial Analysis, Innovative Development, Integration, Knowledge-Driven Economy, Knowledge-Intensive
and High-Tech Product, Mathematical Modeling, Risk
1. Introduction
Currently effective administrative and economic protection of knowledge-intensive and high-tech programs and
projects requires a risk management methodology and
tools that are typical of sci-tech and engineering activity and allow for estimating, compensating or mitigating
such risks.
*Author for correspondence
Modern global economy is known for its advanced
achievements in knowledge-intensive technologies that
are capable of providing any means and systems to a
man, ensuring fast entry of the world into an era of postindustrial civilization1–3.At the same time, the world has
been rapidly growing polar and contradictory. Growth
and continuous deepening of society differentiation and
aggravation of social contractions have brought this
The Methodology and Mathematical Tools to Assess and Mitigate the Risk of Creating High-Tech Products
world to the edge of global system crisis, which makes the
issue of protecting the existing social and economic system particularly pressing. Extreme exacerbation of crisis
contradictions of the modern geopolitical structure has
got most of the population under a state of survival, thus
addressing the issue of human life and environment security.
Global change in its movement towards globalism
gets corporate and global and develops according to the
laws of economic wars that are no less cruel than wars
of the 20th century. Under the conditions, human factor
comes to the foreground. Attempts to build up capitalism and socialism with a human face, while not bothering
to comprehend internal laws that guide the man were no
success. Currently, we are in the process of comprehensive understanding of internal human and social laws that
drive the social (collective) and individual (personal), and
contradictions between the two.
Conducting and backing up fundamental research
and development (R&D) is a key condition for the establishment and development of all elements of the scientific
and production and innovation activity, which will ensure
achievement of the desired sci-tech and, technological,
production and labor potential4,5.
The importance of knowledge-intensive, high-tech
fields and productions is determined by a variety of factors, in particular:
- a connection between knowledge-intensive productions and innovations with a tendency towards securing
their own niche at the global market, establishing new
commodities markets and/or more far-sighted use of
resources;
- a close connection between knowledge-intensive
high-tech fields and industries that are known by their
high share of net product and great successes at foreign
markets; and
- research and development (R&D) that is done in
knowledge-intensive fields has a multiplying effect.
The field of development of high technologies and
innovative use of such technologies in knowledge-intensive industries and economy is the one, where Russia’s
lag from advanced industrial countries of the modern
post-industrial society becomes more apparent, and will
rapidly increase, if no new development strategy and adequate financing are sought.
Poor financing of sci-tech and innovative activities in
Russia forces it inevitably to scale down principal lines,
to spend material stock and intellectual developments
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extensively6. Therefore, further decline in the financing
may render it impossible in 3 to 5 years to carry out any
sci-tech and innovative activity in knowledge-intensive
and high-tech field of economy. A decrease in R&D
financing scope will lead to the following:
- decreased performance and quality, extended job
duration;
- inhibition of advanced development of key elements
of modern knowledge-intensive engineering;
- loss of qualified personnel, securing such advanced
development;
- contraction of areas, nomenclature and depth of
research.
Under the conditions of possible financing de-scope
that is caused by anti-Russian sanctions in force, an issue
of economic protection of knowledge-intensive and
high-tech projects takes a great meaning7–9. One should
establish a conceptual approach, allowing for solving any
problems of selecting project protection methods, R&D
(R&D complex) priority assessment and analysis from the
unique methodological positions and leaving no ambiguity in taking their outcomes, and sharing information,
using the unique format. This if of extreme importance for
complex research, involving a great number of effectors
and with view to financial limitations and R&D priority
for application of their innovative effects in design and
development and entry into high-tech (intellectual property) markets.
While granted an opportunity to enter the global
knowledge-intensive market, Russian industry preserved
and has been developing its key technologies, using its
cutting-edge techniques and approaches to assessment of
intellectual activity results (non-tangible assets), demand
for such results in new market relations in this area of
Russian economy, and it is in need of organizational
changes, improvement of governmental industrial and
education and science policy.
