The document discusses various aspects of risk management for projects. It describes reactive risk management where risks are addressed after occurring versus proactive risk management where formal risk analysis is performed upfront. It identifies different types of project risks and provides questions to assess risks due to factors like product size, business impact, customers, and development processes. Overall project risk management involves identifying, analyzing, planning for, and tracking risks.

1. 1
Chapter 25Chapter 25
Risk ManagementRisk Management
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2. 2
Project RisksProject Risks
What can go wrong?What can go wrong?
What is the likelihood?What is the likelihood?
What will the damage be?What will the damage be?
What can we do about it?What can we do about it?
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3. 3
Reactive Risk ManagementReactive Risk Management
project team reacts to risks when they occurproject team reacts to risks when they occur
mitigationmitigation——plan for additional resources inplan for additional resources in
anticipation of fire fightinganticipation of fire fighting
fix on failurefix on failure——resource are found andresource are found and
applied when the risk strikesapplied when the risk strikes
crisis managementcrisis management——failure does not respondfailure does not respond
to applied resources and project is in dangerto applied resources and project is in danger
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4. 4
Proactive Risk ManagementProactive Risk Management
formal risk analysis is performedformal risk analysis is performed
organization corrects the root causes of riskorganization corrects the root causes of risk
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5. Risk involves two characteristics:Risk involves two characteristics:
UncertaintyUncertainty
LossLoss
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6. Project risks: threaten the project plan: schedule and costProject risks: threaten the project plan: schedule and cost
Potential budgetary, schedule, personnel, resource, stakeholder,Potential budgetary, schedule, personnel, resource, stakeholder,
and requirements problemsand requirements problems
Technical risks: threaten the quality and appropriatenessTechnical risks: threaten the quality and appropriateness
Potential design, implementation, interface, verification, andPotential design, implementation, interface, verification, and
maintenance problems + technical uncertainty (leading edge)maintenance problems + technical uncertainty (leading edge)
Business risks: threaten the practicalityBusiness risks: threaten the practicality
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7. Business risks: threaten the practicalityBusiness risks: threaten the practicality
Market risk: no one really wantsMarket risk: no one really wants
Strategic risk: no longer fits into the overall business strategStrategic risk: no longer fits into the overall business strategy fory for
companycompany
Sales risk: sales force doesnSales risk: sales force doesn’’t understand how to sellt understand how to sell
Management risk: losing the support of managementManagement risk: losing the support of management
Budget risk: losing budgetaryBudget risk: losing budgetary
Personal risk: losing personnel commitmentPersonal risk: losing personnel commitment
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8. 8
Seven Principles of SEISeven Principles of SEI (Software Engineering Institute)(Software Engineering Institute)
for effective risk managementfor effective risk management
Maintain a global perspectiveMaintain a global perspective
view software risks within the context of system and the businesview software risks within the context of system and the business problems problem
Take a forwardTake a forward--looking viewlooking view
think about the risks that may arise in the future; establish cthink about the risks that may arise in the future; establish contingency plansontingency plans
Encourage open communicationEncourage open communication
if someone states a potential risk, donif someone states a potential risk, don’’t discount it.t discount it.
IntegrateIntegrate
a consideration of risk must be integrated into the software proa consideration of risk must be integrated into the software processcess
Emphasize a continuous processEmphasize a continuous process
the team must be alert throughout the software process,the team must be alert throughout the software process,
modifying identified risks as more information is known and addimodifying identified risks as more information is known and adding new onesng new ones
as better insight is achieved.as better insight is achieved.
Develop a shared product visionDevelop a shared product vision
if all stakeholders share the same vision of the software, it liif all stakeholders share the same vision of the software, it likely that better riskkely that better risk
identification and assessment will occur.identification and assessment will occur.
Encourage teamworkEncourage teamwork
the talents, skills and knowledge of all stakeholder should be pthe talents, skills and knowledge of all stakeholder should be pooledooled
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9. 9
RISK
Risk Management ParadigmRisk Management Paradigm
controlcontrol
identifyidentify
analyzeanalyze
planplan
tracktrack
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10. 10
Risk Identification: check listRisk Identification: check list
Product size:Product size:
the overall size of the software to be built or modified.the overall size of the software to be built or modified.
