Risk Management in High-Tech Project Ling Chuanfan Jiangxi University of Finance and Economics, P.R.China 330013 Abstract: Based on the features of high-tech projects, we analyze the high-tech project risk characteristics and classification; present the risk assessment model and indicator system, and combine the methods of qualitative analysis and quantitative analysis, including the analytic hierarchy process, linear weighted method, fuzzy comprehensive analysis and other evaluation methods. At last, a high-tech project risk evaluation system is designed and developed to meet the high-tech project management needs. Keywords: High-Tech Project, Project Management, Risk Management

1 Introduction With the emergence of human activity, there are risks. As human productivity, the risk is gradual becoming a prominent role in the destruction of production, and therefore, risk management has also prospered. Along with the practice of large-scale complex projects, the development of project management skills and the completion of the project management knowledge system, risk management is included in project management, which constitutes the project risk management. The basic system of project risk management is also steadily improving. Nichalas thinks that the project risk management consists of three stages, namely the risk identification, risk assessment and response programs [1]. Chapman thinks project risk management includes two stages or processes: risk analysis and risk management [2]. In 2000, Project Management Institute (PMI) promulgated a new project management body of knowledge (PMBOK) to extend the content of project risk management. The process is changed from four to six: risk management planning, risk identification, qualitative risk analysis, quantitative risk analysis, risk response planning, risk monitoring and montrol [3]. In China, risk management in theoretical research is relatively backward, but the situation of project risk management is more worse. Since the mid-1980s, along with the constant development of economy, the theory and practice of project risk management is studied comprehensively and systematically by domestic researcher. For example, in "The Three Gorges Project Risk Analysis and Investment Theory and Methods", a research project sponsored by the State Science and Technology Commission, a comprehensive utilization of the multi-disciplinary theories and methods achieved a number of important research results. From the domestic and abroad situation, there are many relevant studies of high-tech project risk evaluation index system and the methods of evaluation. The evaluation methods consist of level analysis, data envelopment analysis, fuzzy comprehensive analysis, and artificial neural network method, and so on. These studies have achieved encouraging results, with higher theoretical value and significance, but lacked the practical application of evaluation system in decision-making and management of high-tech enterprises.

2 Characteristic of high-tech project High-tech is high-level, state of art, emerging and advancing dominant technology, which has crucial influence to the national economy and military, has the high economic and social significance and can be industrialized, and plays the key role in the economic process. According to the description of intelligentsia and industrial community of the domestic and foreign on high-tech, high-tech project includes the following major characteristics: High-Innovativity As a knowledge-intensive technology, high-tech is not only the innovation and accumulation of technology in the original development path, but also the new idea and path of technology implementation by utilizing existing research achievements widely, investing R&D, and exploiting and accumulating knowledge.

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②High-Strategy

High-tech is an important symbol of world development. It is a kind of form of strategy resource and national power represented by science and technology, and relates directly to the economic, political, military status of a nation or region in global competition model. Knowledge-Intensivity High-tech is more complicate and more difficult than general technology. The breakthrough of areas and domains in frontier science and technology requires the massive high intelligence and high quality researcher. High-Investment High-tech needs large numbers of expensive instruments and devices, a great of investment, and more expenses of R&D than general technology. High-Benefits The charm of high-tech and its industries is its high-benefits and high return on investment. High-tech not only can improve labor productivity, product performance and quality, and bring the origination profit, but also can produce more added value than general technology. High-Competition High-tech is high time-sensitive and high quality. Those who keep ahead in time and quality will have the advantage in competition. Strong-Penetration High-tech involves various knowledge, disciplines and professionals. It also brings along the upgrading of traditional industries while penetrating and proliferating to all aspects of economy and society. High-Fusion The fusion of high-tech is mainly showed in the fusion and promotion between the high technology research and science research, and in the fusion, coordination and penetration of different types of technologies. High-Risk The high-tech innovation risk is enormous, and includes technology risk, financing risk, production risk, management risk, environment risk and market risk, etc.

