COVID–19 and the ensuing economic downturn have changed our attitude about how to manage the business. In just a few months, some big businesses have failed and the main reason is they were poorly prepared for the crisis. This time of uncertainty during the pandemic has shown us how important it is to develop an effective risk management strategy.
How do you prepare your business for a new reality? There are effective risk management strategies that can save your business from uncertainty. In software development, risks can be very costly, but there are specific tips for software risk management.
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During these pandemic times and economic recession, many brands and companies had to close or significantly cut their expenses. Some large companies are struggling to survive, while many small businesses have shut down because of pandemic-related regulations that made running some businesses impossible. Even brands like Airbnb almost went bankrupt in just a few months. AirDNA says in its data analysis that bookings across Europe collapsed in March, dropping 80%.
“It took us 12 years to build Airbnb, and we lost almost everything in four to six weeks,” Airbnb CEO Brian Chesky said in an interview on CNBC. But he added that Airbnb was preparing to go public this year.
Chesky also noted that the company faces an uncertain future due to the new reality and an uncertain future. “Tourism as we knew it is over,” he said.
The future of the travel company is still promising though. According to CNBC: “The start-up’s $30-billion-plus equity valuation has been cut dramatically, but it could emerge in a post-COVID world as a preferred vacation option to hotels, investors say.”
If you think it was just luck that the company has survived and is even hopeful about the future, it’s not. Airbnb had a crisis management strategy. First, the goal was to keep hosts and customers loyal. How? Apart from quick refunds and excellent customer service, they established a $250 million relief fund for hosts to survive.
Anti-crisis strategy and risk management is a new trend in marketing and business management. We would like to share the top strategies of risk management relevant to technology companies.
What Is Software Risk Management?
Some think that the technology world is facing fewer challenges than other industries like hospitality for example. Sure, e-learning courses or streaming services have become more popular during the pandemic, but software products are different, and some like Airbnb have experienced a negative impact similar to those faced by restaurants and hotels. Risk management in software development and the launch of new technology products are also being impacted just like other industries but in a different way.
Software development is the process where you gather a team of highly-qualified experts, follow strict deadlines, and the processes are very costly. The process of software development is always uncertain, which is a well-known project risk. As in any industry, risk in software development is the loss of money, time, and resources. Risk can lead to the loss of something valuable. Risk management is a set of activities to overcome unexpected situations and unplanned events.
However, software risk management is different from risk management in other industries. Software risk is related to circumstances that lead to a loss with the organization during the software development process. To overcome risks, you should take some basic steps including identifying, prioritizing, planning, monitoring, implementing and communicating on development results.
- Identification – identify the possible risks
- Prioritizing – define the biggest risks and prioritize those that are the most relevant
- Analyzing – define the risk probability and the number of actions needed to avoid them
- Planning – develop a mitigation plan to decrease the risk probability
- Monitoring – check the results of actions and minimize negative effects
Types of Risks in Software Engineering
The best practices of IT risk management include minimizing risk factors in the Software Development Life Cycle (SDLC) to develop a system that is able to counter and mitigate risks when necessary.
The main risks of software development are:
- Organizational and task requirements can create risks. With a team of experts involved in the process, any circumstance like the departure of a key team member can be catastrophic. It is not the same as losing another employee, as the whole project can depend on a product developer. In this case, the risk management strategy is to sign a contract that protects the project from a loss of the employee, or in the case of other circumstances, the team should have other resources to fill the gap. A good way is to hire an outsourced team and then keep them on call if needed.
- If the client changes the requirements, this can be a force-majeure. Project managers should be ready to change the direction of the work anytime, and this shouldn’t interfere with the whole process and deadlines. It is also important that developers are following the requirements properly, as any mistake in building the foundation may lead to the failure of the system or software product.
- Innovation and unused products, or other external risks can also create risk. Before launching the new technology on the market, it’s hard to predict whether this product will be welcomed by users. In this case, it’s vital to monitor the market during development.
- Results and performance are the main risks of any project. The development team needs to deliver the desired results and meet the customer’s expectations. To avoid pitfalls and failures, it’s crucial to test and monitor the process during every step of the project.
- Deadlines are the main challenge in software development. The main risks with timing are incorrect time estimation, improper resource allocation, and underestimating the complexity of the project.
- Budget and other financial risks are similar to previous risks. If there is an improper budget estimation and inaccurate tracking of expenses it can be a big problem.
What Does The Software Risk Management Algorithm Look Like?
There are five phases of the Software Development Life Cycle and Risk Management:
- Inception: This stage includes the planning and analysis of requirements, and then identifying the possible risks at an early stage.
- Design and prototype – This is the stage when the team is starting the development process and they should be taking into account the possible risks.
- Implementation – This phase includes system configuration, development, testing, and verification. The system is tested against possible risks.
- Maintenance – If new risks are identified during debugging and updating, they should be noted in the system modules.
- Audit – This is the risk management plan assessment.
What Should Your Crisis Management Strategy Be?
Companies can apply different strategies, but there are some principles of effective crisis management that can be followed. In some cases, the company can cut expenses, or make the transition to remote work. But sometimes, its better to keep operations the same, supporting employees and keeping customers loyal. After the recession is over, companies may be able to restore previous revenues, but it’s difficult to regain reputations. Below are three steps that can help mitigate loss.
#1 Lean principles
There are some universal rules that any business should follow even
In Non-Crisis Times
- Waste elimination: It is crucial to optimize the process and decrease possible
Downtime or Other Distractions.
- Communication: It’s also very important to set up the right communication. The clearer the task is, the better the chances are that it’s going to be completed.
- Knowledge sharing: Brainstorming is a good way to come up with the best ideas for the project, so don’t underestimate knowledge sharing within the team.
#2 Watch The Budget
The first thing you need to do during a crisis is to minimize costs. It can be done by lowering interest rates on loans, decreasing taxes, or cutting other expenses. It is also a good idea to move to a smaller office or close one and cut expenses for that location during a crisis like the current pandemic and economic downturn. Some companies also canceled corporate events and other benefits.
#3 Invest In Wise Marketing Efforts
During this pandemic, it is important to review marketing efforts. Some of those previously used may not be effective now and in the near future. Now, is a good time to start implementing (if you have not already done this) your digital marketing and online presence.
In IT risk management, one needs to follow a strict plan that reflects the new reality. Take care of high-priority tasks in the budget first, making sure the team is productive and busy with a reasonable list of tasks. Take into account and adapt to a new remote reality, where different problems can still surface. For example, data or other technology tools, telecommuting problems, communication issues, etc.
This year to date has shown how crucial it is to overcome negative outcomes in the long term. Risk management is something that can protect the company from a total crash. And even though we are living in a new reality and a time of economic recession, a proper crisis management strategy can turn risks into opportunity and growth.