Risk Management in Software Engineering: Types & Assessment

Are you developing any Test Plan or Test Strategy for your project? Have you addressed all the risks properly in your Test Plan or Test Strategy?

As testing is the last part of the project, it’s always under pressure and time constraint. To save time and money you should be able to prioritize your testing work.

How will you prioritize testing work? For this, you should be able to judge more important and less important testing work. How will you decide which work is more or less important? Here comes the need for Risk-Based Testing.

Risk in Software Engineering

Risk Management in Software Engineering

What is a Risk

Risk is the anticipation of loss, a potential problem that may or may not materialize in the future. It is usually the result of the lack of proper information, control, or time. In other words, the risk is a problematic situation, which has not yet occurred, that might cause some loss or derail the progress of the project if it occurs.

Software risk(s) that exist in the future (e.g. market needs, technology changes) is quite uncertain. Numerous known and unknown factors cannot be integrated with the software project plan.

Risk identification, assessment, and management are the main elements of every software project. Effective analysis of software risks will help in reducing the chances of these risks turning into issues.

Risks are identified, classified, and managed before the actual execution of the program. The following section discusses software project risks and mitigation examples.

Risk Scenarios

Software project risks can occur from the following possible scenarios:

  • Unknown Unknowns: These are mainly technology-related risks of which the software organization is completely unaware. For example, working with unknown tools (no experience with these tools) or technology poses a risk.
  • Known Unknowns: Although the organization is aware of these kinds of risks, they are unsure whether such risks exist in their software project. For example, miscommunication between the client/stakeholder (and product owner) and the development team can cause gathering incorrect requirements. Although this is a well-known fact, the team is unsure whether the client provided accurate information.
  • Known Knowns: These kinds of risks are very well known to the project team and are based on facts or historical evidence. Identification of these risks is done early and comprehensively documented in the project plan. For example, an inadequate number of resources or lack of skill may cause a risk in delaying the development of the software application.

Types of Software Risks

#1) Schedule Risk

The possibility of a plan, strategy, project, activity, or task taking longer than expected is referred to as schedule risk. The schedule usually contains estimations (which are forward-looking) that are quite uncertain. As a result, there is a risk that the estimated time durations, dependencies, and assumptions considered in the schedule may prove incorrect.

This refers to the risks associated with project delivery planning or timing. These risks mostly arise when projects run behind schedule, causing development to stall and negatively affecting software project delivery. If scheduling risks are not addressed in time, the project may fail. This will reduce the organization’s ROI.

Project schedules slip when project tasks and schedule release risks are not addressed properly. Schedule risks mainly affect a project and, finally, the company’s economy. This may lead to project failure.

Reasons that could contribute to the schedule slippage:

  • Inaccurate time estimations.
  • Resources (people, systems, etc.) and skills of individuals are not optimally used.
  • Failure to identify complex functionalities and time required to develop those functionalities.
  • Unexpected project requirement changes or late changes in requirements.
  • Lack of software development and engineering processes.
  • Lack of sufficient QA.
  • Communication issues.
  • Not using the right tools.

How to avoid or minimize schedule risk?

  • Include stakeholders and management in the estimation process.
  • Anticipate team members leaving and new hires. Reserve time and cost for this.
  • Reach a complete consensus on the product’s core and optional features.
  • Implement essential engineering and QA processes.

#2) Budget Risk

Budget risk is a very dangerous risk. It relates to the monetary risks mainly caused by budget overruns. The financial side of the project should always be managed in accordance with the project plan.

However, when the financial aspect is mismanaged, budget concerns occur, resulting in budget risk. Therefore, efficient budget allocation and management are required for the success of any project.

Budget risk can arise because of the following reasons:

  • Improper initial budget estimation and allocation.
  • Unanticipated project scope expansion (requirement changes).
  • Cost overruns
  • Mishandling and inaccurate tracking of the budget (budget mismanagement).

How to avoid or minimize budget risk?

  • Decide on the project scope/requirement after doing thorough research, before the initial cost estimation.
  • Regularly track the budget to maintain constant control.
  • Anticipate any changes/updates and calculate the costs accordingly.

#3) Operational Risks

Operational (also referred to as procedural) risks are the risks that might occur in day-to-day operations during the project development phase. These risks happen because of inadequate process implementation or some external environmental factors and actions.

Operational risks can arise due to some of the following reasons:

  • Mismanagement of the project tasks.
  • Conflicts within the team.
  • Failure to prioritize tasks.
  • Roles and responsibilities are not precisely defined.
  • Lack of skilled resources.
  • Inadequate training in the application and/or technology.
  • No resource planning (insufficient resources).
  • Lack of communication or miscommunication within the team.
  • Poor project management.

How to avoid or minimize operational risks?

