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Understanding Risk Management in Software Development

Understanding Risk Management in Software Development

Understanding Risk Management in Software Development

Like any other project, software development involves certain risks that, if not addressed, can derail the project or even lead to failure.

Whether you are a large corporation, a government agency, an international organization, or a small startup, you must actively manage risk in software development.

Common risks include budget overruns, project delays, personnel problems, poor performance, substandard products, etc.It is essential for the project manager to be aware of the risks, assess them, prioritize them, and have an action plan to mitigate them. This guide describes seven common types of risks encountered in software development and addresses them effectively.

What Is Software Risk Management?

Risk management in software development is the process of identifying, accessing, assessing risks, and then limiting and mitigating them to ensure project success. Any threat, explicit or implicit, small or large, internal or external that threatens the successful implementation of your product must be carefully analyzed and mitigated. Each project participant is responsible for identifying these threats and passing them on to the project manager for further processing.

Risk management in software development includes the following tasks:

  • Identify
  • Classify and prioritize
  • Develop a risk mitigation action plan template
  • Continuous monitoring throughout the project life cycle
  • Implement an action plan if any threat materializes
  • Ongoing team communication to identify new threats

The Importance of Risk Management in Software Development

Software development projects are complex projects that often involve a large team and a huge budget. However, the relentless pursuit of software development opportunities without adequate risk mitigation can fail. Some project managers view software development risk management and related tasks as additional work and expenses that do not advance the core product development process.

Adequate Risk Management in Software Development Will:

  • Save money by reducing costs associated with responding to unforeseen emergencies.
  • Allow the development team to work faster, focusing on the main project, knowing that all risks are covered.
  • Allows for a more accurate estimated project cost without the risk of cost overruns due to unrecognized risks
  • Strengthens the reputation of the company/agency by ensuring that software development projects go according to plan.
  • Simply put, the importance of risk management in software development cannot be overstated.

Types of Risks in Software Development and How to Deal with Them

Risks associated with the inaccurate estimation

This is a critical part of risk management in software development. We make estimates all the time, but there is a risk of creating expectations that are not realistic.

Estimating in software development is primarily about timing and budget. With respect to timing, the risk is mainly in underestimating the time required for the various iterations. Mitigating this risk lies in carefully understanding the client’s requirements, communicating them to the development team, and setting realistic timelines.

As a project manager or decision-maker, you must resist the temptation to pressure the development team to meet unrealistic deadlines. A risk-reward analysis is not worth it, and you run the risk of getting a substandard iteration. However, you also need to manage customers and their expectations for a software release. Customers are notoriously impatient, but they should also avoid having their impatience materialize into risk.

A big risk is underestimating project costs in terms of budget, which can easily lead to delays.

This risk can be mitigated, for example, by making a contingency budget to cover any unforeseen costs.

Risks associated with changes in the scope of work

One of the biggest challenges software developers face is scope changes. Changing requirements due to the constant customer and user feedback is a continual risk in software development.

This is a good thing because it ensures that the final product will be quality and valuable to the end-users.

However, from a management perspective, it is a risk that can delay project implementation, introduce numerous uncertainties, or even lead to budget overruns.

Thus, it is a critical risk that needs to be analyzed, tracked, and mitigated. The best way to minimize this risk is through structured communication between the development team and the client/end-user. The project manager is usually the liaison between the development team and the client.

The best practice is to monitor volume changes with a metric visible to both the development team and the customer.

The deviation metric will serve as a tool to show how volume deviations have affected the project in terms of budget and timeline. Moreover, it will help prioritize tasks.

Risks of interaction with the end-user

You can’t talk about risk management in software development and not consider the risks associated with end-user engagement.

The ultimate goal of software development is to create a product that is useful to some people. If those people have problems using the end product, that is a significant risk. End-user involvement is critical to the project’s success, whether the software is for external customers or internal customers. Strong end-user involvement and participation throughout the project lifecycle ensure that the final product is easily acceptable.

