Today, most software projects are large and more complex therefore they are more riskier than before. Project managers must take time to manage project risks because it is a key factor in determining a project’s success. To managing risks, managers must identify all risks, plan prevention, monitor risks, and managing changes. By understanding risk management, project manager can avoid and reduce the impact of risks, provide better schedule and budget estimations and achieve customer satisfaction.
Risk management also involves continuous communication about risks to the project team and monitor all identified risks to stay on top of anything that may happen during the project. In order to identify risks, managers can consider typical software project issues such as technical risks, personnel risks and estimation risks. In addition to common risks there can be specific risks unique to a project. Any data from similar projects can be helpful in identifying these unique risks. Based on this information, plans can be made to handle the risks. Most software projects have the following risks: Size estimation, Budget limitation, New technology implementation, Limited customer involvement, Market changes, Staff turnover, Scope changes, Hardware dependency issues, Network dependency issues, Project team’s skills issues, and Teamwork issues. Project manager must determine risks that are likely to occur or risks that will cause a great impact and monitor them carefully and handled as early as possible. The earlier that risks are mitigated, the less costly the impact.
Estimation risks are very common in software projects because it is difficult to accurately predict how long development will take. A project manager must continuously track the actual progress against the schedule to determine if the project is progressing according to target. In most software projects, changes in requirements often occur and interfere with the development progress and they should be part of risk management because they impact the schedule and put the project at risk for not being completed on time. To deal with requirement changes, a change control process must be established to ensures that changes are monitored, prioritized so the team can work them accordingly. Sometime, customers want these changes to be implemented immediately but do not want to change the schedule. This is where the negotiation skills of the project manager will become important. A good project manager knows how to negotiate with customers about changes and still achieve customer satisfaction because how he discusses and negotiates on changes will determine the outcomes of the project.
A good project manager must balance the team’s working schedules with customer requests by considering both when evaluating changes. Project manager can address request for changes by adjusting resources, time, cost or functionality and discuss with the team to come up with the best reasonable solution. Many inexperienced project managers do not know how to negotiate but hurry to agree with customers and order the team to do something unreasonable which impact productivity, incur more defects and destroy teamwork. It usually ends up with the customer is happy because the request for change is agreed to for a short time but when the product is late, full of defects, then the customer would be very unhappy for a long time.
Every software project has request for changes but a good software project managers know how to handle change issues by using risk management skills to prevent them or lessen their impact. This includes identifying change risks, assessing them, determining solutions, taking action and constantly monitoring the project for impact. I strongly believe that risk management along with good estimation and negotiation skills are the minimum skills needed by all software project managers.
1) Construction industry: Dependency risks
Construction projects often consist of many specialized contractors who work together to build a new house. The contractors’ timelines often depend on other workers which can create risk if there is a bottleneck. If people work on the foundation is not finish, you can not build walls and without walls and columns, you can not put on the roof These dependencies should be determined as early as possible and monitored in order to adjust the schedule as necessary.
2) Automobile industry: Market change risks
Recent news has shown how market changes have impacted the automobile industries’ projects. Though large vehicles have been popular in the recent years; the demand for fuel efficient cars has increased. These risks are particularly difficult to predict but they can have a huge impact and should be monitored and addressed if possible.
3) Pharmaceutical research and development : Experimentation risks
Implementing a risk management process is challenging for pharmaceutical research and development projects because there are high degrees of complexity and uncertainty. Effort can be put towards proofs of concept that may or may not be used. These attempts can be difficult to predict and easily change costs and schedules.
Example for Risk table for a software project | Risk | Category | Probability | Impact | Notes | |:--- |:--- |:--- |:--- |:--- | | Size estimates may be low | Project risk | 55% | Critical | Sizes estimates may need to be adjusted. | | Funding may be reduced by 15% | Customer risk | 40% | Significant | Functionality may need to be reduced based on a prioritized list. | | Complex project | Technology risk | 45% | Critical | Complex parts of the software may take time to figure out. This may result in adjusting the schedule. | | Learning new technology | Technology risk | 85% | Critical | Developers will be learning new technology which will slow down progress initially. | | Many stakeholders involved | Customer risk | 35% | Significant | It will be difficult to please all stakeholders and requirements may fluctuate greatly. | | Market demand may change | Business Impact risk | 25% | Significant | The demand for certain project management software may change soon. This may result in different functional requirements. | | Staff turnover | People risk | 15% | Significant | The staff turnover is not high at the moment but it is a risk that should be monitored. | | Scope creep | Estimation risk | 75% | Critical | Because there are so many stakeholders involved the risk for scope creep is high. A good change process can help with this risk. | | External dependency on hardware delivery | Business Impact risk | 30% | Critical | There is a hardware dependency that is critical to this project. If there is a delay in delivery, the schedule will have to be adjusted. | | Outsourcing part of the project | Project risk | 35% | Significant | Part of the project is outsourced so the risk listed below will factor into the risk assessment. |
