Lecture: Risk Management in Software

Projects
Duration: 1 Hour

Learning Objectives
By the end of this lecture, students will be able to:

1. Identify different types of risks in software projects.

2. Perform risk assessment and develop mitigation strategies.
3. Create an effective contingency plan to handle risks.

1. Introduction to Risk Management (5 min)

📌 What is Risk?
A risk is an uncertain event that can impact a project's success.

📌 Why is Risk Management Important?

✅ Prevents budget overruns and delays.
✅ Ensures project success and stakeholder confidence.
✅ Helps in early issue detection and proactive planning.

🔹 Example:
A software company developing a new banking app identifies that:
✔ The database might crash due to high traffic (technical risk).
✔ Budget constraints might delay development (financial risk).

2. Types of Risks in Software Projects (10 min)

2.1 Technical Risks

📌 Risks related to technology, software, and infrastructure.

✅ Examples:
✔ New technology adoption issues (e.g., AI implementation).
✔ Scalability challenges in cloud-based applications.
✔ Integration problems with third-party APIs.

2.2 Financial Risks

📌 Risks affecting budget, funding, and costs.

✅ Examples:
✔ Project cost overruns due to poor estimation.
✔ Funding issues if investors withdraw support.
✔ Unexpected licensing fees for software tools.

2.3 Operational Risks

📌 Risks related to processes, human resources, and communication.

✅ Examples:
✔ Team conflicts or loss of key developers.
✔ Miscommunication between stakeholders.
✔ Delays in requirement changes affecting project deadlines.

🔹 Example Scenario:
A company developing an e-commerce website faces:
📌 Technical risk: Payment gateway fails in peak hours.
📌 Financial risk: The client reduces the budget.
📌 Operational risk: Key developer resigns unexpectedly.

3. Risk Assessment & Mitigation Strategies (15 min)

📌 What is Risk Assessment?
A process to identify, analyze, and prioritize risks.

3.1 Risk Identification

✅ Tools for Identifying Risks:

✔ Brainstorming sessions with stakeholders.
✔ SWOT Analysis (Strengths, Weaknesses, Opportunities, Threats).
✔ Historical data analysis from past projects.

🔹 Example:
A hospital management software project identifies:
📌 Data security risks (patient data leaks).
📌 Regulatory risks (non-compliance with health laws).

3.2 Risk Analysis: Probability vs. Impact

📌 Risk Matrix (High, Medium, Low)

Risk Type Probability Impact Action Plan

Database crash High High Backup strategy
Developer resigns Medium High Train backup staff
 Risk Type Probability Impact Action Plan
Scope creep High Medium Strict change control

📌 Example:
A project delivering an AI chatbot faces:
✔ High probability, high impact: API failure → Redundant API strategy.
✔ Low probability, high impact: Data breach → Advanced encryption.

3.3 Risk Mitigation Strategies

📌 Proactive steps to reduce risk impact.

✅ Risk Avoidance:
✔ Use proven technologies instead of experimental ones.
✔ Hire experienced developers to minimize technical failure.

✅ Risk Transfer:
✔ Outsource complex tasks (e.g., security testing).
✔ Buy insurance for financial risks.

✅ Risk Reduction:
✔ Implement automated testing to catch defects early.
✔ Use version control systems to prevent code loss.

✅ Risk Acceptance:
✔ Prepare a backup strategy for unavoidable risks.
✔ Have buffer time in project timelines.

🔹 Example:
📌 A software company developing IoT-based home automation:
✔ Mitigation: Use multiple communication protocols to prevent device failures.

4. Contingency Planning (10 min)

📌 What is Contingency Planning?
A backup plan to handle risks when they occur.

📌 Steps in Contingency Planning:

✅ Step 1: Identify critical risks.
✅ Step 2: Develop action plans.
✅ Step 3: Assign responsibilities.
✅ Step 4: Test and refine the plan.
🔹 Example:
📌 A cloud-based project faces potential server crashes.
✔ Contingency Plan: Maintain secondary cloud providers (AWS + Azure).

✅ Key Benefits:
✔ Reduces downtime in failures.
✔ Ensures faster problem resolution.

5. Interactive Activities & Exercises

Collaborative Exercise (10 min)

📌 Task:
✔ Form teams and analyze risks in a new mobile banking app.
✔ Identify at least 3 risks (technical, financial, operational).
✔ Propose risk mitigation strategies for each.

🎯 Goal: Understand real-world risk management in projects.

Scenario-Based Exercise (10 min)

📌 Scenario:
You are managing a social media platform project.

 The project deadline is tight, and a key developer resigns.

 The client requests last-minute feature changes.
 The budget is almost exhausted.

📌 Discussion Questions:

1. How would you handle developer loss?

2. What strategy should be used for feature changes?
3. How can you adjust the budget without delaying the project?

🎯 Goal: Apply risk management principles in real-world challenges.

Discussion Questions (5 min)

1. How does risk assessment help in preventing project failures?

2. What are the best strategies for handling budget-related risks?
3. Why is contingency planning important in large projects?
Assignment (Take-Home Task)

📌 Task:
Choose a real-world software project (e.g., an e-commerce app, banking system).

✔ Identify 3 key risks (technical, financial, operational).

✔ Analyze their probability and impact using a risk matrix.
✔ Develop mitigation and contingency plans.

🎯 Objective: Apply risk assessment and planning in real-world projects.

Conclusion
✅ Types of Risks: Technical, Financial, Operational.
✅ Risk Assessment: Identifies risks based on probability and impact.
✅ Mitigation Strategies: Avoid, Transfer, Reduce, Accept risks.
✅ Contingency Planning: Ensures backup strategies are in place.