  • Use agile methodology (e.g. Scrum).
  • Hire the right number of resources with the required skills
  • Prioritize tasks (maybe use some prioritization techniques like MoSCoW prioritization)
  • Monitor the task/project progress, inspect, and adapt.

#4) Technical Risks

Technical risks relate to the functional or performance risks which are mainly associated with the working functionality of the product or the performance aspect of the application.

Technical risks can arise because of the following reasons:

  • Frequently changing requirements.
  • Insufficient knowledge and experience of rapidly changing technologies.
  • Implementation is highly complex.
  • Module integration issues (improper integration).
  • Lack of sufficient amount of skilled resources.

How to avoid or minimize technical risks?

  • Hire the right number of resources with the required skills.
  • Keep the implementation as simple as possible and consider adequate performance testing.
  • Avoid scope creep by proper prioritization of features (or user stories).
  • Start with the development of MVP (Minimum Viable Product) and get feedback.

#5) Programmatic Risks

Programmatic risks refer to risks that are usually unavoidable. These are the external and uncertain risks that are beyond the control of the software programs.

We list below some events that can lead to programmatic risks:

  • Running out of funds (limited budget allocation for the project).
  • Rapidly changing market needs or no market development.
  • Sudden changes in government rules and regulations (e.g. GDPR).
  • Changing customer product strategy and priorities.
  • Contract cancellation due to issues with client organization (e.g. budget cut, internal politics).

How to avoid or minimize programmatic risks?

  • Hire experienced business analysts and empower them to do thorough market research.
  • As far as possible, make proper budget estimation by considering changes and/or updates.
  • Implement Scrum framework so that changes in customer requirements can be accommodated efficiently and with more ease.

Risk Management

Software risk management consists of two distinct activities: Risk Assessment, and Risk Control.

Risk management in software engineering has to have an effective and successful strategy that will help protect the organization’s resources, people, profits, brand, and, of course, reputation.

The risk management strategy should address both the internal and external environments. We can develop an efficient strategy to avoid, control, and overcome potential risks.

Risk Management

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When adopting a risk management plan for any software project, the following seven essential risk management principles need to be considered:

  • Identify Risks at an Early Stage: Risk identification should always begin at an early stage in the software project when there is a lot of uncertainty and the greatest possible risk exposure. The project manager, along with the team, should determine the cause of the potential risk and develop efficient mitigation and response actions.
  • Overall Goals and Objectives of the Organization: Make sure that the risk management strategy aligns with the overall culture, goals, and objectives of the organization. Each organization will have different desired goals and priorities, which should be considered when developing a risk management plan.
  • Context (Perspective): Organizational context is very crucial when dealing with software project risks. Various environmental elements (societal, political, geographical, technological, and legal) influence and affect every organization to varied intensities. Internal culture, communication protocols & channels, and risk management processes vary considerably from organization to organization. It is therefore crucial to consider both the internal and external contexts while defining risk management strategy.
  • Stakeholder Involvement: All the stakeholders should be involved at each decision-making stage throughout the risk management process. The roles and responsibilities of all those involved should be very clear and well-defined.
  • Clear Roles & Responsibilities: Ensure that each one involved is well aware of the roles and responsibilities at every stage of the software risk management process. The risk management process must be open (inclusive) and transparent.
  • Risk Evaluation at each step: Once the risk management plan is in place, evaluate risk at every step and execute reasonable preventive actions. Implement inspect and adapt cycles.
  • Review & Improve: Review the risk management plan & strategy after the completion of the project to assess how well the plan performed and check if there is any scope for further improvement.

Risk Management Flow Chart

Risk Assessment

In this fast-paced and rapidly changing environment, technologies, and of course, ever-changing unique requirements, vulnerabilities of the software applications are also strengthening. As a result, the risk of the software systems failing is ever-increasing.

Software risk assessment is the process of identifying, analyzing, and prioritizing risks at the earliest stage and saving time and money.

It is a critical step in getting prepared for any potential future problems that might occur in the software project. If a potential risk is identified during the risk assessment, a possible viable solution or action plan (contingency & mitigation) should be developed in time.

Performing risk assessment involves three different steps:

  • Risk Identification
  • Risk Analysis
  • Risk Prioritization

Risk Identification: It is vital to anticipate and detect the risks and their types in the software project as early as possible and address them so that possible impact can be reduced by ensuring effective risk management.

