Glossary term
New Product Approval Process (NPAP)
Subject: Risk Management, Operational and Model Risk
Also known as: NPAP, New Product Approval
A new product approval process is the set of checks a firm completes before launching a new product, service, market or major change, so that risks, controls and obligations are assessed and signed off first.
Explanation
Experts from risk, compliance, legal, finance, operations, technology and sometimes tax review a proposal drawn up by the business. They ask what could go wrong for customers and for the firm, whether the product fits the firm's risk appetite, what capital or liquidity it uses, which rules apply, and whether systems and staff are ready. An approval committee gives a yes, a conditional yes or a no, and conditions are tracked until met. Many firms also review the product after launch to see if early results match the plan. The scope usually includes changes to existing products, new customer groups and outsourcing arrangements. Skipping the process is a recurring cause of mis-selling and operational failures. Committees look for a named owner for every condition, since a conditional approval that nobody chases is a launch with no check at all.
Example
An insurer plans a low-cost health policy for freelancers. The approval committee finds that the pricing rests on thin claims data and the claims team cannot handle the expected volume. It approves the launch only after the insurer adds a waiting period, an annual payout limit and extra claims staff, with a review three months after the first policies are sold.
Not to be confused with
- Product governance
- Product governance covers the whole product lifecycle. The approval process is the gate a new product must pass before launch.