Technological and innovative development shapes a
status of a country and fundamentals of its national security in the current dynamic economy. Progressive changes
in sci-tech and technological development occur due to
acceleration in the rates of development, production and
distribution of innovations, and due to capacity development of knowledge-intensive and high-tech production
industries that are the principal moving force of progressive development of the existing economy structure,
while integrating actively into such economy, thanks to
resource-saving and intensive factors.
Indian Journal of Science and Technology
Aleksandr Mikhaylovich Batkovskiy, Elena Georgievna Semenova, Alena Vladimirovna Fomina, Еvgenii Iur'evich Khrustalev and
Oleg Еvgen'evich Khrustalev
Risk assessment methods and models allow for calculation of risk indicators for each individual project
that can possibly be included into the established alternative development plan of knowledge-intensive and
high-tech product of various profiles, and plan alternative as a whole10–16. Risk consideration, management and
mitigation (compensation) in the process of providing
alternatives and implementing the selected option is a
crucial tasks of plan developers and coordinators.
2. Literature Review
Work of many domestic and foreign researches is devoted
to certain aspects of the issue of assessing, mitigating and
preventing investment project implementation risks at
the stage of investment.
Thus and so, challenges of analysis and estimation of
innovative process development are discussed in research
associated with intellectualizing the process of determining new sci-tech and social needs17, encouraging search
for most effective ways of achieving established technical
and social goals,18 and allowing for finding solutions to
innovation-oriented strategic problems19.
A lot of authors that studied risk conditions in economy and business professionally and successfully devoted
their research to a deep analysis of different risks that
accompany development, implementation, systematization, estimation, control and quantitative assessment of
innovations, and ways of preventing and averting such
risks1,20–26
Work of modern researchers that work in countries
of varying level of economic development are devoted
to an assessment of ratio of possible benefits from innovation implementation and associated risks, and to
finding a balance between the innovative activity and stable improvement of social and economic and production
activity of various kinds.27–29
Findings of analysis of successful innovation activity
practices at industry-leading companies are presented
by E. Fitzgerald,30 while J. Hampton31 suggests the way to
assess and control the associated risks. In32 a methodology
of risk management was discussed for implementation
of a certain Driven project. A scholar and practitioner
D. Livermore33 suggests options for risk management at
companies that introduce fuel innovations.
Due to insurance development, a concept of economic
risk appeared and it is understood as a possibility of losses
Vol 9 (28) | July 2016 | www.indjst.org
as a result of random nature of outcomes of commercial
decisions made or actions taken. Economic risk means a
possibility of losses as a result of capital contribution in
the investment field34.
There are other definitions available that should not
be disregarded; e.g a Russian Economist V. Abramov35
believes the risk to be a threat, a hazard of loss or damage.
This is a probability of success or error of any choice made
in a situation offering alternatives, a degree of uncertainty
in outcome prediction. We may come across other definitions of risk, where the risk is as an event or a group
of related random events causing financial or production
loss to a facility36.
According to V.V. Dmitrieva37, the risk is a hazard
of reduction in income or loss of financial resources, as
compared to the optimum alternative in economic activity of this type.
J. Schumpeter38 distinguishes between two types of
economic risks:
- losses due to production incidents; and
- losses associated with commercial miscalculations.
It should be pointed out that the concept of risk will
vary for various categories of managers, academics and
businessmen. Thus, the risk is an integral part of a business process allowing for profit gain for businessmen.
The risk is an undesirable event that may affect social
infrastructure development adversely for officials and
managers. The risk expresses itself in under-gain of the
desired effect of research for scholars39.
Innovation risks that arise in the process of development, familiarization, production and operation of
progressive equipment, technologies and materials are
target of this research. Innovation risk is a kind of economic risk and the concept covers all risks that are
manifested in the process of new project development and
new technology introduction at a company40. According
to D.M. Stepanenko41, the innovative risk ‘may be defined
as a probability of breaking the existing or establishing
new innovative relations (bonds) between parties, a party
and subject-matter of such relations in time and space.
A risk classification in great detail is provided by R.M.
