How to Perform a Software Risk Assessment?

Are you a startup owner or CTO looking to perform a software risk assessment to ensure successful product development?

If yes, then you are on the right track to identifying and managing the uncertainties that overshadow the development of any innovative software product. 

In this article, we will discuss an important component of software risk management – software risk assessment. The global risk management market size is expected to reach $28.87 billion by 2027. 

Let’s explore why there is a need for software risk assessment and how to perform it effectively.

Why Perform Software Risk Assessment?

Software projects often involve working on unique features and utilizing advancements in software technology. 

Moreover, with the progress of technologies, the vulnerabilities to software systems are also evolving. As such, the risks of software products failing or underperforming are increasing.

Risk is the ‘possibility of encountering a loss’ in a software project. This can occur due to a number of unfortunate events like schedule delays, wrong cost estimations, terminations, lack of resources, security risks, etc. 

An efficient project manager will not only stay aware of risk possibilities but will efficiently work to identify, prioritize, and perform risk control or take preventive measures proactively throughout the development cycle. 

According to research, software projects are 2.5 times more successful when effective project management strategies are in place. These project management practices include efficient risk assessment and associated cost reduction, etc.

How to Perform Software Risk Assessment?

Software risk management breaks down into two processes. Risk assessment and risk control. For risk assessment, you will go through the following steps.

1. Risk Identification
2. Risk Analysis 
3. Risk Prioritization

Risk control includes activities like risk management planning, risk monitoring, and finally, risk resolution.

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It is necessary to identify and prioritize any possible vulnerabilities as early as possible in the software development cycle by conducting regular risk assessments to ensure your project stays clear of as much danger as possible.

How can you and your technical team do this? Let’s go through the risk assessment steps in detail.

Risk Identification

The different types of risks your software project can encounter are:

Technical Risks

These can arise due to the software and hardware technologies and tools being used in software development.

Human Resource Risks

These can arise due to an error on the part of the software development team.

Requirement Risks

A change in the customer/client’s requirements and the process of fulfilling these requirements may pose a risk to the software product.

Estimation Risks

Poor estimations in terms of cost and time may affect a risk-free delivery of software products.

We will discuss prominent risks for a software project a bit later on.

Risk Analysis Process

Analysis of the identified risk is performed in light of experience gained from previous projects (another reason you need experienced developers). Your project management team should make estimations regarding the possibility of a risk occurring and the seriousness of the risk in terms of its effects.

Risk Prioritization

The probability of a particular risk occurrence may be low, moderate, or high. Similarly, risks may cause serious survival situations, cause significant delays, tolerable delays within an acceptable time frame, or are very insignificant.

The probability of a risk occurring and the consequences of risks occurring determine the risk priority. Prioritization of software risks will help your technical team to mitigate them efficiently. They would know which risk situation requires immediate attention.

Risk Exposure Estimation

Estimation of risk exposure helps in determining the severity of risks your software project is facing. The risk exposure analysis process takes into account two values.

1. Size of potential loss in time
2. The probability that a corresponding risk will occur.

The following formula for measuring risk exposure is commonly used to estimate risk severity.

Risk exposure = probability of such a risk occurrence in percentage x the impact of loss in time.

For example, there is a 60% chance of a client insisting on introducing a different product feature that will impact product delivery. If we estimate the impact as a delay of 5 weeks, then we can measure risk exposure as 0.60×5 = 3 weeks.

Estimating the impact of loss in time is comparatively easier than calculating the loss probability. The few points that can help your software manager in calculating the risk occurrence probability are as follows:

• The person most familiar with the software development environment and infrastructure should estimate risk probability or should supervise the risk-probability estimation review.
• Use the Delphi approach, where each team member individually estimates the risk probability. Afterward, there is a team review to finalize the risk probability after collective analysis and discussion.
• Steve McConnell in Rapid Development discusses using a unique approach that relates to betting on the outcome. For example, if project deployment is completed on time, you will win $120.000, while you will lose $100.00 if it does not, etc. 

