Risk Management

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(1)Risk Management. 1. 07/10/2020.

(2) discover yourself inspire posterity. Definition of Risk A risk is a potential problem – it might happen and it might not Conceptual definition of risk Risk concerns future happenings Risk involves change in mind, opinion, actions, etc.. Two characteristics of risk Uncertainty – the risk may or may not happen, that is, there are no 100% risks (those, instead, are called constraints) Loss – the risk becomes a reality and unwanted consequences or losses occur. 07/10/2020. 2.

(3) discover yourself inspire posterity. Risk • Uncertain event that has a positive or negative effect on at least one of the project objectives (scope, schedule, budget, quality).. 07/10/2020. 3.

(4) discover yourself inspire posterity. Threat • A project risk that has a negative effect. • Project Managers will look for ways to eliminate or reduce the effects of a threat.. 07/10/2020. 4.

(5) discover yourself inspire posterity. Opportunity • A project risk that has a positive effect. • Project Managers will look for ways to enhance, exploit, or share the effects of an opportunity.. 07/10/2020. 5.

(6) discover yourself inspire posterity. What is Risk Management?? “Series of systematic steps that helps software team to understand and manage uncertainty or risk is called Risk Management”. 07/10/2020. 6.

(7) discover yourself inspire posterity. Why Risk Management?? 1. Software is difficult undertaking 2. Huge investments, time, human resources are on stake 3. Futures, careers, company reputation depends upon a project 4. Lots of things can go wrong or not according to plan 5. No plan is 100% secure. 07/10/2020. 7.

(8) discover yourself inspire posterity. Risk Management Strategies: Reactive: Risk management or react after its appearance Pro-Active: Risk management or planning before its appearance. 07/10/2020. 8.

(9) discover yourself inspire posterity. Reactive vs. Proactive Risk Strategies Reactive risk strategies "Don't worry, I'll think of something" The majority of software teams and managers rely on this approach Nothing is done about risks until something goes wrong The team then flies into action in an attempt to correct the problem rapidly (fire fighting). Proactive risk strategies Steps for risk management are followed (see next slide) Primary objective is to avoid risk and to have a contingency plan in place to handle unavoidable risks in a controlled and effective manner 07/10/2020. 9.

(10) discover yourself inspire posterity. TYPES 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 viability (ability to work successfully)of the software to be built If they become real, they jeopardize (put something into situation in which there is a danger of harm, loss or failure) the project or the product 07/10/2020. 10.

(11) discover yourself inspire posterity. Project Risks: Threaten project plans 1. May cause project over budget and cross delivery deadlines 2. Identify budgetary, schedule, personal (staff), resource, etc 3. Change in clients requirements, technology, etc with respect to time and there impact on software life cycle. 07/10/2020. 11.

(12) discover yourself inspire posterity. Technical Risks: Threaten quality of software product 1. If any technical risk becomes reality implementation becomes almost impossible 2. Identify design, code, implementation, interface and maintenance issues 3. Technical risks mostly arises when we consider a problem easy to implement but in reality its not. 07/10/2020. 12.

(13) discover yourself inspire posterity. Business Risks: Threaten product from business point of view 1. Sale/Marketing of Product 2. End Users feedback 3. All tangible expectations from project 07/10/2020. 13.

(14) discover yourself inspire posterity. Sub-categories of Business risks 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. 07/10/2020. 14.

(15) discover yourself inspire posterity. Business Risks Examples: Excellent built product but no one really wants it (Market Risk). Good product but not fits in current business scenarios (Strategic Risk). Product which no one would buy (Sales Risk). Loosing support from upper management (Management Risk). Loosing budget or personal commitment (Budget risk). 07/10/2020. 15.

(16) discover yourself inspire posterity. Risk Categorization 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 extrapolated (to guess what might happen using information that is already known)from past project experience (e.g., past turnover). Unpredictable risks Those risks that can and do occur, but are extremely difficult to identify 07/10/2020 in advance 16.

(17) discover yourself inspire posterity. Predictable Risks: Explored from past experiences, for e.g. poor communication with customers, working in new or unfamiliar domain, poor staff efforts etc. Un-Predictable Risks: They may occur extremely difficult to identify predict in advance, only flexible pre-planning is the way to handle them. 07/10/2020. 17.

(18) discover yourself inspire posterity. Steps of Risk Management: Recognize Risk: What can go wrong?? Analyze Risk: What sort of damage it does Rank Risk: According to impact Develop Plan: Finally plan is develop to manage risk. 07/10/2020. 18.