Kachalov.12 He determined main features for risk classification, i.e. according to types of economic activity; risk
diversification ability; level of decision-making; effect
duration; party’s attitude towards the risk; conditions
that may give rise to the risk. He also divides risks into
systemic and specific, manufacturing and commercial,
Indian Journal of Science and Technology
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The Methodology and Mathematical Tools to Assess and Mitigate the Risk of Creating High-Tech Products
investment and insurance risks. From the point of view
of damage that is done due to risk realization, risks may
be defined as global, local, unconditional and conditional.
Risks that are present at various stages of innovative project implementation should be considered for
developing most effective methods of protection of
knowledge-intensive innovative projects. These are the
most important stages of any innovative process:
- basic research;
- applied research;
- design and engineering and design and development; and
- mastery of new product and innovation commercialization.
This suggested innovative process flow that is applied
to knowledge-intensive and high-tech products may be
supplemented in the following way: marketing research
to reveal social needs of new types of services; research
and development; pre-production design; pre-production
engineering; mastery and production of new high-tech
product; operation of high-tech product and sales of
knowledge-intensive and high-tech services; utilization
of high-tech product.
Economic protection of knowledge-intensive and
high-tech programs and projects implies management of
risks that are inherent in innovative scientific and technological practices. The most important methods of action
on risks include risk avoidance, risk mitigation, risk
transfer, and risk acceptance.
Risk avoidance method involves elimination of the
reason for damage. While analyzing a life cycle of investment projects in development and manufacturing of
high-tech product, the riskiest implementation stages are
determined. A possibility of creating conditions to minimize risk of damage is then assessed. This may include
restructuring, renovating or technical re-equipping of
companies of knowledge-intensive and high-tech economy sector, re-equipping, erecting new facilities and
other administrative and technical measures.2 If the need
for financial resources to take such measures exceeds cost
of transfer of a part of life cycle of the investment project
to any other companies, the riskiest stage of the project
should be avoided. This method is applied to catastrophic
risks with their probability beyond threshold values. For
calculating financing scope, the risk avoidance technique
includes determination of risk probability thresholds,
determination of possible damage amount, calculation of
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the requirement of financing scope for risk minimization
measure, analysis of the possibility of placing risky processes of the investment project at other sites. Financing
minimization measures for risks of this group is the most
essential part of governmental innovation-oriented scitech and technological programs and projects.
Risk mitigation method should be applied in cases,
where possible damage amount is insignificant, while
probability is rather high. This method includes preventive measures aimed at risk mitigation and diversification.
Diversification method involves creating conditions,
when single risk realization does not trigger a series of
adverse events for the project. Manufacturing of new
types of high-tech product should be duplicated, as
appropriate, to reduce time wasted for the recovery.
This method requires extra financial resources to
manufacture backup copies of high-tech product and
arrange production diversification measures.
Risk transfer method involves transfer of responsibility
for risk occurrence and indemnification to other institutions, such as insurance companies, commercial banks
that decrease financial risk occurrence, while fixing loan
interest in a long-time perspective, dedicated companies and organizations that take up damage reparation
commitment etc. An insurance fund is established at
insurance companies at the expense of insurance premiums contributed by the insured.
Risk acceptance method is applied in cases, when
damage and damage probability are insignificant, and
production diversification cost is not proportionate to
possible losses. That being the case, the company agrees
with possible losses and develops loss minimization measures. Some production, commercial and financial risks
may be referred to risks that may be accepted by knowledge-intensive and high-tech industrial companies. Stock
building, bank and governmental guarantees and mutual
insurance may be considered basic tools of this technique.
Commercial risks that are expressed as disruption of
material, raw material and component supply threaten
production process upset. The same troubles are caused
by production risks due to process equipment breakdown, computer bugs, disruption of communications
between workshops etc. Remedial actions, conclusion of
contracts with new suppliers takes time, during which the
production process may be upset. Extra stock of materials, raw materials and components allows for reducing
the likelihood of production upset, and stock of finished
Indian Journal of Science and Technology
Aleksandr Mikhaylovich Batkovskiy, Elena Georgievna Semenova, Alena Vladimirovna Fomina, Еvgenii Iur'evich Khrustalev and
Oleg Еvgen'evich Khrustalev
and semi-finished products (work in progress) give the
company a change to fulfill its contractual obligations, in
case of equipment breakdown or other incidents.