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3 High-tech project risk analysis A high-tech project is a complex, systematic project, and is influenced by many factors. These factors have the complicated relations, direct or indirect, clear or implicit, or difficult to predict. The serious consequences caused by these factors may go to different degrees. When assessing a risk project, it would lead to the analysis errors that risk factor is not considered or a major factor is overlooked. But if each of the risk factors were considered, the issue would be too complicated. Therefore, in order to having a depth, comprehensive understanding of the risks of high-tech projects, and to focusing on management, it is necessary to identify the risk classifications, to identify the natural relationship and seize major factor from the complicated factors, and analyze its main features. 3.1 Features of high-tech project risks Risk: An objective existence in high-tech projects The risk of high-tech project is caused by its transformation process of technology to market, which led to constant innovation. And innovation has always faced many uncertainties, which are new vigor innovation and a source of risk. The risk of technological innovation is an objective existence that cannot be avoided and eliminated completely [4] [5]. Losses and gains: Coexisting in high-tech projects risks General absolute risk, such as floods, fires, would only bring losses, but not revenue. High-tech projects is a high-risk investment, it could cause damage, and may also bring opportunities to the risk takers. Incremental risk: Losing in high-tech projects Invested in high-tech projects is an ongoing process, the longer the time of the project failure or the terminate time, the more the cumulative investment risk losses. Loop transfer: Risk in high-tech projects In the process of promoting high-tech projects, the risk has the function of one-way transmission that the former performance of risk factors will have an impact on the follow-up phase. For example, a technical error of the laboratory stage might lead to instability and lead to adverse market access. 3.2 The classification of high-tech project risk Risk factors in the high-tech industry can be classified from different perspectives to different standards division. It can be classified according to the source, can be classified according to the various stages of project implementation process, but also can be classified according to risk characteristics, or

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by the risk level classification. Risk classification by stage It is divided into five stages: product planning and innovative ideas stage, the development of research and experimental design stage, the middle stage of testing, mass production stage, and marketing stage [6]. Risk classification by features Including: technical risk, financing risk, production risk, risk management, environmental risk, market risk [4] [5].

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4 Evaluation system design in high-tech project risk According to the research data at home and abroad, from the perspective of both qualitative and quantitative, evaluation method can be summarized into five main types: subjective analysis and empirical methods, scientific measurement methods, economics methods, mathematical methods and comprehensive evaluation [7]. Mathematical methods which included the level analysis, and evaluation of the linear weighting, fuzzy comprehensive evaluation, data envelopment analysis, the associated analysis, operations research and other utility function evaluation methods. These methods mainly adopt mathematical methods to identify and quantify the relationship between the object variable and its weights. We evaluate the risks of high-tech projects by the mathematical method: the linear weighting method, analytic hierarchy process and fuzzy comprehensive evaluation. According to the evaluation of the final score, the project risk is ranking. 4.1 Risk evaluation system model High-tech project risk assessment model is shown in figure 1. Create the high-tech projects risk assessment system AHP method used to determine the index weight Choose risk assessment methods

Add the linear weighting method

Analytic Hierarchy Process

Fuzzy comprehensive assessment

Risk evaluation in high-tech projects Figure 1 High-tech project risk assessment system architecture

4.2 The creation of risk evaluation system High-tech project goes through many stages, and also faces risks. The risks at all stages lead comprehensively to high-tech projects risks inherent contradictions in the structure and regularity, also cause the complexity of the new high-tech projects risks. From a more general perspective, the high-tech projects can reflect the risk from the following six areas [6]: Environmental Risk: the risk caused by of fluctuations in market demand because of the changing of political society (policies and laws), the economic environment. Financial risk: the risk of investment because of the changing of the financial markets Technology risk: the issue caused by product development as new ideas and research their own deficiencies (i.e., technical immature and imperfect) and the emergence of new technologies, which can

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be replaced. Productive Risk: the risk of the production process caused by foresees difficulty of enterprise production process, apparatus, equipment, raw materials and so on. Market risk: the market uncertainty caused by the difficulty to determine the competitiveness, to foresee product innovation diffusion, to ascertain the market requirements. Management risk: the risk caused by the different opinions about the innovation projects in manage layer, or the adaptability of management-level and quality of staff. Target architecture is shown in figure 2. Environmental Risk U1 Financial Risk U2

Country’s political and economic environment U11 Compatible degree of creative item and policy law U12 Bank interest rate change U21 Low Risk

Market investment rate of return U22 Replaced technology U31

Technical Risk U3

Advanced technology U32 Lower Risk

Technical applicability U33 Technical dependence U34

Use of existing production equipmentsU41 Risk Assessment of High-Tech Project

Productive Risk U4

Staff’s situationU42

General Risk

Material supply U43 Annex ability of investment U44 Product innovation U51

Higher Risk

Price of product competition ability U52 Market Risk U5

Customer needs degree U53 Sale route of product request U54 Life cycle of product U55