Business impact :Business impact :
constraints imposed by management or the marketplace.constraints imposed by management or the marketplace.
Customer characteristicsCustomer characteristics
the sophistication of the customer andthe sophistication of the customer and
the developer's ability to communicate with the customer in a tithe developer's ability to communicate with the customer in a timely manner.mely manner.
Process definitionProcess definition
the degree to which the software process has been defined andthe degree to which the software process has been defined and
is followed by the development organization.is followed by the development organization.
Development environment:Development environment:
the availability and quality of the tools to be used to build ththe availability and quality of the tools to be used to build the product.e product.
Technology to be builtTechnology to be built
complexity of the system to be built andcomplexity of the system to be built and
the "newness" of the technology that is packaged by the system.the "newness" of the technology that is packaged by the system.
Staff size and experience:Staff size and experience:
the overall technical and project experience of the software engthe overall technical and project experience of the software engineers who willineers who will
do the work.do the work.
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11. 11
Assessing Project RiskAssessing Project Risk--II
Have top software and customer managers formallyHave top software and customer managers formally
committed to support the project?committed to support the project?
Are endAre end--users enthusiastically committed to the projectusers enthusiastically committed to the project
and the system/product to be built?and the system/product to be built?
Are requirements fully understood by the softwareAre requirements fully understood by the software
engineering team and their customers?engineering team and their customers?
Have customers been involved fully in the definition ofHave customers been involved fully in the definition of
requirements?requirements?
Do endDo end--users have realistic expectations?users have realistic expectations?
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Assessing Project RiskAssessing Project Risk--IIII
Is project scope stable?Is project scope stable?
Does the software engineering team have the right mixDoes the software engineering team have the right mix
of skills?of skills?
Are project requirements stable?Are project requirements stable?
Does the project team have experience with theDoes the project team have experience with the
technology to be implemented?technology to be implemented?
Is the number of people on the project team adequate toIs the number of people on the project team adequate to
do the job?do the job?
Do all customer/user constituencies agree on the
importance of the project and on the requirements for
the system/product to be built?
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13. 13
Risk ComponentsRisk Components
(US Air Force)(US Air Force)
performance riskperformance risk——the degree of uncertainty that thethe degree of uncertainty that the
product will meet its requirements and be fit for itsproduct will meet its requirements and be fit for its
intended use.intended use.
cost riskcost risk——the degree of uncertainty that the projectthe degree of uncertainty that the project
budget will be maintained.budget will be maintained.
support risksupport risk——the degree of uncertainty that the resultantthe degree of uncertainty that the resultant
software will be easy to correct, adapt, and enhance.software will be easy to correct, adapt, and enhance.
schedule riskschedule risk——the degree of uncertainty that the projectthe degree of uncertainty that the project
schedule will be maintained and that the product will beschedule will be maintained and that the product will be
delivered on time.delivered on time.
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14. Risk category:Risk category:
CatastrophicCatastrophic
CriticalCritical
MarginalMarginal
NegligibleNegligible
A table based on components and categories: Fig. 25A table based on components and categories: Fig. 25--11
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15. 15
Risk ProjectionRisk Projection
Risk projectionRisk projection, also called, also called risk estimation,risk estimation, attempts to rateattempts to rate
each risk in two wayseach risk in two ways
the likelihood or probability that the risk is realthe likelihood or probability that the risk is real
the consequences of the problems associated with the risk,the consequences of the problems associated with the risk,
should it occur.should it occur.
The are four risk projection steps:The are four risk projection steps:
establish a scale that reflects the supposed likelihood of a risestablish a scale that reflects the supposed likelihood of a riskk
define the consequences of the riskdefine the consequences of the risk
estimate the impact of the risk on the project and the product,estimate the impact of the risk on the project and the product,
note the overall accuracy of the risk projection so that there wnote the overall accuracy of the risk projection so that there will beill be
no misunderstandings.no misunderstandings.