High-tech product manufacture is characterized
by a high level of cooperation, which motivates associated companies to set up joint mutual insurance funds.
Interested companies contribute some of their temporarily surplus funds for this to a financial fund that is used
for damage repayment for certain insurance events, such
as production, traffic accidents, supplier bankruptcy etc.
If no insurance events occurred over project implementation, these funds are returned to the companies. These
funds may be invested temporarily into highly liquid
financial instruments.
A bank guarantee of extra loan to compensate the
damage and eliminate the reasons and consequences of
failures may be an additional means of protection against
non-catastrophic risks. Banks require governmental security to grant loans in some cases.
3. Method
We suggest to consider risks at the long-term planning stage a priori (form plan alternatives and choose a
reasonable alternative) or a posteriori (conduct productive-economic assessment for the formed alternative).
The a priori method is based on a principle of acceptable risk of plan implementation and implies that risk
indicators are additional criteria (along with efficiency
and cost indexes) to be accounted for, while forming optimum high-tech product development alternatives.
Therefore, the task of plan formation becomes a multiple-criteria task of productive-economic analysis42–44.
One of the techniques that are used when several criteria
are present is the following: all criteria but one is fixed and
accepted as limitations and optimization is done according to the criterion that is recognized as dominant. The so
called principal criterion is isolated from a set of criteria
(e.g. Fi ), and additional limitations of inequality type are
put on the rest of the criteria. Thus, this task will generally
look the following: maximize Fi on a set of plans
u∈U
against limitations Fi (u) ≥ Fimp (i =
2,3,..., m). . The plan
that corresponds to the solution of the following task will
be optimum:
max
u∈U
Fi (u) where Fi (u) ≥ Fimp
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(1)
In this case, problem statement is clear and allows
for finding optimum solution out of acceptable solutions
according to conditions and limitations.
At the same time, multivariance that implies development of a number of alternatives for various scopes of
possible allocations C Bj is a specific of this plan formation process. Therefore, the amount of such allocations
may be considered given for each alternative. The above
risk acceptance method (method of acceptable risk) also
allows for calculating the amount of acceptable risk that
is set for each alternative. This measure is expressed as
money or efficiency (e.g, amount of possible financial
losses must not exceed a half of alternative cost or degree
of level recession of the problems solved must not be less
than 20%). In the first instance, it depends on economic
factors, and primarily on the amount of immediately
available funds, and on requirements of doctrinal nature
with the second instance. Thus and so, plan optimization
task is reduced to a single-criterion problem against two
limitations: total allotments and risk amount.
A task of forming a reasonable plan alternative (s) is
stated in this case in the following way:
Let there be n balanced development alternatives
for the high-tech product (plan alternatives) formed as
a result of productive and economic research of each
possible financing options C Bj , and each alternative be
characterized by efficiency factor W1 j ,...,Wnj . Moreover,
scores for one risk indicator R1 j ,..., Rnj , arising as a result
of action of external and internal factors, are obtained for
each alternative.
It is required to choose the most effective development alternative for the high-tech product system for
each financing option, on condition that its implementation risk is within the acceptable value ( Rdon j ):
Wj =
max W , where
i
ij
C j ≤ C Bj uRij ≤ Rdon j (2)
This problem statement differs drastically from classic
statements, because there is an additional limitation upon
risk value.
Maximum orientation of the alternative that is formed
through the solution of this problem is on capacities of
the industry and it must ensure acceptable implementation risk of the high-tech system. On the downside, in
order to ensure the required level of risk, one may have to
sacrifice efficiency brought by the perspective knowledge-
Indian Journal of Science and Technology
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The Methodology and Mathematical Tools to Assess and Mitigate the Risk of Creating High-Tech Products
intensive and high-tech equipment, due to elimination of
highly effective, however risky projects - that is in the first
place, and risk management is not possible, unless the
project is included into the alternative plan by selecting
reliable contractors and changing job nomenclature - that
is in the second place, and significant research expansion,
i.e. generation of a number of additional alternative plans
within the single possible financing option, is required that is in the third place.
