Top Ten Product Development Risks That Can Kill Your Project

Every project has some degree of risk. Every project is a leap of faith. Risk identification and mitigation start long before the contracts are signed. Some of these risks can be mitigated or aggravated through the contract. What are these risks, how does Scrum mitigate them, and how do they play into the contract?

This series of articles will look at the top 10 risks of product development and how you can mitigate those risks in Scrum,

Most risks occur when you have to make a decision based on incomplete information. You make an assumption, take a decision, spend the money and hope for the best. Sometime later the facts will emerge. This is called validation. If your assumptions were correct, then you get the return or other benefits you hoped for. If not, your time has been wasted and your money is lost.

How big is the risk? A securities trader would explain that it depends on how much money is at stake and the duration of your exposure. Exposure is the period of time between making an assumption and getting validation, that is, learning whether your assumption was correct or not. In projects, the amount of money at risk increases linearly over time as costs accumulate.

A traditional project management approach to handling risks is ‘Expected Monetary Value’ (EMV) . A risk is something bad that could happen. What is the financial impact if it does happen? What is the likelihood of it happening? The product of these two items is the EMV.

For example, if a car is destroyed in an accident, the impact is the cost to replace the car. What is the likelihood of an accident? If this is 2%, then the EMV is 2% of the cost of the car.

All of the risks in this series can cause the project to fail outright or go way over budget. Adding them up, the amount at risk can substantially exceed the initial project budget.

In general, to reduce risk, deal with it. Mitigate it. Prevent it. This chapter will tell you how. Be proactive. Get validation faster. Look for validation of key assumptions before committing serious money.

If you want to get the whole list right away, you can get my book “Ten Agile Contracts: Getting beyond fixed-price, fixed-scope.”

I am releasing one article per day for the next two weeks. Tomorrow, we’ll start with the Also Rans, 5 risks that didn’t make the top 10 (but can kill your project too).