CS615 – Software Engineering I

Lecture 11

Chapter 25: Risk Management

Reactive vs. Proactive Risk Strategies



Software Risks

Risk always involves two characteristics:


Must quantify:


Kinds of Risks:

Project risks threaten the project plan.

Identify potential budgetary, schedule, personnel (staffing and organization), resource, customer, and requirements problems and their impact on a software project


Technical risks threaten the quality and timeliness of the software to be produced


Business risks threaten the viability of the software to be built.

Top five business risks :

(1)   building an excellent product or system that no one really wants (market risk)

(2)   building a product that no longer fits into the overall business strategy for the company (strategic risk)

(3)   building a product that the sales force doesn't understand how to sell

(4)   losing the support of senior management due to a change in focus or a change in people (management risk)

(5)   losing budgetary or personnel commitment (budget risks).


Known risks - uncovered after evaluation:


Predictable risks - extrapolated from past project experience


·        staff turnover

·        poor communication with the customer

·        dilution of staff effort as ongoing maintenance requests are serviced


Unpredictable risks - occur, but difficult to identify in advance.


Risk Identification

·        Attempt to specify threats to the project plan (estimates, schedule, resource loading, etc.)

·        Two types of risks:

o       Generic risks - potential threat to every software project.

o       Product-specific risks - identified by: those with a clear understanding of the technology, the people, and the environment that is specific to the project at hand.

§         Identify by looking at the project plan and the software statement of scope

§         Ask question - "What special characteristics of this product may threaten our project plan?"


Risk item checklist

Short List

1.      Have top software and customer managers formally committed to support the project?

2.      Are end-users enthusiastically committed to the project and the system/product to be built?

3.      Are requirements fully understood by the software engineering team and their customers?

4.      Have customers been involved fully in the definition of requirements?

5.      Do end-users have realistic expectations?

6.      Is project scope stable?

7.      Does the software engineering team have the right mix of skills?

8.      Are project requirements stable?

9.      Does the project team have experience with the technology to be implemented?

10. Is the number of people on the project team adequate to do the job?

11. Do all customer/user constituencies agree on the importance of the project and on the requirements for the system/product to be built?

Sample Risk Checklist (Long)


Risk Components and Drivers

·         U.S. Air Force pamphlet contains guidelines for software risk identification and abatement.

·         Air Force approach requires that the project manager identify the risk drivers that affect software risk components—performance, cost, support, and schedule.

·         Risk components:

(1)   Performance risk—the degree of uncertainty that the product will meet its requirements and be fit for its intended use.

(2)   Cost risk—the degree of uncertainty that the project budget will be maintained.

(3)   Support risk—the degree of uncertainty that the resultant software will be easy to correct, adapt, and enhance.

(4)   Schedule risk—the degree of uncertainty that the project schedule will be maintained and that the product will be delivered on time.

·         Impact of each risk driver on the risk component is divided into one of four impact categories—negligible, marginal, critical, or catastrophic


Figure 1 - Risk Characterization Table


Risk Projection (aka Risk Estimation)

Attempts to rate each risk in two ways

·         The probability that the risk is real

·         The consequences of the problems associated with the risk, should it occur.


Project planner, along with other managers and technical staff, performs four risk projection activities:

(1)   establish a measure that reflects the perceived likelihood of a risk

(2)   delineate the consequences of the risk

(3)   estimate the impact of the risk on the project and the product

(4)   note the overall accuracy of the risk projection so that there will be no misunderstandings.


Developing a Risk Table

Risk table provides a project manager with a simple technique for risk projection


Figure 2 - Risk Table

Steps in Setting up Risk Table

(1)   Project team begins by listing all risks in the first column of the table.

Accomplished with the help of the risk item checklists.

(2)   Each risk is categorized in the second column

(e.g., PS implies a project size risk, BU implies a business risk).

(3)   The probability of occurrence of each risk is entered in the next column of the table.

The probability value for each risk can be estimated by team members individually.

(4)   Individual team members are polled in round-robin fashion until their assessment of risk probability begins to converge.


Assessing Impact of Each Risk

(1)   Each risk component is assessed using the Risk Charcterization Table (Figure 1) and impact category is determined.

(2)   Categories for each of the four risk components—performance, support, cost, and schedule—are averaged to determine an overall impact value.

1.      A risk that is 100 percent probable is a constraint on the software project.

2.      The risk table should be implemented as a spreadsheet model. This enables easy manipulation and sorting of the entries.

3.      A weighted average can be used if one risk component has more significance for the project.

(3)   Once the first four columns of the risk table have been completed, the table is sorted by probability and by impact.

·         High-probability, high-impact risks percolate to the top of the table, and low-probability risks drop to the bottom.

(4)   Project manager studies the resultant sorted table and defines a cutoff line.

·         cutoff line (drawn horizontally at some point in the table) implies that only risks that lie above the line will be given further attention.

·         Risks below the line are re-evaluated to accomplish second-order prioritization.

·         Risk impact and probability have a distinct influence on management concern.

o       Risk factor with a high impact but a very low probability of occurrence should not absorb a significant amount of management time.

o       High-impact risks with moderate to high probability and low-impact risks with high probability should be carried forward into the risk analysis steps that follow.

·         All risks that lie above the cutoff line must be managed.