The a posteriori method is based on a principle of
high-tech product system balance and implies a special
financial risk fund δ C Bj is available. Alternative plans are
formed as a two-stage procedure. Alternatives are formed
at the first stage, using a classic cost-efficiency method,
while risk indicators serve alternative quality indicators:
Wj → max where C j ≤ (C Bj − δ C Bj )
(3)
Risk management is done at the second stage at the
expense of a provision for the most risky projects ( L R
) that are included in the plan. Moreover, the make-up
of projects that are included in the alternative remains
unaltered for the sake of principle of balanced state. Thus
and so, the plan that has already been formed undergoes
a posteriori improvement, using the following criterion:
Rj →
min where W
Lr
j
=
Wj max u δ C j − δ C Bj
(4)
This approach allows us to form high-tech product
development alternatives of maximum reachable efficiency and minimum possible level of implementation
risk of the projects that are originally considered high risk
(at the first stage) against the existing financial limitations.
The use of financial risk fund for the a priori method
leads to an adverse effect of ‘keeping proportions’, as long
as the number of alternatives within a certain level of
allocations will depend, among other things, on fund distribution among the projects that are included into each
alternative.
4. Results
Basic outcomes of this research that are presented in this
article may be systematized in the following way.
It is known that a short-term plan is the key implementation tool of a long-term program. Formation of
parameters of the short-term plan that would ensure hightech product development maintained on the program
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trajectory in order to achieve predetermined program
development targets at the end of the planning period
(primarily, desired efficiency) is a task of short-term plan
development. However, estimated conditions for longterm plan implementation may be disrupted due to the
impact of various risk factors. The actual development
trajectory (tactical technical and economic indicators of
high-tech product specimen) may diverge from the program trajectory.
As mentioned before, the principal method that
allows for high-tech product development management
under the conditions is the long-term program revision method. For this purpose, an exploratory high-tech
product development alternative is formed at the stage of
next annual plan development, which implies long-term
plan transformation due to so called internal provisions
(planned work scope is revised, development deadlines
are extended for non-priority jobs, scopes of financing of
such jobs are modified etc.). We believe application of the
revision method is not reasonable, unless there is a significant uncertainty in financing the sci-tech and high-tech
equipment development program. A different approach
to elimination of undesirable course of events (compensation of consequences) may be applied against a rather
stable macroeconomic forecast.
A principle of multi-version (adaptive) short-term
plan management is implied as the basis of this approach,
and this principle is about supplementing high-tech product development alternatives that have been established at
the stage of long-term plan formation, and after the program alternative has been adopted, by possible alternative
divergences from the program trajectory with view to the
fact that a financial risk fund is used; thus, a set of possible
development alternatives is generated, which serves as the
basis for decision making during formation of public contracts for the next financial year.
Then, the following are main tasks at the stage of
short-term plan formation: identification of events that
occurred before the considered point of time and assessment of implementation consequences for each event
(damage assessment) at the end of the planned period;
formation of controlling actions that ensure minimum
divergence of the high-tech product development program trajectory.
Identification of events that occurred before the
considered point of time (before formation of public
contracts for the next financial year) implies analysis of
project implementation, managerial decisions that have
Indian Journal of Science and Technology
Aleksandr Mikhaylovich Batkovskiy, Elena Georgievna Semenova, Alena Vladimirovna Fomina, Еvgenii Iur'evich Khrustalev and
Oleg Еvgen'evich Khrustalev
already been adopted, available resources and assessment
of disagreement between the planned and current conditions for long-term plan implementation.
Dynamics of implementation risk for each project and
plan as a whole is assessed for each annual plan. If the risk
does not exceed than the acceptable value, no controlling
actions will be required. Otherwise, the course of events
must be revised, for which purpose the next stage, i.e. risk
management, is carried out.
Risk management methods must be selected based on
the amount of special financial funds and required scope
of extra cost of damage compensation.
