Risk Management

Types of Risk in Risk Management 

• Project risk
  These risks include budget schedule slips, personnel issues or sometimes customer-related issues. Say, you promised a customer to make make a project in $50,000, but when you started doing your work, you realised that there are some hardware or some products which you need to buy to do this project and you found that the cost estimated by you is not sufficient to complete the project. 
  The reasons behind these risks are: 
  i) wrong budget estimation
  ii) cost overruns. To prevent risk caused by overrunning of cost, fix the price high beforehand and give cash-backs at the time of delivery.
  iii) project scope expansion.
   
• Technical risk
  These kinds of risks are relevant to the system's function and the system's performance.
  The reasons behind these risks are:
  i) continuous requirements changing.
  ii) if the project is complex to implement.
  iii) module integration. To prevent risks from occurring by module integration, use an object-oriented approach model.
   
• Business risk
  Possibility of inadequate profit, even losses are included in business risks. There are two types of business risk. They are speculative risk, i.e. either profit or loss and pure risk, i.e., loss or no loss. Demand fluctuation is included in speculative business risk, and fire is an example of pure risk. 

Importance of Risk Management 

• It helps to lower the uncertainty.
• Better data for decision making is encountered.
• Expectations are set and managed.
• Less guesswork.

Limitations of Risk Management 

• Cost of software increases 
• Schedule changes due to encountering of risks.
• Risks may impact success and quality. Hence, decreasing the morale of the team.
   

Also see,  V Model in Software Engineering

FAQs

1. What are trade-offs?
   A trade-off is a situation or condition which involves losing one quality of something in return for gaining another quality or aspect and vice versa. Another name for trade-off is compromised.
    
2. What is the operational risk? 
   These risks refer to activities carried out within an entity arising from structure, systems, people, products or processes. These include frauds, litigation, loss of suppliers, failure of IT system, etc. Workshops and audits are used to identify these types of risks.
    
3. How to approach risk management?
   We can approach risk management by avoiding, sharing, reducing, and retaining risks.

Key Takeaways

This article taught us about risk management. We discussed the risk management process, different types of risk management, their importance and limitations.

We hope you could easily take away all critical and conceptual techniques by walking over the given examples. 

Now, we strongly recommend you to understand the other related concepts in Software engineering and enhance your learning. You can get a wide range of topics similar to this on software engineering.

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