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Software Risk Management

Software risk management is the process of identifying software risks and planning to avoid those risks or to minimize their effects if they cannot be avoided.

Using risk management techniques, we can alleviate the harm or loss in a software project. All risks can not be avoided, but by performing risk management, we can attempt to ensure that the risks are minimized.

Risk management is about understanding the internal and external project influences that can cause project failure. once the project plan is built, a risk analysis should be performed. The result of the initial risk analysis is a risk plan that should be reviewed regularly and adjusted accordingly. The main purpose of risk management is to identify and handle the uncommon causes of project variation. This is captured in a formal process in which risk factors are systematically identified, assessed and provided for.

“Risk is the possibility of suffering loss.” In a software development project, loss describes a negative impact to the project, which could be in the form of the demised quality of the end product increased costs, delayed completion, or outright  project failure. Risk is uncertainty or lack of complete knowledge of the set of all possible future events. It can be classified as referring either to favorable or unfavorable future events.

Strictly speaking, risk involves only the possibility of suffering harm of loss. Risk can be categorized as:
•    Internal, within the control of the project manager;
•    External, outside the control of the project manager.
The Project manager deals with risks resulting from three general classes;

1.    Known knows

These are risks known to the project team as both a category of risk and a reality of this project. An example of this is not having an executive sponsor for a large project places continued funding at risk. If there is not executive sponsor, this is a known type of risk and it is known to exist on this particular project.

2.    Known unknowns

These are risks that are known to the project team as a category of risk, but not known as a reality on this project. For example, not having access to the ultimate end-user is a risk in that requirements may not be correctly identified. In this project, if ti is unknown whether there is access to the ultimate end-user, this is a known type of risk, but it is unknown whether the risk exists on this project.

3.    Unknown unknowns

These are risks that are unknown to the project team as both a category of risk and as a reality of this project. Although project mangers use broad categories of risk, an unknown can arise in the technology area. An example of this is when a project must use a specific technology solution because it is dictated by the terms of the contract for the project. Even thought his in itself is a risk, with not experience in

Risk uncertainty spectrum

the tool, The project manager cannot know all the potential risks inherent in the tool’s use. These can only be addressed in the most gernal way by setting a budget for contingencies.

Risk management is a concept that can be implemented in number of ways. All good risk management approaches have the following characteristics:
•    There is a planned and documented risk management process for the project or program;

•    The process is based on a prospective assessment. The project management team looks ahead to find and manage possible problems;

•    The initial assessment is periodically redone to validate the initial findings and to uncover new problem areas;

•    The program has a defined set of evaluation criteria that covers all facets of the program;

•    The on-going results of the risk management process are formally documented. Part of what risk management is all about is risk quantification. Concepts of risk quantification are:

•    Risk Event: the precise description of what might happen to the project.

•    Risk probability: the degree to which the risk event is likely to occur.

•    Amount at stake: the loss if the outcome is unsatisfactory.

•    Risk exposure: the overall liability potential of the risk; the formula for risk exposure.

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