The high-tech development management process
itself is presented as a process of modifying states of a
weakly determined and multi-parameter system in this
case. A state of the dynamic system means a set of mean
parameters Y = {y1 , y 2 ,..., y n } of such system at a fixed
point of time, i.e. a point in the phase space (parameter
space). Tactic technical and economic indicators of hightech product specimens are used as state parameters of
this system.
The process of change in states is described by the following equations:
Y (t + 1) = f (t , Y (t ), u (t ), W (t )), t = 0,1,..., N − 1
(5)
n
where: Y – vector of state Y ∈ R ; u – vector of
controlling actions, u ∈ U (t ) ⊆ Ω ,U (t ) – certain
q
given closed set of admissible values, t – discrete time
t ∈ T = [0,1,..., N − 1]; N – given number of steps;
W (t ) ∈ Ω m – m-dimensional vector that describes
an uncertainty of external effects on controlled targets;
f (t , y, u , w) : T × Ω × U (t ) × R → R
n
m
n
– vector
function of change in system states.
Initial state of the system (5):
Y (0 ) = Y0 ∈ Ω n dynamic system.
Values of components u (t ) determine the following:
- implementation dynamics for high-tech product life
cycles: a structure of assigning specimen development
and production tasks to certain contractors and points of
time; a sequence of creating high-tech product specimens
of various kinds to ensure their complete delivery to the
consumer; points of time of alternation of generations of
same-type specimens in production etc.;
- a structure and dynamics of financing certain stages
of high-tech product specimen life cycles (development,
production and operation): scopes of allocations for
development, production and operation; a dynamics of
investment gain and possible mastery of such investment;
a dynamics of allocations distributed among the development stages; funds distribution alternatives among
planned jobs etc.;
- a high-tech product system structure: a possible
replacement of same-type specimens that is equivalent in
terms of efficiency; a change of product package contents
of various types; and
- a capacity utilization structure: development and
differentiation of capacities of manufacturers and contractors; possible capacity conversion; creation and
utilization of provisions; availability of productions of
deficit components etc.
n
Information about the actual Y ∈ R and required
Y mp ∈ Rn value of the vector of state of the dynamic sys-
tem is used in management, i.e. a controlling action that
is applied at any discrete moment of time t ∈ T appears
as management with full feed-back of the vector of state.
A set of acceptable controlling actions U n forms
(6)
Management objective is a certain final state Y ( N ) in
this case, while the following condition must be ensured
at the end of management interval:
G (Y ( N )) = 0 (7)
where, G (Y ( N )) – hyperplane of dynamic system
state divergences.
Vol 9 (28) | July 2016 | www.indjst.org
u(0 ), u(1),..., u(N − 1)
is called controlling actions u(.) , with a sequence
y (0 ), y (1),..., y ( N − 1) that is determined by the
controlling actions u(.) being a trajectory y (.) of the
A sequence of vectors
functions u (t , y ) : T × Ω → U (t ) with the trajectory
of the initial dynamic system for varying initial conditions (5) to satisfy condition (6).
Then, the high-tech product development managen
ment task reads as follows: to determine a set of acceptable
controlling actions u (t ) ∈ U (t ), t = 0,1,..., N − 1 , for
given initial conditions (5) the system trajectory to satisfy
condition (6).
Indian Journal of Science and Technology
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The Methodology and Mathematical Tools to Assess and Mitigate the Risk of Creating High-Tech Products
5. Discussion
Unidentified factors W (t ) ∈ Ω that affect high-tech
product development, along with controlling actions, are
an integral attribute of the hight-tech product development management process. Currently, it is associated
with hard-to-predict economy development and low
accuracy of macroeconomic indicators of long-term
and short-term high-tech product development plans.