Achieve engagement through:

  • user surveys
  • frequent releases
  • Minimum viable product release (MVP)
  • Beta testing

These risk mitigation strategies will allow for a smoother implementation phase.

Risks related to stakeholder expectations

There is always some risk associated with stakeholder expectations in every software development project. Stakeholders in these projects are all people involved in the successful completion of the project in one way or another.

Of particular concern in reducing this risk are:

  • End users
  • Customers
  • Investors
  • Development team.

These groups will need a risk mitigation strategy to meet their expectations before it escalates into a risk affecting the project.

Technical risks

Technical risks in a software development project are typically those that affect the final product’s quality. These are poor quality code, support, integration issues, etc.

These technical risks can have a severe negative impact on the product’s usability. The peculiarity of managing technical risks is that they are not immediately apparent during the development phase. They become apparent at the end of the process, making them challenging to correct. The low productivity of software developers is a technical risk. It occurs mostly in projects with a long lifecycle, and developers may lose motivation the longer the project lasts. There is also the risk that the long-term deadline for the project is far away, and there is enough time to cover all outstanding tasks.

Intensive supervision of software iterations reduces technical risk. Agile methodologies are especially reliable in keeping the development team productive and motivated.

Risks associated with human resources

When working with people, there is always the risk that someone may suddenly become unavailable. That person may be an important member of the team, leading to gaps in knowledge. That person could be from the development team or the client-side, actively involved in the project. To reduce this risk, it is critical to document every detail of the project properly. Writing software development is an active and ongoing process.

In addition, you should always have contingency plans for welcoming new team members.

Communication risks

As with any other project, a breakdown in communication during software development can lead to disaster. Constant and effective communication is essential to the success of a project, and a communication breakdown will lead to delays and reduced productivity.

To reduce the risk of communication breakdown, the entire team must be committed to the project. When we talk about the team, we mean everyone from the project manager, developers, testers, customers, etc. Regular meetings of all stakeholders are a great way to keep everyone engaged and communicating. The purpose of the meetings should be to assess each other’s progress and expectations.

Common risk management strategies in software development

Having discussed the seven most common risks in software development, let’s now look at some practical strategies for mitigating these risks.


Software risk monitoring is the active observation of project activities in order to identify risks early and apply an appropriate action plan to mitigate them. Project plans or meetings are a great time to identify emerging risks. Project reports, risk plans, and status reports are also opportunities to assess whether any problems are materializing. Risks are more likely to occur when implementing any change or changing the scope of work than at any other time.

Risk avoidance

This doesn’t sound good, but some risks shouldn’t be mitigated. They are best avoided altogether. If the risk is too great, has a very high probability of occurring, or it may be costly to mitigate, risk avoidance may be the best option.

Small organizations/businesses or startups will benefit from this approach because some risks can be mitigated.

Risk transfer

This is a strategy in which you hire someone to handle any risks on your behalf. This software development risk management strategy is attractive to organizations/agencies that have the resources to purchase such services and are focused on their core software development work.

Software development risk management can take precious time and attention away from your core work. Therefore, it makes sense to outsource to a professional whose sole job is to handle such risks. Additionally, this approach speeds up the process.

Final Thoughts

The ultimate goal of risk management in software development is to identify, monitor, and mitigate all risks that could hinder the success of the project.

Institutions/corporations/startups must have a risk management system in place for all of their software development projects in order to achieve their goals.

The risk management process for software development is an ongoing process and is applied throughout the life cycle of the project. Organizations that have a robust risk management system that guides all their software development projects are more successful than those that don’t.

How Can Altezza Creative Solutions Help?

Partnering with Altezza Creative Solutions can help you develop a specific threat model for your software project. With industry experience from a variety of projects, companies have a better understanding of appropriate risk management strategies based on project type and goals. Contact us today!