Management Risk U6

Energy of management leverU61 Experience of project manager U62

Figure 2 High-tech project risk assessment index system and layer analysis model

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High Risk

4.3 Risk Assessment Research high-tech risk evaluation method under the conditions of different information. Linear weighting method under the condition of complete information When the information of high-tech products research and development process, the production and marketing is gathered more fully, it is can be calculated for the products of the risk indicators index value based on risk measurement, calculated the index weight by the AHP, then calculated integrated risk assessment values of products according to the linear weighted plus of index value. AHP under the condition of insufficient information First, establish the hierarchical model to the problems analyzed (shown in figure 2), then compare one level of various factors with previous levels of the various criteria (or objectives), construct judgment matrix, make the layers and single ordering and consistency of testing according to the result of the judgment matrix, at last, culminate total level ordering, get each factor’s optimization sequence of the decision-making goals (risk assessment), and through normalization sequence, and the final one treatment, as the evaluation of each project risk [8]. Fuzzy comprehensive assessment under the condition of insufficient information First of all, analyze the problems and establish hierarchical model, and then divide risks into five evaluation grades (low-risk, lower risks, general risks, higher risks, high risk), define the standards of evaluation grading, issue expert assessment questionnaire, get evaluated matrix by the expert scoring. At last, by using Fuzzy comprehensive evaluation model, we can get the industrialization of high and new technology risks belongs to various evaluation grading while various levels weights of indexes by the levels analysis. The final evaluation results of the industrialization of high and new technology risks can be obtained according to the largest Subordination Principle. 4.4 System Implementation Programmer code design The system is developed by Delphi. The software is a powerful, rich control, and conducive to object-oriented programming (OOP) development [9]. In order to enable the code designed to be simple and easy to modify, maintain, in the process of programming design, code inheriting is fully used. For example: to create Windows-based categories, join the number of public events and used code to the incident dealing code, then, every time we use, just only inherit and create a Windows Forms from the base windows, and inherit all category of the incident, so as to achieve the purpose of saving code. System Interface Design System interface would be simple, clear, with particular attention to the user-friendliness of the world. Including: main window (display users to input / output and can remind information), File operation (opened up has evaluation projects data files, preservation the current window the data, preservation of all window the data, printing experts statements and evaluation results, etc.), evaluation methods (linear weighted and Law, the levels analysis, fuzzy comprehensive evaluation method), and help the (online help, system descriptions), system tools column (the system service main function using by icon manner that convenient users operation), evaluated projects (presents all that has been evaluated to the project). For example, the mouse to click the project has been evaluated, and the results will be demonstrated that (figure 3 below).

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Figure 3 An example of evaluation results

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5 Conclusion After entering the 21st century, the world's economic development has entered the era of the knowledge economy, science and technology as the main driving force in economic development. There is an increased awareness of high-tech power to enriching and improving overall national strength, a significant role. The competition of high-tech is the key focus of the world nowadays, more in future. The high-tech project risk management, which is an important component of high-tech project management, is aiming at the new high-tech projects in the course of turning to market merchandise and taking precautionary measures, or remedial measures after danger occurred, so that it can minimum the negative impact of the accident in and around the new high-tech projects. Paying more attention to risk management in high-tech projects will help enhance the profitability of an enterprise, and not just to defense loss.

References [1] John. M. Nichalas. Business and technology-oriented project management. Tsinghua University Press: Beijing, 2000. [in chiness] [2] R. J. Chapman. The controlling influence on effective risk identification and assessment for construction design management. International Journal of project 2001, 19: 147-160. [3] Project Management Institute. A Guide to the Project Management Body of Knowledge (PMBOK) 2000 Edition. Newtown Square Pennsylvania USA, 2000. [4] Cheng Wei zhong, Cheng Jin xian. The risk of high-tech industry research. Xi’an: Shaanxi People's Publishing House, 1998. [in chiness] [5] Wang zhan ying, Gu jian quan Risk high-tech industries to invest in research. Beijing: China Science and Technology Publishing House, 2000. [in chiness] [6] Shi wen qing High-tech industry, venture capital and management. Harbin: Northeast Forestry University Press, 2001. [in chiness] [7] Luo shi sheng Science and technology indicators: The measurement and evaluation of applications. Wuhan: Wuhan University Press, 2000. [in chiness] [8] Thomas L. Saaty, Luis G. Vargas. Prediction, projection, and forecasting: applications of the analytic hierarchy process in economics, finance, politics, games, and sports. Boston: Kluwer Academic Publishers, 1991. [9] Paul Kimmel. Building Delphi 6 Applications. Boston: McGraw-Hill, 2001.

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