Collection and interactive use of additional information about non-controlled factors is a way of mitigating
the uncertainty. The use of additional information leads
to management in the form of synthesis, i.e. in the form
of function of arguments with their values unknown in
advance. In practice, it is difficult to formally construct
the synthesis function due to high dimension of the problem, functional connections that are difficult to describe
and use of variables of various types (continuous, discrete
or indistinct variables). Thus, let us divide the high-tech
product development management problem into the following two problems against the uncertainty conditions:
1) a program management problem that uses only
m
information that is available at the process start. Let
()
us call discrete vector function u .
with discretiza-
tion interval t = 0,1,..., N − 1 of segment [0,Т], called
‘planning period’, a high-tech product development
management program. From the formal perspective, the
management program is a determined description of the
high-tech product development management process on
a certain given time interval that ensures high-tech product system transfer from the current state to the required
state. A high-tech product development plan (long-term
management program and short-term management plan)
is a management program in the course of innovationoriented sci-tech activity management;
2) an operational management problem that uses
refined inputs (conditions and parameters of the external environment) for revising implmentation of program
management, based on divergences of actual high-tech
product development conditions from the assessed values
used for calculation. The operational management problem is solved during short-term plan formation.
A program trajectory for high-tech product development is selected at the stage of long-term planning to
measure divergences and determine resources to compensate such divergences relative to such trajectory. Against
the approved budget, special financial funds that allow
8
Vol 9 (28) | July 2016 | www.indjst.org
for eliminating certain divergences and maintain the trajectory within the tubing of acceptable trajectories is the
only source of compensation of the external disturbances.
However, sometimes they cannot be enough to damp the
external disturbances. Then, a need to transfer to another
trajectory arises.
Let us determine a set of acceptable processes
D( y, u ) as a set of pairs d = ( y (⋅), u (⋅)) comprising of
a trajectory
y (.)
()
and controlling action u . ∈ U . Let
us determine a management quality functional on the set
D( y, u ) :

N −1

I = M  F (Y (N )) +
f (t ,Y (t ),u (t ), w(t ))
(8)
∑

0

t =0
where: M – mathematical expectation, and averaging is done using a set of implementations of a
random process Y that is produced by a random vec-
tor W (t ), t = 0,1,..., N − 1 and acceptable controlling
()
action u . ∈ U ; F (Y ( N )) – functional terminator
that characterizes a state at the end of the management
interval; i.e. a degree of achievement of the stated management objective - a quantitative measure that characterizes
a divergence between the required and achieved results at
the end of the program period; f (t , Y (t ), u (t ), w(t ))
– functional integrator that characterizes quality of a management synthesis function. The concept of ‘quality of the
management synthesis function’ actually represents such
aspects of the high-tech product development management process as associated with arrangement of solution
of the whole set of tasks of plan justification, agreement,
formation and revision and operational implementation
management. A plan that has not ever been revised for
the duration of the planning period could obviously be
considered a perfect choice and the highest degree of
quality of the management synthesis function. However,
the above may be ensured by extra heavy spending of
resources or unacceptable decrease in high-tech system
efficiency at the end of the planning period. There is not
any obvious formal description for this criterion, however
multifactorial representation (in the form of vector function) via a set of partial criteria (plan stability, likelihood
of successful implementation, required provisions, internal resources, expected losses etc.) is possible.
Quality functional (8) appears as a terminator or integrator, depending on the scope of external disturbances
in solving the multi-version management problem.
0
Indian Journal of Science and Technology
Aleksandr Mikhaylovich Batkovskiy, Elena Georgievna Semenova, Alena Vladimirovna Fomina, Еvgenii Iur'evich Khrustalev and
Oleg Еvgen'evich Khrustalev
Provided the external disturbances can be compensated at the expense of special financial funds, the
problem is to get as far as possible along the program trajectory towards its final point and ensure achievement of
the given values of state indicators (7). And the integrator
is a limitation for selecting acceptable controlling actions
and the management task is formalized as follows:
( )
I d * = min M [F (Y ( N ))]
0 < t < N −1
(9)
If the plan provision is not enough to damp external
disturbances, the program trajectory is revised, while
the terminal element serves as a limitation and determines the range of acceptable states at the end of program
management interval. Then, the management task is formalized as follows:
T

I d * = min M ∑ f i 0 ( y i (t ), u (t ), w(t ), t )
1≤i ≤ n
 t =1

( )
(10)
Selection of quality functional (9) or (10) is a result
of correlating the high-tech product development plan
and objective with the information about plan fulfillment
and degree of objective achievement, or correlating the
predicted plan implementation status to the required status. Reports and notifications about plan progress are a
source of information in the first instance, and methods
and means of analyzing information about changes of
conditions (external environment) for high-tech product
development are a source of information in the second
instance.
