The Value of Risk Management

At its core, software development depends on a wide variety of intertwining factors and dependencies. Because of their complexity, projects often have a bad track record for sprouting quality, usability, cost, schedule and overrun risks. When these risks are overlooked, they can often lead to failure.

Despite the lack of project stability in software projects, many organizations still have a foggy perception when it comes to the value of risk management. Most management teams perceive risk management processes as extra work and expenses that do not amount to much.

However, risks can be managed successfully, which can reduce the chances of failure. Research shows that in the majority of failed projects, complications could have been reduced or even avoided if the teams showed early concerns with identifying and resolving high-risk factors. In fact, many experts agree that an effective risk management approach is one of the most important tools project managers can employ to increase their likelihood of success.

Effective Risk Management

Risk management should not be limited to the beginning of a project. It should be a continuous task performed throughout the cycle of development.In order to make risk management an effective part of your project cycle you should strive to:

  • Employ a shared vision- your team should have a common vision for success based on shared project ownership, purpose, and collective commitment
  • Establish open communications- there should be a free flow of information inside and between all program levels in your organization
  • Look out for uncertainties – think towards the future, identify uncertainties, anticipate potential outcomes, and manage program activities and resources while being aware of potential risks
  • Place value on individual voice – do not discourage people in your team from speaking up. Individuals can bring up unique insights and knowledge, which can help identify potential risks
  • Be proactive – create proactive strategies to anticipate future events
  • Continuous process – keep identifying risks and management activities throughout all phases of the lifecycle

Results of Effective Risk Management

Process implementation is one of the most challenging aspects of risk management. The biggest issues with current processes is that they have either weakly implemented, out of order, or missing process steps. The greatest risk drivers are often overlooked, and inappropriate attention may be given to one driver over the other. This leads many companies to abandon their risk management efforts.

Effective risk management practices are not developed overnight – a collaborative and continuous effort is needed. Organizations that implement effective risk management processes enjoy a higher rate of successful projects, while those that ignore risk management increase their chances of failure. They also help teams manage the complex issues associated with software development projects.

By implementing effective risk management, your organization can ensure that objectives are more likely to be completed. Additionally, you improve your company’s chances to quickly respond and plan to unexpected circumstances. This in turn saves efforts, and helps your staff stay concentrated on the core efforts of the project.

Organizations can use effective risk management reporting and data to better manage their budgets and make better timely decisions. This has the potential to reduce audits costs and minimize resources needed for regulatory responses. Overall, a solid risk management system has the ability to reduce the cost of your existing processes and functions.

In today’s world, as project risks continue to increase, companies are finding it necessary to implement a formal risk management system. Software development teams need an effective program that can help them minimize risks in order to maximize their opportunities. In simple terms, risk management is valuable because it creates a more risk focused culture in your organization, standardizes risk reporting, improves perspective risk and focus, ensures effective uses of resources, and prioritizes compliance and regulatory efforts.