   The risk probability would then be (100/(100+120)) = 0.45

• Use a verbal scale or qualitative risk assessment for measuring the likelihood of risk occurrence. You can use phrases like highly unlikely or highly likely. These can then be converted to quantitative assessments to show risk probability.

Once you have a list of possible risk factors, their occurrence possibilities, level of risk loss in terms of project delivery delay, and risk exposure estimations, you can put together a risk assessment table. 

This risk assessment table will help your project stakeholders and managers effectively perform risk planning.

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Before touching on project risk planning, let’s talk about the prominent risk factors that often impact the software development process.

Common Software Development Risk Factors

Some of the risk factors your software product management personnel should be vigilant of are:

1. Schedule Creation: If product development schedules set unrealistic timelines and do not take into account the available resources, project delivery is bound to be delayed. This can also include missing important development tasks and underestimating efforts and final product size, etc.
2. Organization: Organizational risks can include inefficient top management supervising the project. Project progress slows down due to slow decision-making and delayed approvals, etc. Layoffs in a company, project budget cuts, and poor project planning can extend software product deployment too.
3. Software Development Environment: Unavailability or inadequate availability of required technical resources increases the project delivery timeline. This also includes software development tools not working according to the expected results. This can cause developers to switch to new tools and platforms, which is time-consuming. 
4. End Users: End-user feedback may require the redesign and recoding of certain modules. This causes a delay in final product delivery.
5. Clients: Clients insisting on frequent new additions of product features can add to the project timeline. If the client is incapable of performing prototype and specifications reviews or is slow in doing so, then the development and testing process can become very slow. 
6. Software Project Requirements: Poorly or vaguely defined requirement outlines can also impact a project. If requirements are continuously being changed or new requirements are continuously being added, the project ultimately takes more time to complete.
7. Software Code: Low-quality code with bugs resulting in more testing and implementation fixes. It also includes the implementation of wrong functional and design requirements. 
   • Using an immature software development technology that is still being heavily developed can add to the project delivery time or cause your application to underperform.
8. External Environment: If a project is dependent on government regulations, or legal compliance standards, and they change, then project deployment can face an unexpected halt.
9. Business Processes: Inefficient quality assurance can result in time-consuming development improvements and software not performing efficiently. 
   • Very informal processes with a lack of policies and standards or too much formality (bureaucracy) can result in unexpected project performance risks and delays.
   • According to research, 73% of organizations following a formal project management strategy are successful in achieving project goals. 63% are able to meet project requirements within a specified budget, and 59% are able to meet project deadlines.
10. Human Resources: Personnel involved in a software development project can impact the product’s timely delivery and performance in several ways. There may be a delay in recruiting the required talent, moreover, their training may require additional time. 
    • Software development and related technical team members can be unmotivated or inefficient in completing project milestones within the set timeframe. 
    • The unavailability of skilled resources can also lower project performance and increase development expenses. 
    • Poor communication between different team members can lead to poor design and coding implementations.

Project Risk Control

Software project risk control consists of three stages – risk management planning, risk monitoring, and risk resolution.

Project risk management planning can be of five types:

1. Crisis management: Address risks after they pose a threat to project delivery, survival, or continuity.
2. Risk mitigation: Plan ahead of risk occurrence and provide resources to recover from them beforehand.
3. Prevention: Implement plans as a part of a software project to identify and remove risk factors before they become a problem.
4. Elimination of root causes: Implement strategies to identify and remove factors before they even give rise to any software risk.

An important concept in risk management is risk reduction leverage. Risk reduction leverage helps to choose the most suitable risk reduction method.

It allows teams to find out the difference between risk exposure estimations before and after applying risk reduction activity. It divides the difference value by the reduction activity cost as follows:

Risk reduction leverage = (risk exposure estimate before reduction – risk exposure estimate after reduction) / risk reduction cost

It is better to plan for the elimination of potential risk factors from the beginning of the software development project. Risk assessment at the beginning of technical activity lowers development time, costs, and effort by mitigating the final consequences of the software risks.

