PROJECT RISK MANAGEMENT

REPORT

Effective Project risk management strategies allow identifying the projects strengths,
weaknesses, opportunities and threats. By planning for unexpected events, we can be
ready to respond if they arise. To ensure the projects success, define how will handle
potential risks so we can identify, mitigate or avoid problems when we need to do.
Successful project managers recognize that risk management is important, because
achieving a projects goals depends on planning, preparation, results and evaluation that
contribute to achieving strategic goals.
Risk management plans contribute to project success by establishing a list of internal and
external risks. This plan typically includes the identified risks, probability of occurrence,
potential impact and proposed actions. Low risk events usually have little or no impact on
cost, schedule or performance. Moderate risk causes some increase in cost, disruption of
schedule or degradation of performance. High risk events are likely to cause a significant
increase in the budget, disruption of the schedule or performance problems.
To ensure that projects run smoothly, effective project managers communicate their plan
to the project sponsors, stakeholders and team members. This sets expectations to people
who provide funding and are affected by the outcomes. It ensures that the project runs
smoothly so one step proceeds to the next without disruption. By identifying, avoiding
and dealing with potential risks in advance, you ensure that your employees can respond
effectively when challenges emerge and require intervention.
By defining risk management processes for your company, you make success more likely
by minimizing and eliminating negative risks so projects can be finished on time. This
enables you to meet your budget and fulfill targeted objectives. When you dont have risk
management strategies in place, your projects get exposed to problems and become
vulnerable. Effective risk management strategies allow your company to maximize profits

and minimize expenses on activities that dont produce a return on investment. Through
detailed analysis, effective leaders prioritize ongoing work based on the results produced,
despite the odds.

It has almost been a decade since the software industry has detonated. It has witnessed a
remarkable growth and a tremendous escalation not only in the core activities but also in the
IT enabled services. Despite the uninterrupted expansion, the software industry still has the
highest number of project delays and failures. According to the Standish report [9], 44% of
the software projects are challenged (late, over budget and/or with less than the required
features and functions) and 24% have failed (cancelled prior to completion or delivered and
never used). Thus, making a total of 68% (both challenged and failed) which is quite
exponential. Boehm found that 15-35% of all the software projects were cancelled outright
while the remaining projects suffered either from schedule slippage, cost overruns or failure
to meet the project goals.

Software development projects are collections of larger programmes with many interactions
and functional dependencies. It involves a creation of a product that has never been created
before although the development processes are similar among other projects. As a result,
software development projects have a dismal track-record of cost and schedule overruns and
quality and usability problems . Further, it becomes very difficult to predict the success of
project because the scope of the project keeps changing depending upon the market; hence
the resources have to be re-allocated leading to schedule slippage and cost overruns. Many
software projects involve multiple entities such as companies, divisions, etc., that may have
varying interests. There is often a feeling of disconnection between software developers and
their management, each believing that the others are out of touch with reality resulting in
misunderstanding and lack of trust . According to Doherty and King [27] and Warkentin et al.
organizational risks stemming from organizational culture, structure and business processes
impacts the technical software development issues, creating a wide range of potential trouble
points. A study revealed that 65% of the project failures were due to management issues

Apparently, this implies that software project development is extremely risky. Therefore,
managing the involved risks is of primary importance in software project development,
especially in the large-scale software projects. If the risks are not controlled at the early
stages of the project, it will result in an exponential increase in the cost of the project as
shown in Figure 2.1 .

The extant literature has produced a number of conceptual frameworks to explain different
types of software development risk, risk management strategies, the preferred organizational
climate and measures of software project performance . This chapter aims to enlist and
critically review the studies that have been conducted in the area of software risk,
organizational climate and software projects.

Project, by definition, is a temporary activity with a starting date, specific goals and
conditions, defined responsibilities, a budget, a planning, a fixed end date and multiple
parties involved . According to Turner and Muller, a project is an endeavour in which human,
material and financial resources are organised in a novel way, to undertake a unique scope of
work, of given specifications, within the constraints of cost and time, so as to achieve
beneficial change defined by quantitative and qualitative objectives.

A software project is a project which encompasses a unique scope of work with given
specifications which needs to be completed in a given time at a given cost .

The main stakeholder of a software project is the customer, the party that is going to use the
delivered system to its business purposes and will benefit from the value added by applying
the system to its business. The second most important stakeholder of a software project is the
developer, the party that is building the system to be used by the customer.

a) Cost refers to any or part of the projects materials, supplies or external contracts.
b) Time refers to any part of the project schedule, including the duration of individual tasks,
milestones and deadlines.
c) Product performance refers to the specifications, quality, scope or standards that part or
the entire project is planned to achieve.

Managements view of what constitutes a successful project may be different from that of a
project manager, while developer and users may have different take on the success. The
difference in view point is due to different perspectives, motivation and responsibilities
associated with the roles . Linberg found that software developers considered a project
successful albeit it got cancelled before arriving at a conclusive outcome because it resulted
in substantial learning that could be applied to future projects. Baker et al. has defined project
success as follows: the project is considered an overall success if the project meets the
technical performance specification and/or mission to be performed, and if there is a high
level of satisfaction concerning the project outcome among the key people in the parent
organization, key people in the project team and key users or clientele of the project effort.
One of the studies identified two criteria namely project management criteria and product
success criteria, for defining project success. It noted that project management success covers
meeting time, cost and quality objectives, while product success deals with the ability of the
projects final product to meet the projects owners strategic organizational objectives,

satisfaction of users needs and satisfaction of stakeholders needs where they relate to the
product . The same was reiterated in other studies.