Helps to prioritize risksHelps to prioritize risks
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16. 16
Building a Risk TableBuilding a Risk Table
RiskRisk ProbabilityProbability ImpactImpact RMMMRMMM
RiskRisk
MitigationMitigation
MonitoringMonitoring
&&
ManagementManagement
Larger
number of
users than
planned
Staff
inexperienced
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17. 17
Building the Risk TableBuilding the Risk Table
Estimate theEstimate the probabilityprobability of occurrenceof occurrence
Estimate theEstimate the impactimpact on the project on a scale of 1on the project on a scale of 1
to 5, whereto 5, where
1 = low impact on project success1 = low impact on project success
5 = catastrophic impact on project success5 = catastrophic impact on project success
sort the table by probability and impactsort the table by probability and impact
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18. 18
Risk ExposureRisk Exposure
The overall risk exposure, RE, is determined using the
following relationship [HAL98]:
RE = P x C
where
P is the probability of occurrence for a risk, and
C is the cost to the project if the risk occur.
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19. 19
Risk Exposure ExampleRisk Exposure Example
Risk identification.Risk identification. Only 70 percent of the software components scheduledOnly 70 percent of the software components scheduled
for reuse will, in fact, be integrated into the application. Thefor reuse will, in fact, be integrated into the application. The remainingremaining
functionality will have to be custom developed.functionality will have to be custom developed.
Risk probability.Risk probability. 80% (likely).80% (likely).
Risk impact.Risk impact. 60 reusable software components were planned. If only 7060 reusable software components were planned. If only 70
percent can be used, 18 components would have to be developed frpercent can be used, 18 components would have to be developed fromom
scratch (in addition to other custom software that has been schescratch (in addition to other custom software that has been scheduled forduled for
development). Since the average component is 100 LOC and local ddevelopment). Since the average component is 100 LOC and local dataata
indicate that the software engineering cost for each LOC is $14.indicate that the software engineering cost for each LOC is $14.00, the00, the
overall cost (impact) to develop the components would be 18 x 10overall cost (impact) to develop the components would be 18 x 100 x 14 =0 x 14 =
$25,200.$25,200.
Risk exposure.Risk exposure. RE = 0.80 x 25,200 ~ $20,200.RE = 0.80 x 25,200 ~ $20,200.
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mitigationmitigation——how can we avoid the risk?how can we avoid the risk?
monitoringmonitoring——what factors can we track that willwhat factors can we track that will
enable us to determine if the risk is becoming moreenable us to determine if the risk is becoming more
or less likely?or less likely?
managementmanagement——what contingency plans do we havewhat contingency plans do we have
if the risk becomes a reality?if the risk becomes a reality?
Risk Mitigation, Monitoring,Risk Mitigation, Monitoring,
and Managementand Management
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Risk Due to Product SizeRisk Due to Product Size
•• estimated size of the product in LOC or FP?estimated size of the product in LOC or FP?
•• estimated size of product in number of programs,estimated size of product in number of programs,
files, transactions?files, transactions?
•• percentage deviation in size of product frompercentage deviation in size of product from
average for previous products?average for previous products?
•• size of database created or used by the product?size of database created or used by the product?
•• number of users of the product?number of users of the product?
•• number of projected changes to the requirementsnumber of projected changes to the requirements
for the product? before delivery? after delivery?for the product? before delivery? after delivery?
•• amount of reused software?amount of reused software?
Attributes that affect risk:Attributes that affect risk:
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22. 22
Risk Due to Business ImpactRisk Due to Business Impact
•• affect of this product on company revenue?affect of this product on company revenue?
•• visibility of this product by senior management?visibility of this product by senior management?
•• reasonableness of delivery deadline?reasonableness of delivery deadline?
•• number of customers who will use this productnumber of customers who will use this product
•• interoperability constraintsinteroperability constraints
•• sophistication of end users?sophistication of end users?
•• amount and quality of product documentation thatamount and quality of product documentation that
must be produced and delivered to the customer?must be produced and delivered to the customer?
•• governmental constraintsgovernmental constraints
•• costs associated with late delivery?costs associated with late delivery?
•• costs associated with a defective product?costs associated with a defective product?
