A Risk in software development project is an event that may have an impact on the outcome of the project. Risk differs from problems or issues because a risk refers to the future potential of loss/benefit. Problems or issues, however, are conditions or states of affairs that exist in a project at present time.

Risks should be identified for the following reasons:

• Schedule can be developed more realistically based on accurate Risk planning
• Budget is more accurate when it includes reservations for possible Risks
• Specification is unambiguous when Risks are revealed in advance
• Outcomes are more predictable if the project team is prepared to handle unexpected negative interruptions

Risks are found and identified by the project team, project manager and you during the whole project lifecycle. Risk management is an iterative process. The sooner a Risk is identified, the faster it can be managed and mitigated.

Major Risk identification activities are performed during the Inception Phase. Risk Strategies and Risk response plans are baselined on a LCO Milestone in the Risk List.

Risks are typically sourced by people, Requirements, software, hardware, and communications. Mid-size software projects include hundreds of Risks. Not all Risks are identified and managed, only those that appear to be the most severe.

Each Risk is defined in a 'Cause-Risk-Effect' format. The cause may be the source of the Risk, the Risk is what may or may not happen, and the effect is the impact to the project objectives, should the Risk actually happen.

Examples of Risks from typical software development projects include:

#	Cause	Risk	Effect
RISK1	Deployment server will be purchased by the customer on 8/26	System installation and configuration take more than 3 days	Project will be delayed
RISK2	Data provider changes API on its own schedule, without prior notification	Next change happen before the end of project release Milestone	Integration module re-factoring will take and 40+ additional staff-hours
RISK3	System analyst doesn't have experience in medical business software	System analyst and the customer have difficulty in communicating and understanding	Inception Phase will take more than 3 weeks, the customer may become frustrated, and the project may be canceled

When Risks are identified and discussed with the project team, the project is prepared to handle any negative interruptions. This decreases the probability of a Risk taking place throughout the course of the project.