The suggested multi-version method will allow for a
transition from one short-term plan to another, without
losing consistency of solutions, while preserving balance
between high-tech product elements throughout the program.
6. Conclusion
Knowledge-intensive and high-tech productions are
among few industries of Russian economy and economy of
many developed countries that possess cutting-edge technologies and innovative sensibility due to the nature of
their tasks of developing sophisticated commercial equipment. Therefore, such productions are destined to play a
leading role in ensuring accelerated rates of development
of national economies and overall global economy, and
their new quality. In doing so, high-tech product manufacturers facilitate at the same time strengthening of
Vol 9 (28) | July 2016 | www.indjst.org
stable state of the modern economic system, being of crucial importance in the long run, and global commodities
markets and financial system under unstable conditions.
Knowledge-intensive and high-tech activity is marked
by high rates of application of innovative technologies,
significant investment expenses and substantial damage
in case of adverse effects of risky conditions. Therefore,
projects of this line of activity are in need of protection
against the adverse effect of the environment and, at the
same time, against internal failures within their implementation programs.
Knowledge-intensive and high-tech industry is of
special importance to Russia and Russian international
integrated production structures, as long as it facilitates
establishment and strengthening of international relations and narrowing the lag from developed industrial
countries; moreover, this is the kind of activity, where
Russia still preserves its competitive power. This type of
sci-tech and production activity facilitates development
of information technologies and other services having no
alternative.
Our analysis showed that risks are an integral part of
investment knowledge-intensive and high-tech programs
and projects with frequent failures and associated financial losses as specifics of such programs and projects.
The magnitude and nature of risks depends on the stage
of project life cycle and type. Project implementation
environment and global strategy adopted by the corporate project members affect greatly stable and foreseeable
development of such knowledge-intensive and high-tech
project.
A new concept that based on mitigation and compensation of risks arising as a result of action of financial
and economic and scientific and technical and production and technological factors in order to resolve the
conflict between the determined approach to high-tech
product development planning and growing uncertainty
of processes of sci-tech and economic support of implementation of high-tech product creation programs, plans
and projects.
Generalization of best world methodological and
administrative support practice of risk assessment and
management on an academic level has revealed the following: the above methods were most developed against
justification of investment projects that are principally
based on the ‘concept of acceptable risk’, which depends
on person’s (investor’s) attitude towards the risk; arrangement of design tenders, multi-version planning and plan
Indian Journal of Science and Technology
9
The Methodology and Mathematical Tools to Assess and Mitigate the Risk of Creating High-Tech Products
revision method, financial funds reservation method, and
avoidance method are among principal risk management
methods used for high-tech product development planning. However, there is not any comprehensive approach
to application of all such methods available for forming
and implementing high-tech product development plans.
Risks are suggested to be accounted for at the stage
of development plan formation for complex technical
systems a priori or a posteriori. The a priori method is
based on the principle of acceptable risk of implementation. Statement of the plan optimization task factoring in
the the risk is reduced in this case to a single-criterion
problem against two limitations: total allocations and risk
magnitude. The a posteriori method is based on the principle of balance state and uses financial risk funds that are
designed for mitigating implementation risk of the most
risky projects within the plan.
The multi-version (adaptive) management method
should be used at the stage of short-term plan formation that is supplementation of the compiled alternative
knowledge-intensive and high-tech product development plans with information about potential divergences
from the given program trajectory, taking into account
the use of financial risk fund. Thus and so, a great variety of acceptable sci-tech and technological development
alternatives that are used for forming a plan for the next
financial year are established. A fundamental difference of
the suggested method from the popular revision method
for public sci-tech programs, plans and projects is a new
formation philosophy of managerial decisions represented as subsequent implementation of synthesis stages
of multiple case scenarios, analysis of scenario effects, and
synthesis of a variety of solutions to prevent or mitigate
associated adverse effects.
7. Acknowledgement
The study has been carried out with the support from
the Russian Science Foundation (RSF project No 14-1800519).
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