Attributes that affect risk:Attributes that affect risk:
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23. 23
Risks Due to the CustomerRisks Due to the Customer
•• Have you worked with the customer in the past?Have you worked with the customer in the past?
•• Does the customer have a solid idea of requirements?Does the customer have a solid idea of requirements?
•• Has the customer agreed to spend time with you?Has the customer agreed to spend time with you?
•• Is the customer willing to participate in reviews?Is the customer willing to participate in reviews?
•• Is the customer technically sophisticated?Is the customer technically sophisticated?
•• Is the customer willing to let your people do theirIs the customer willing to let your people do their
jobjob——that is, will the customer resist looking over yourthat is, will the customer resist looking over your
shoulder during technically detailed work?shoulder during technically detailed work?
•• Does the customer understand the softwareDoes the customer understand the software
engineering process?engineering process?
Questions that must be answered:Questions that must be answered:
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24. 24
Risks Due to Process MaturityRisks Due to Process Maturity
•• Have you established a common process framework?Have you established a common process framework?
•• Is it followed by project teams?Is it followed by project teams?
•• Do you have management support forDo you have management support for
software engineeringsoftware engineering
•• Do you have a proactive approach to SQA?Do you have a proactive approach to SQA?
•• Do you conduct formal technical reviews?Do you conduct formal technical reviews?
•• Are CASE tools used for analysis, design andAre CASE tools used for analysis, design and
testing?testing?
•• Are the tools integrated with one another?Are the tools integrated with one another?
•• Have document formats been established?Have document formats been established?
Questions that must be answered:Questions that must be answered:
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25. 25
Technology RisksTechnology Risks
•• Is the technology new to your organization?Is the technology new to your organization?
•• Are new algorithms, I/O technology required?Are new algorithms, I/O technology required?
•• Is new or unproven hardware involved?Is new or unproven hardware involved?
•• Does the application interface with new software?Does the application interface with new software?
•• Is a specialized user interface required?Is a specialized user interface required?
•• Is the application radically different?Is the application radically different?
•• Are you using new software engineering methods?Are you using new software engineering methods?
•• Are you using unconventional software developmentAre you using unconventional software development
methods, such as formal methods, AImethods, such as formal methods, AI--based approaches,based approaches,
artificial neural networks?artificial neural networks?
•• Are there significant performance constraints?Are there significant performance constraints?
•• Is there doubt the functionality requested is "doIs there doubt the functionality requested is "do--able?"able?"
Questions that must be answered:Questions that must be answered:
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Staff/People RisksStaff/People Risks
•• Are the best people available?Are the best people available?
•• Does staff have the right skills?Does staff have the right skills?
•• Are enough people available?Are enough people available?
•• Are staff committed for entire duration?Are staff committed for entire duration?
•• Will some people work part time?Will some people work part time?
•• Do staff have the right expectations?Do staff have the right expectations?
•• Have staff received necessary training?Have staff received necessary training?
•• Will turnover among staff be low?Will turnover among staff be low?
Questions that must be answered:Questions that must be answered:
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Project:Project: Embedded software for XYZ systemEmbedded software for XYZ system
Risk type:Risk type: schedule riskschedule risk
PriorityPriority (1 low ... 5 critical):(1 low ... 5 critical): 44
Risk factorRisk factor:: Project completion will depend on tests which requireProject completion will depend on tests which require
hardware component under development. Hardware componenthardware component under development. Hardware component
delivery may be delayeddelivery may be delayed
Probability:Probability: 60 %60 %
ImpactImpact:: Project completion will be delayed for each day thatProject completion will be delayed for each day that
hardware is unavailable for use in software testinghardware is unavailable for use in software testing
Monitoring approachMonitoring approach::
Scheduled milestone reviews with hardware groupScheduled milestone reviews with hardware group
Contingency (Emergency) plan:Contingency (Emergency) plan:
Modification of testing strategy to accommodate delay usingModification of testing strategy to accommodate delay using
software simulationsoftware simulation
Estimated resourcesEstimated resources:: 6 additional person months beginning 76 additional person months beginning 7--11--9696
Recording Risk InformationRecording Risk Information
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