Every time your enterprise takes on a software development project, it takes on risk. From a project management standpoint, risk is the potential for partial or complete project failure. Risk is present in interactions with the uncertainty presented by various factors throughout the development period and process. Part of a project manager’s job is to work at mitigating risk, and identifying risks should be the first phase of risk mitigation. In general, four primary types of risks are associated with software development projects.
Time-related risks are threats to successful task completion and final product delivery. Time-related risks arise when allotted project time is incorrectly estimated or misused, or when unexpected factors cause expansion in project scope or delays in task completion. Incorrect time estimations generally result from a misunderstanding of project scope and complexity and/or failure to accurately evaluate available resources and capabilities. Misuse of time occurs when resources are improperly allocated or underutilized. It may also be the result of failure to achieve desired levels of performance and production from resources.
Operational risks are associated with day-to-day project operations and can show up as incomplete tasks or unmet objectives and deadlines, errors, or poor-quality production. One of the most common sources of operational risk is communication breakdown. Poor communication may also be a contributing factor to the occurrence of several other causes of operational risk: lack of sufficient training, lack of clarity about responsibilities, and conflicting or confused priorities. Software development is a communication-intensive process, and projects of this type demand the support of an effective communication structure. Without one, operational risks skyrocket.
Unforeseen risks tend to be unavoidable and impervious to most types of advance preparation. Examples might include shifts in government policy that directly or tangentially affect the project, new releases of rival technology that cause immediate obsolescence in the project, or unexpected changes on the client side of the contract. Often, the only thing to be done is to attempt to anticipate such unforeseen risks as part of a strategy for at least reducing their impact.
Financial risks are threats to profitability, and are usually associated with budget overruns. These risks are often the effect of inaccurate initial budgeting work. Financial risks can also arise in conjunction with time-related and operational risks, and from the same causes. Improper tracking of project finances is another common source of financial risk.
An effective way to deal with the first three risks on this list is to optimize the project design and management process. This can be done by deploying a well-designed project management software suite. For example, Timewax offers online project and team management software that can be used to mitigate or even entirely eliminate most of the common causes of time-related and operational risks. One of the most important functions of this type of software tool is bringing all team members together on the same page, helping to support effective communication, efficient resource scheduling, and timely access to information for all stakeholders from project start to finish. In a sense, good online project management software also serves as a risk management tool, and is a worthwhile investment for any project manager looking to improve outcomes.