(19) discover yourself inspire posterity. Risk Recognition or Identification: Two distinct type of risks can be identified: •Product Specific Risks: Identification of scope and special characteristics of your software Can be specified by those who have clear understanding of current technology, people, environment, market situation etc, that is specific to software that is to be built. •Generic Risks: They are potential threats to all software projects 07/10/2020 19.

(20) discover yourself inspire posterity. Risk Identification: One method is to create risk checklist: •Product Size: Risk associated with overall size •Business Impact: Impact on market •Customer Characteristics: Customer interests, knowledge and developers ability to communicate •Development Environment: Availability & quality of tools •Technology to be built: Overall complexity of a system •Staff size and experience: Experience and skills of team. 07/10/2020. 20.

(21) discover yourself inspire posterity. Risk Components and Drivers The project manager identifies the risk drivers that affect the following risk components Performance risk - the degree of uncertainty that the product will meet its requirements and be fit for its intended use Cost risk - the degree of uncertainty that the project budget will be maintained Support risk - the degree of uncertainty that the resultant software will be easy to correct, adapt, and enhance Schedule risk - the degree of uncertainty that the project schedule will be maintained and that the product will be delivered on time. The impact of each risk driver on the risk component is divided into one of four impact levels Negligible, marginal, critical, and catastrophic 07/10/2020. 21.

(22) discover yourself inspire posterity. Risk Analysis or Projection: Also called risk estimation or risk analysis Attempt to specify each risk in two ways: •Probability that risk is real •Consequences or Impact of risk Planners & technical staff perform risk projection in four steps: 1. 2. 3. 4.. Establish scale of risk Explain the consequences of risk Estimate the impact on project Note overall accuracy of risk projection 07/10/2020. 22.

(23) Risk Rank:. discover yourself inspire posterity. 1. Establish scale of risk. Impact Values: 4 ----- Catastrophic 3 ----- Critical 2----- Marginal 1------ Negligible R.E = Probability * Category 07/10/2020. 23.

(24) discover yourself inspire posterity. Risk Analysis or Projection: 2- Delineate (indicate the exact position) the consequences of risk “Assign probability of to each risk according to the general possibility of occurrence” For e.g.: Technology will not meet the requirement 30% Customer will change the requirements 70% 07/10/2020. 24.

(25) discover yourself inspire posterity. 3. Estimate the impact on project RISK. Catego ry. Probability. Risk Exposure. Larger number of users then plan. Critical. 30%. 90. Delivery Deadline will be tighten. Marginal. 70%. 140. 30%. 120. 50%. 50. Lack of Catastrophi training on toll c Staff. 07/10/2020. Negligible. 25.

(26) discover yourself inspire posterity Contents of a Risk Table. A risk table provides a project manager with a simple technique for risk projection It consists of five columns Risk Summary – short description of the risk Risk Category – one of seven risk categories (slide 20) Probability – estimation of risk occurrence based on group input Impact – (1) catastrophic (2) critical (3) marginal (4) negligible RMMM – Pointer to a paragraph in the Risk Mitigation, Monitoring, and Management Plan. Risk Summary. 07/10/2020. Risk Category Probability. Impact (1-4). RMMM. 26.

(27) discover yourself inspire posterity. The overall risk exposure formula is RE = P x C P = the probability of occurrence for a risk C = the cost to the project should the risk actually occur. Example P = 80% probability that 18 of 60 software components will have to be developed C = Total cost of developing 18 components is $25,000 RE = .80 x $25,000 = $20,000 07/10/2020. 27.

(28) discover yourself inspire posterity. Example:. The average component has 100 LOC Say engineering cost of per LOC = 9 $ The over all cost impact to develop the components will be: Impact = 18 * 100 * 9 = 16,200 $ Risk Exposure 07/10/2020. = 0.8 * 16200 = ±12,960 $ 28.

(29) discover yourself inspire posterity. Seven Principles of Risk Management Maintain a global perspective View software risks within the context of a system and the business problem that is intended to solve. Take a forward-looking view Think about risks that may arise in the future; establish contingency plans. Encourage open communication Encourage all stakeholders and users to point out risks at any time. Integrate risk management Integrate the consideration of risk into the software process. Emphasize a continuous process of risk management Modify identified risks as more becomes known and add new risks as better insight is achieved. Develop a shared product vision A shared vision by all stakeholders facilitates better risk identification and assessment. Encourage teamwork when managing risk Pool the skills and experience of all stakeholders when conducting risk management activities. 07/10/2020. 29.

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