The different risks that a software project may encounter are listed below:

  • Organizational Risks: These risks are related to organizational factors, such as environment, culture, way of funding, etc.
  • People (Human Resource) Risks: These risks are related to the people in the development team. The risks can arise because of the error(s) which might be committed (of course unintentional) by the development team.
  • Technology Risks: These are the risks that can be encountered due to the hardware and software technologies used to develop the software system.
  • Tools & External Libraries Risks: These risks are related to the tools (e.g. IDEs used for development) and other third-party software/libraries.
  • Estimation Risks: These risks are related to incorrect estimations of cost, time, and resources.
  • Requirement Risks: These risks can arise from the ever-changing customer requirements and managing those changes.
  • Market Risks: These risks are related to the volatile market needs and the often changing rules & regulations.

Risk Analysis: In this phase of risk management, analysis is done on the likelihood of occurrence of every identified risk and its severity in terms of its effects. Risk analysis is performed based on experience (experience gained from previous projects, by the developers).

Risk Prioritization: In this phase, the project management team estimates the probability of the occurrence of every identified risk. Also, the seriousness of the risk is gauged.

Each risk is assigned to one of several bands of probability, as it is not possible to establish an exact numerical estimate of the likelihood and severity of each risk.

  • Bands of the probability of occurrence (Likelihood): Different bands of the probability of the risk are defined as very low (0-10%), low (+10-25%), moderate (+25-50%), high (+50-75%), and very high (+75%)
  • We can categorize the severity of the risk as:
    • Catastrophic: This risk severity threatens the overall survival of the project.
    • Serious (Critical): Significant delays in the project delivery will occur.
    • Tolerable (Moderate): Delays caused are well within the allowed contingency.
    • Insignificant (Negligible): Risk can be ignored.

The priority of the risk can be determined by using the following formula:

p = r * s
Where p stands for priority;
r stands for the probability of the risk occurring (true or false)
s stands for the risk severity

Software Risk Assessment Templates

Risk Assessment Matrix Template


The risk matrix is a project management template in the grid format that is used to plot the risk against the likelihood of its occurrence and the severity of the impact on the project.

The top of the grid represents the likelihood of the risk happening, from very likely to highly unlikely. The left side represents the severity of the risk, from catastrophic to negligible. This risk matrix gives a better understanding of how much attention the risk should receive.

Download the Risk Assessment Template by SoftwareTestingHelp

Risk Assessment Template – by ProjectManager

ProjectManager’s IT Risk assessment template helps in identifying:

  • The number of resources (system & personnel) required to continue operating.
  • Response time for restoring data or functionality of the application.


Download the Risk Assessment template by ProjectManager

Risk Control

Risk control is the process of managing classified risks to obtain desired results. After conducting a risk assessment of the identified risks, the project manager develops risk-control strategies. It is important to note that different risks need different control methods.

Risk control goes through three steps:

#1) Risk Management Planning: One of the following three main strategies can be used for risk management planning:

  • Reduce the Risk: This strategy of planning involves a plan to reduce the loss caused due to the risk. For example, planning to hire new resources to replace the people serving the notice period.
  • Transfer the Risk: This strategy involves outsourcing the development of a challenging project or getting a third party to solve a difficult problem that is posing a risk. Another example could be, buying insurance to negate natural disasters, etc.
  • Avoid the Risk: Avoid the risk method involves various strategies like paying incentives to skilled, hard-working people; requesting clients to reduce the scope by changing requirements.

#2) Risk Monitoring: Risk monitoring is the process of tracking the risks of different types and evaluating the effectiveness of the strategies/responses which are implemented by the organization.

Once the risk monitoring process is completed, its findings can determine whether proper methods were used, and if new risks can be identified easily. The findings will also help in defining new strategies to replace ineffective ones.

#3) Risk Resolution: Risk resolution is the process of eliminating the risk entirely. It involves finding effective solutions to the risks that occur. It includes techniques like prototype simulation, benchmarking, cost-to-design approach, and so on.

Software Development Risks

In software development, there are several internal and external risks. Here are the risks specifically associated with software development, as well as mitigation actions:

#1) Code Problems: Because of hurriedly developed code and several other reasons, like frequent requirement changes and lack of skills, software applications/projects may contain poor-quality code, which is a very significant risk. Code issues may involve logical errors, complexity, performance issues, difficulty in scalability, etc.


  • Involve proper and sufficient unit testing.
  • Conduct code reviews.
  • Resolve observed bugs/errors on time.
  • Maintain defined coding standards.

#2) Budget Issues: Budget (cost) issues are another risk involved in software development. It is important to continuously monitor projects so that they don’t overrun the budget estimates, which can happen because of often changing requirements.


  • Update the project plan and budget whenever requirement changes are committed.
  • Maintain continuous customer/stakeholder collaboration.

#3) Scope Creep: Continuous and uncontrolled changes to project scope and/or requirements can lead to project delivery issues.


  • Changes to the project scope/requirements should follow a systematic process. The development team should be taken into confidence, allowing them to provide feedback about the changes. The process should be collaborative.
  • Features/User Stories should be properly prioritized so that the development team can decide what is possible and what is not possible.