·         The column labeled RMMM contains a pointer into a Risk Mitigation, Monitoring and Management Plan


Assessing Risk Impact

·        Three factors determine the consequences if a risk occurs:

o       Nature of the risk - the problems that are likely if it occurs.

o       e.g., a poorly defined external interface to customer hardware (a technical risk) will preclude early design and testing and will likely lead to system integration problems late in a project.

o       Scope of a risk - combines the severity with its overall distribution (how much of the project will be affected or how many customers are harmed?).

o       Timing of a risk - when and how long the impact will be felt.


·        Steps recommended to determine the overall consequences of a risk:

  1. Determine the average probability of occurrence value for each risk component.
  2. Using Figure 1, determine the impact for each component based on the criteria shown.
  3. Complete the risk table and analyze the results as described in the preceding sections.

Overall risk exposure, RE, determined using:


RE = P x C


P is the probability of occurrence for a risk

C is the the cost to the project should the risk occur.



Assume the software team defines a project risk in the following manner:


Risk identification.

·        Only 70 percent of the software components scheduled for reuse will be integrated into the application.

·        The remaining functionality will have to be custom developed.


Risk probability. 80% (likely).


Risk impact.

·        60 reusable software components were planned.

·        If only 70 percent can be used, 18 components would have to be developed from scratch (in addition to other custom software that has been scheduled for development).

·        Since the average component is 100 LOC and local data indicate that the software engineering cost for each LOC is $14.00, the overall cost (impact) to develop the components would be 18 x 100 x 14 = $25,200.


Risk exposure. RE = 0.80 x 25,200 ~ $20,200.



Risk Assessment

·        Have established a set of triplets of the form:


[ri, li, xi]



ri is risk

li is the likelihood (probability) of the risk

xi is the impact of the risk.


·        During risk assessment :

o       further examine the accuracy of the estimates that were made during risk projection

o       attempt to rank the risks that have been uncovered

o       begin thinking about ways to control and/or avert risks that are likely to occur.


·        Must Define a risk referent level

o       performance, cost, support, and schedule  represent risk referent levels.

o       There is a level for performance degradation, cost overrun, support difficulty, or schedule slippage (or any combination of the four) that will cause the project to be terminated.

o       A risk referent level has a single point, called the referent point or break point, at which the decision to proceed with the project or terminate it are equally weighted.


·        Referent level rarely represented as a smooth line on a graph.

·        Most cases - a region in which there are areas of uncertainty

·        Therefore, during risk assessment, perform the following steps:

1.      Define the risk referent levels for the project.

2.      Attempt to develop a relationship between each (ri, li, xi) and each of the referent levels.

3.      Predict the set of referent points that define a region of termination, bounded by a curve or areas of uncertainty.

4.      Try to predict how compound combinations of risks will affect a referent level.


Risk Refinement

·        A risk may be stated generally during early stages of project planning.

·        With time, more is learned about the project and the risk

o       may be possible to refine the risk into a set of more detailed risks

·        Represent risk in condition-transition-consequence (CTC) format.

o       Stated in the following form:

Given that <condition> then there is concern that (possibly) <consequence>

·        Using CTC format for the reuse we can write:

Given that all reusable software components must conform to specific design standards and that some do not conform, then there is concern that (possibly) only 70 percent of the planned reusable modules may actually be integrated into the as-built system, resulting in the need to custom engineer the remaining 30 percent of components.


·        This general condition can be refined in the following manner:


Subcondition 1. Certain reusable components were developed by a third party with no knowledge of internal design standards.


Subcondition 2. The design standard for component interfaces has not been solidified and may not conform to certain existing reusable components.


Subcondition 3. Certain reusable components have been implemented in a language that is not supported on the target environment.



Risk Mitigation, Monitoring, and Management

Effective strategy must consider three issues:


·        Proactive approach to risk -  avoidance strategy.

·        Develop risk mitigation plan.

·         e.g. assume high staff turnover is noted as a project risk, r1.

·         Based on past history

o       the likelihood, l1, of high turnover is estimated to be 0.70

o       the impact, x1, is projected at level 2.

o       So… high turnover will have a critical impact on project cost and schedule.


·         Develop a strategy to mitigate this risk for reducing turnover.

·         Possible steps to be taken


·        Project manager monitors for likelihood of risk

·        For high staff turnover, the following factors can be monitored:


·        Project manager should monitor the effectiveness of risk mitigation steps.


·        Risk management and contingency planning assumes that mitigation efforts have failed and that the risk has become a reality.

e.g., the project is underway and a number of people announce that they will be leaving.

·         Mitigation strategy makes sure:

§          backup is available

§         information is documented

§         knowledge has been dispersed across the team.


·        RMMM steps incur additional project cost

e.g. spending time to "backup" every critical technologist costs money.


·        Large project - 30 or 40 risks.

·        80 percent of the overall project risk (i.e., 80 percent of the potential for project failure) can be accounted for by only 20 percent of the identified risks.

·        Work performed during earlier risk analysis steps will help the planner to determine which of the risks reside in that 20 percent (e.g., risks that lead to the highest risk exposure).



The RMMM Plan

·        Risk Mitigation, Monitoring and Management Plan (RMMM) - documents all work performed as part of risk analysis and is used by the project manager as part of the overall project plan.


·        Alternative to RMMM -  risk information sheet (RIS)

RIS is maintained using a database system, so that creation and information entry, priority ordering, searches, and other analysis may be accomplished easily.


  1. Risk monitoring is a project tracking activity
  2. Three primary objectives:
    1. assess whether predicted risks do, in fact, occur
    2. ensure that risk aversion steps defined for the risk are being properly applied
    3. collect information that can be used for future risk analysis.