Explain Risk Management

Risk Management

  • A risk is a potential problem – it might happen and it might not. A software project can be affected by a large variety of risks. In order to be able to systematically identify the important risks which might affect a software project, it is necessary to categorize risks into different classes. The project manager can then examine which risks from each class are relevant to the project.
  • Conceptual definition of risk
    • Risk concerns future happenings
    • Risk involves change in mind, opinion, actions, places,
    • Risk involves choice and the uncertainty that choice entails
  • Two characteristics of risk
  1. Uncertainty – the risk may or may not happen, that is, there are no 100% risks (those, instead, are called constraints)
  2. Loss – the risk becomes a reality and unwanted consequences or losses occur

Categories of risk

·         Project risks
  • They threaten the project plan 
  • If they become real, it is likely that the project schedule will slip and that costs will increase
·         Technical risks
  • They threaten the quality and timeliness of the software to be produced
  • If they become real, implementation may become difficult or impossible
    Business risks
  • They threaten the feasibility of the software to be built
  • If they become real, they threaten the project or the product
  Known risks
  • Those risks that can be uncovered after careful evaluation of the project plan, the business and technical environment in which the project is being developed, and other reliable information sources (e.g., unrealistic delivery date)
Predictable risks
  • Those risks that are deduced from past project experience (e.g., past turnover)
Unpredictable risks
  • Those risks that can and do occur, but are extremely difficult to identify in advance

Sub-Categories of risk

  • Market risk – building an excellent product or system that no one really wants
  • Strategic risk – building a product that no longer fits into the overall business strategy for the company
  • Sales risk – building a product that the sales force doesn’t understand how to sell
  • Management risk – losing the support of senior management due to a change in focus or a change in people
  • Budget risk – losing budgetary or personnel commitment

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