Page 3: Managing risk
Any large investment required to meet the needs of customers involves a careful examination of the balance between risk and reward of the project. Risk describes the potential of negative results; the potential for positive results creates opportunities and revenue for the business organisation.
In the past, risk management was viewed as a reactive business activity that simply responded to events and changes as they occurred. Today, risk management is viewed as a solution to many of the challenges facing modern businesses, providing them with a competitive edge in planning.
In the same way that Rolls-Royce needed to work with its customers in order to meet their needs, it also needed to work with suppliers in order to share insight and add value to business propositions. Rolls-Royce knew that to respond to future challenges it would have to develop a new generation of advanced engines.
With research and development costs for a new engine programme estimated to cost approximately $1 billion, the company made the strategic decision to develop risk and revenue sharing partnerships with other world-class companies. The merging of leading edge technologies and high level capabilities ensured that future Rolls-Royce products would challenge the industry. We now take a look at how the Trent 500 engine was developed, through risk and revenue partnerships.