What is Software Development Risk and How Can Firms Mitigate Against It?

Like all other risk management strategies, if software development risk is neglected, the potential for projects to derail and become a liability rather than an asset is a real possibility. Actively engaging in mitigating software development risk is critical for companies of all sizes, whether it is a start-up or a large corporate.

Andrew Settle, Head of Development at Synetec explores Software Development Risk and how firms can strategise to mitigate against its threat.

What exactly is software development risk? 

Risk is evaluating the likelihood of a loss that might arise as a potential problem that may or may not occur in the future. Risk can include factors such as protecting intellectual property, ensuring compliance with software licensing agreements, maintaining up-to-date and supported software frameworks, protecting system or environment outages, and having sufficient governance around change management.

In addition to these risks, it is important for COO’s to ensure the continuity and accessibility of code; particularly in the face of changing development teams, and maintaining consistent, high-quality development practices for smooth functioning and scalability of software systems.

More often than not, these potential risks and losses are apparent when a company does not have enough governance around their software development processes.

Within software development specifically, these risks fall under the following categories:

·       Intellectual Property Risk – This includes risks associated code repository management and the use of third-party libraries, including licensing and potential exposure of code or data through the use of platforms such as ChatGPT.

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·       Compliance Risks – FCA systems regulations are constantly changing and being updated. The same can be said for legal requirements concerning GDPR compliance. Firms need to ensure that their code governance can keep up with these regulatory demands.

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·       Change Management Risks – Issues can arise and cause delay to project development during approval and sign-off processes for new features. Additional risks can be caused by rollback strategies, release and deployment procedures, and data management surrounding such changes.

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·      Security Risks – COOs need to know which users have access controls and have a holistic understanding of the code repository their software uses. Risks can be caused by the improper configuration and utilisation of outdated or unsupported libraries.

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·       Quality Risks – When software developers are tasked with assessing the quality of their data and projects, the identification and resolution of bugs is paramount. It is crucial to be able to manage error handling, especially when they are related to failed financial transactions. The overall goal of any software project is ensuring a positive user experience.

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·       Process Risks – Risks will always be inherent within the software development process, and include the change management covering approval processes for new features, as well as handling of user requirements and technical specifications, and finally considerations for resource allocation.

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·      Operational Risks – A key part of managing risk includes investing in software Business Continuity planning and user adoption challenges. It is important that developers can manage the risk associated with software support and maintenance, through failover mechanisms and prevention of any data loss.  

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·      Technical Risks – The use of unproven technology can cause substantial risk to software developers. In addition, the dependence on outdated or unsupported technology, performance issues, and alignment and appropriateness of technology choices are all factors that require critical consideration within risk management.

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·      Vendor and Outsourcing Risks – The dependency on external vendors, the challenges associated with outsourcing and agreement terms with partners are all key components of software risk management.

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·       Team Risks – Key man risk should be a priority for firms. Depending on key personnel with a lack of backup for key roles can significantly hider a project, as can the use of exotic technology stacks and the utilisation of technology without sufficient expertise.  

In short, software development risks are increasingly complex and present themselves within every facet of a business. Therefore, the process of identifying, assessing and evaluating these potential risks, and consequently strategising to limit and mitigate against them are fundamental for managing regulatory and operational risks.

In order to overcome these risks, companies should review their software development risk as part of their overall governance and risk policies. This includes taking a holistic view of the business and carrying out a risk analysis to understand the vulnerabilities within the business and the entire SDLC. Once identified, companies can begin to strategise to reduce the impact of these risks and develop a strategy to maintain risk monitoring throughout the entire duration of a software development project.

If you would like to learn about Synetec’s Software Development Risk services and how we can help you, contact us today.

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