How to Control Common Software Risks?

In a survey conducted by Wellingtone, 40% of respondents believed that effective risk management is the most valuable project management process behind software project success.

Your software development team should be able to avoid a majority of risk factors or, at least, control their effects by following software project management and development practices.

• Use a user-market-oriented development approach.
• Use incremental software development strategies like Agile. According to PMI, 30% of high-performing organizations are reported to be using agile methodologies. Read our article on adopting agile practices in your organization.
• Invest in quality assurance activities.
• Use multiple estimation strategies and automated estimation tools.
• Conduct design review meetings.
• Recruit required talent and management professionals before the software project starts.
• Invest in software development team members’ training and team building.
• Effectively manage the relationship with clients and customers.
• Invest in risk assessment and management practices.
• Adopt the latest technologies like machine learning in automating real-time risk analysis and forecasting future risk impacts. Read more on adopting AI to improve quality assurance here.
• Creating and maintaining information portfolios for current applications, tools, and operating systems.

Risk Assessment Tools

To timely identify and remove risk factors in a software development project, your project management team can make use of risk management tools. Some prominent ones are listed below.

LogicManager

The software tools help to identify, assess, and mitigate risk factors. It has a risk monitoring feature and assists in metric collection and testing. 

It has features like dashboards, graphical data visualization, etc. 

EcoOnline

This risk assessment software provides a task-based risk assessment template for analyzing and managing risks. It assigns risks to the concerned team members for efficient risk resolution. 

The tool also provides a risk estimation calculator and data visualization through graphs and charts.

EHSinsight

This risk assessment and management tool offers features like a cloud solution, mobile application, key performance indicators, a dashboard, and reports. 

These help by providing tools like an incident management system, audit management system, root cause analysis, compliance requirements, etc.

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Partner with a Credible Software Development Company

As discussed previously, risks are inevitable in a software project. The more complex the software solution is, the higher the probability of high-risk factors. 

In such scenarios, past project experience assists developers and managers with undertaking efficient risk assessment and with formulating risk mitigation strategies.

Consistent software development and management practices lead to better end products. Therefore, the majority of companies, almost 93% of those questioned, reported using standardized software development and management processes and techniques to reduce unexpected risks.

If you are not confident with your team’s technical exposure, we advise you to partner with an expert software development company. 

Software development companies have deployed multiple market-competitive software projects and so are ideally placed to assist you in timely software risk assessment.

Moreover, such software development companies have top-notch software engineering skills. Their full-time developers have undergone thorough vetting and training procedures. 

They have specialized developers and development teams for each software domain, i.e. web app development, mobile app development, machine learning development, etc. 

Their expertise in cutting-edge software development technologies and modern programming languages contributes to the quality of the final software product.

Hybrid software development companies, like DevTeam.Space, also offer effective project management. Their skilled technical project managers have experience in working on multiple software solutions. 

They can advise you on how to adopt a better project development strategy and help you with the process workflow including team management.

Read our guide on managing remote software developers for more guidance on this.

Planning a Risk Assessment Process for Your Software?

The nature of the software product development lifecycle is challenging due to uncertainties that can arise owing to factors such as the user market, development technologies, and deployment environments.

However, the associated risks are avoidable if the right risk assessment and control strategies are adopted. An experienced software product development team can help you adopt the right risk mitigation approach right from the very beginning of your project.

DevTeam.Space takes pride in its high-quality software development teams, developers, and its project managers, all of whom are experts in agile software development using cutting-edge technologies. 

You can get in touch with a technical manager at DevTeam.Space by detailing a few of your project requirements via this form. We can help you to map out an efficient risk assessment plan for your next software project.

Top 3 FAQs on How to Perform Software Risk Assessment