#4) Productivity Issues (Low Productivity): Software development teams might have productivity issues and struggle with the project work because of delays, employee fatigue, and several other reasons like internal conflicts, insufficient training, etc. This can be a serious risk to the overall project.


  • Communicate (internal & external communication) effectively about project work details and any problems. Maintain transparency and foster teamwork.
  • Set SMART (Specific, Measurable, Attainable, Realistic, Timely) goals for the team members.
  • Emphasize task (or user story) prioritization and Sprint planning (make a strong project plan with a well-paced timeline).
  • Appoint a leader (Scrum Master/PM) who can manage the team by motivating and guiding.

#5) Tight & Aggressive Deadlines: Having a tight & impractical delivery deadline might put extra pressure on the development team members. The team may not meet such deadlines, which might pose a substantial risk in the long run.


  • Set realistic timelines by creating a thorough project plan.
  • Implement Scrum framework.

#6) Improper Risk Management: Adequate risk management is required for software development teams to identify issues and respond to them effectively. Otherwise, poor software risk management can be a major risk in itself.


  • Include risk in estimations.
  • Make use of the risk register in estimations and in the product backlog.
  • Identify potential risks.
  • Analyze and calculate the likelihood of identified risks.
  • Prepare a thorough mitigation plan.
  • Continuously monitor the risks.

#7) Poor Project Management: A project’s success depends on effective project management since it may produce goals, expectations, timelines, and deadlines that are all well-defined. So, if the project is poorly managed, there might be a very serious risk.


  • Make use of efficient project management software tools.
  • Recruit an experienced project manager (Scrum master for Scrum).
  • Create a thorough project plan.
  • Keep the communication lines (internal and external) simple and clear.

#8) Stakeholder Problems: Low stakeholder engagement and especially when the stakeholders are from the client side, can be a major risk. Slow responses from the customer can become an impediment to software delivery.

While working with Scrum, stakeholder engagement is actually increased. Product increments are more frequently delivered and require continuous feedback from client stakeholders to the development teams.


  • Communicate and collaborate with customers/stakeholders frequently.
  • Create a thorough project plan so that expectations from the project are clear to the stakeholders.
  • Clear project goals.
  • Clear work agreement with customers/stakeholders about the response time (for feedback/questions).
  • Implement Scrum framework.

#9) Unfulfilled Expectations/Inaccurate Estimations: Project estimations sometimes create expectations that can’t be met. Inaccurate estimations can be caused by various reasons like underestimating task/user stories.

Inaccurate estimations of timelines, costs, and resources can lead to unmet expectations of the customer. This is one of the very likely expected software project risks.


  • Prioritize tasks/user stories properly.
  • Consider uncertainties and risks in the estimations.
  • Consider spikes and ad-hoc tasks in estimation.

#10) End-user Engagement (User Response): The success of a project is directly proportional to the number of users that purchase and utilize the product, so user response is critical to the project and business. Poor user response is another software development risk.


  • Consider Beta testing and user testing.
  • Send out surveys to the end users.
  • Implement agile and do frequent releases.
  • Create focus groups to collect information.

#11) Attrition (Team Members Leaving): Attrition is another significant risk in software development and the project. When project team members leave, it is often hard to replace their experience of the application, their unique skills, and specific expertise.


  • Request leaving team members to create a thorough knowledge transition plan.
  • Document important project details.
  • Design sufficient training programs for the new team members.

#12) External Environmental Risks: Unpredictable external factors like changes in government rules & regulations, market changes, and natural disasters may form external risks. Although it’s difficult to avoid external risks, there are possible mitigation actions to lessen the impact.


  • Obtain insurance (in case of natural disasters).
  • Stay well informed about changes in government rules & regulations.
  • Stay informed about current market events.
  • Respond as quickly as possible to any external risks as they happen.

Software Testing Risks

Similar to the risks in the software development testing phase/cycle may face some risks (which we will discuss in detail in another article). It is crucial to identify and manage software testing risks.

Some risks which might occur:

  • Test environment availability issues.
  • Delays (excessive) in resolving bugs found in testing.
  • Lack of adequate domain knowledge and testing skills.

Also, read => Risk-based Testing – Ultimate Guide

Software risk analysis tools:

Software risk analysis tools can assist the project team to identify and mitigate potential risks, making life a little easier. Commonly used tools are listed below:

  • EcoOnline
  • LogicManager
  • EHSInsight

Suggested Read => Top 10 Risk Assessment and Management Tools


Identifying the risks at the right time and having proper plans to mitigate those risks is vital for any software project to succeed. The above article discusses the types of software project risks and risk management.

Hope that you had a good understanding of the risks in Software Engineering.

Please share your thoughts in the comments section below!

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