Software Project Management

(Risk Evaluation & Strategic

Program Management)
 Contents
❑ Introduction to Risks
❑ Risk Evaluation
❑ Risk Identification and ranking
❑ Cost-Benefit Analysis
❑ Risk profile analysis
❑ Using Decision Tree
❑ Strategic Program Management
 Risk
• "Tomorrow problems are today's risk." Hence, a clear
definition of a "risk" is a problem that could cause some loss
or threaten the progress of the project, but which has not
happened yet.
• There are three main classifications of risks which can affect
a software project:
• Project risks
• Technical risks
• Business risks
3
 Risk Evaluation
• Risk evaluation is meant to decide whether to
proceed with the project or not, and whether
the project is meeting its objectives [1].
• Risk Occurs:
•When the project exceed its original specification.
•Deviations from achieving it objectives and so on.
For riskier projects could use higher discount rates
Ex: Can add 2% for a Safe project or 5 % for a fairly risky one.
 Risk Identification and ranking
• Identify the risk and give priority.
• Could draw up draw a project risk matrix for each project to assess
risks.
• Project risk matrix used to identify and rank the risk of the project

• Example of a project risk matrix [1]

 Cost-Benefit Analysis
• Cost/benefit analysis, comparing
– Expected costs
– Expected benefits
• Issues
– Estimating costs
– Estimating benefits
• Use of financial models to evaluate
 Cost-Benefit Analysis
Steps of CBA:-

• Identifying and estimating all of the costs and

benefits of carrying out the project and
operating the delivered application.
• Expressing the costs and benefits in
common units
 Cost-Benefit Analysis

Cost Category

• Development costs
• Setup costs
• Operational costs
 Cost-Benefit Analysis

Benefits Types

• Direct benefits
• Indirect benefits
• Intangible benefits
 Risk profile analysis
• This make use of “risk profiles” using sensitivity
analysis.
• It compares the sensitivity of each factor of project
profiles by varying parameters which affect the
project cost benefits [2].
Eg:- Vary the original estimates of risk plus or minus
5% and re-calculate the expected cost benefits.
 Risk profile analysis

• P1 depart far from p2,have large variation

• P3 have much profitable than expected
• All three projects have the same expected profit
• Compare to p2 , p1 is less risky.
 Decision Trees
• Identify over risky projects
• Choose best from risk
• Take suitable course of action

Decision tree of analysis risks helps us to

• Extend the existing system

 increase sales
 improve the management information

• Replace the existing system

 Not replacing system leads in loss Replace
 it immediately will be expensive.
 Decision Trees
• The expected value of Extending
system=
(0.8*75,000)-
(0.2*100,000)=40,000 Rs.

• The expected value of Replacing

system=
(0.2*250,000)-
(0.8*50,000)=10,000 Rs.

Therefore, organization should choose

the option of extending the existing
system.

Source:-[1] 51
 NPV (Rs)
Ex 1: Further extension -100,000

0.5
80,000
Extend
0.5
No extension

D2 Further extension

0.5
200,000
0.1
Extend Replace

0.5
No extension -30,000
0.9
D1 Further extension

Replace 0.1
-100,000

0.9
No extension 75,000
Replace

0.2
Further extension

25
0.8 0,000
No extension
D-Decision Point -50,000

Source:-[1]
 Strategic Project/Program Management
• Strategic Project Management is the process of thinking about
your Projects in light of their connection to your strategic plan.

• In other words, Strategic Project Management is about forming clear

links between your Projects and Strategic Objectives.

• The premise of Strategic Project Management is that 'Projects'

should actually work to achieve the goals and objectives outlined in
your strategy.
 Strategic Project/Program Management
Strategic Project Management isn't just about the process of project-managing

big and important projects, it's about designing and managing your portfolio of

Projects to ensure that it supports your strategy, by ensuring that:

• The mix of Projects is appropriate and sufficient to deliver your Strategic

Objectives.

• Your Projects are appropriately resourced.

• If timelines and resourcing have to be changed, Projects

are prioritized accordingly based on the strategic plan,

 References

1. Bob Hughes, Mike Cotterell and Rajib Mall: Software

Project Management – Fifth Edition, McGraw Hill.

2. https://www.tutorialspoint.com/software_engineering/softw
are_project_management.htm
Thank
You