The Cost Management of Innovative Products in an Industrial Enterprise Given the Risks in the Digital Economy

Abstract

This study aims to develop a mechanism for the cost management of innovative products in an industrial enterprise given the inherent risks. Under the conditions of the high volatility of the digital economy, risk assessment in cost management, as well as the development of some mechanisms for staying flexible and adaptable with regard to continual changes, is a priority for the further development of cost management systems for an industrial enterprise. The research results include: (1) a mechanism for assessing and considering the changes in the key cost drivers, which continuously controls the target cost level that has been achieved and can be used for taking into account the risk factors in cost management and for increasing the effectiveness of the business processes of industrial enterprises operating in the digital economy; and (2) a description of the methods recommended for implementing each stage of the mechanism suggested. The mechanism is based on the synthesis of the cost driver concept and the risk-controlling concept. The following tools were used to develop the mechanism: target-costing, kaizen-costing, variance analysis for cost planning, accounting and analysis, an Ishikawa diagram, a fault tree for identifying risk factors for key cost drivers, and simulation modeling using the Monte Carlo method. The mechanism: (1) makes it possible to consider the high uncertainty level of the external environment and the effect of risks in the cost management system; (2) can be used to control the level of target costs reached in real time and introduce prompt corrections regarding the planned costs according to external and internal changes; and (3) is based on using modern, high-precision tools for assessing risks and the effect they produce on the costs and profitability of an industrial enterprise. The advantages above help to increase the dynamics and flexibility of the process of the cost management of innovative products and to maintain such products’ competitiveness. 

Keywords

• cost management
• digital economy
• innovative products
• key cost drivers
• key risk factors