1. Introduction to Risk in SPM (5 minutes)

 Definition: Risk = An uncertain event that may affect the project.

 Components:
o Risk event (what can happen?)
o Probability (how likely?)
o Impact (how bad?)

📌 Example: "There is a 40% chance the third-party API won’t scale during high traffic."

🟩 2. Types of Project Risks (10 minutes)

Category Example
Technical New tech, integration issues, unclear requirements
Managerial Poor planning, scope creep, team conflicts
Organizational Policy changes, team reshuffling
External Legal, environmental, customer-related
Financial Budget cuts, cost overruns

🧠 Activity: Ask students to name one risk they've heard of or seen in projects.

🟩 3. Risk Identification Techniques (10 minutes)

  Brainstorming
 Checklists
 Delphi Technique
 Interviewing stakeholders
 SWOT Analysis

📌 Example: Use a checklist to identify common risks in mobile app development.

🎯 Exercise: Group students and give them a project. Ask them to identify 3 risks using
brainstorming.

🟩 4. Risk Analysis (10 minutes)

Qualitative Analysis

 Probability & Impact Matrix (Low/Medium/High)

 Risk Prioritization

Quantitative Analysis

 Monte Carlo simulation

 Expected Monetary Value (EMV)

📌 Example (Qualitative):

 Risk: Developer leaves mid-project

o Probability: High
o Impact: High
o Priority: Top

📌 Example (EMV):

 Risk: Delay of 1 week (Cost = $5,000), Probability = 0.3

→ EMV = 0.3 × 5000 = $1,500

What is Risk Analysis in Software Project Management?

Risk Analysis is the process of evaluating identified risks to understand:

 How likely they are to happen (Probability)

 How bad the consequences could be (Impact)

It helps you prioritize risks and decide what action to take.

🔍 Two Types of Risk Analysis:

🟩 1. Qualitative Risk Analysis (Quick, subjective)

Used when you don’t have exact numbers. You judge risks based on experience.

✅ Techniques:

a) Probability & Impact Matrix

 You rate each risk as Low, Medium, or High for:

o Probability (likelihood)
o Impact (damage it can cause)

Then you place it in a grid to decide how serious it is.

Low Impact Medium Impact High Impact

Low Prob Ignore Monitor Watch closely
Medium Prob Monitor Plan to reduce Actively manage
High Prob Watch closely Actively manage Immediate action

b) Risk Prioritization

 Focus on High Probability + High Impact risks first.

 Assign colors (Red = High, Yellow = Medium, Green = Low)

📌 Example:
Risk: “Client may change requirements.”

 Probability: High
 Impact: High
→ Priority: Top risk

🟩 2. Quantitative Risk Analysis (More precise, uses numbers)

Used when you have data or want to do cost-based risk evaluation.

✅ Techniques:

a) Monte Carlo Simulation

 A computer runs thousands of random simulations.

 Shows possible project outcomes and their probabilities.
 Helps answer: What’s the chance the project will be late?
b) Expected Monetary Value (EMV)

 Calculates the financial risk using this formula:

EMV=Probability×Impact (cost)EMV=Probability×Impact (cost)

📌 Example:

 Risk: Server may crash

 Probability = 0.3 (30%)
 Cost to fix = $5,000

EMV=0.3×5000=$1,500EMV=0.3×5000=$1,500

You can use EMV to compare risks and decide how much budget to reserve.

🧠 In Short:
 Qualitative = fast, subjective, good for small/medium projects
 Quantitative = detailed, data-driven, good for critical/big-budget projects

🟩 5. Risk Response Planning (10 minutes)

 Avoidance: Change plan to eliminate risk.

 Mitigation: Reduce probability or impact.
 Transfer: Shift risk to third party (e.g., insurance).
 Acceptance: Acknowledge and plan for it (passive or active).

📌 Example:

 Risk: Server downtime

o Mitigation: Use cloud redundancy
o Transfer: SLA with hosting provider
o Acceptance: Add buffer in schedule

🟩 6. Risk Monitoring and Control (5 minutes)

 Continuous risk reviews

 Risk audits
 Status meetings
 Updating risk registers
📌 Tool: Risk Register Table

Risk Probability Impact Owner Response Strategy

🟩 7. Summary & Takeaways (5 minutes)

 Risks are unavoidable but manageable.

 Early identification saves time and money.
 Always keep a living risk register.
 Team communication is key.

🧠 Discussion Questions
 Which type of risk is most dangerous in agile projects?
 Can we ever eliminate all risks?
 Should small risks be ignored?

📝 Assignment (Take-Home)
Scenario: You're managing a university portal project.

Task:

1. Identify 5 risks (different types).

2. Classify them (Probability, Impact).
3. Propose response strategies.
4. Create a sample risk register.

Risk Management System – 1 Hour Lecture Plan

Objective:

To understand the importance of risk management in software projects, its process, tools,
and strategies to manage risks effectively.

Lecture Breakdown:
1. Introduction to Risk Management (10 minutes)

 Definition:
o Risk management involves identifying, assessing, and controlling risks that
could impact the success of a project.
 Importance:
o Reduces the likelihood of negative outcomes
o Helps in decision-making and improves project outcomes
 Risk in Software Projects:
o Software projects are inherently risky due to technological complexity,
changing requirements, tight deadlines, and limited resources.

2. Types of Risks in Software Projects (10 minutes)

 Technical Risks:
o Unfamiliar technology, complex architecture, integration issues.
o Example: Difficulty in integrating new technology with legacy systems.
 Operational Risks:
o Issues with processes, communication breakdowns, or resource allocation.
o Example: Miscommunication between development and testing teams.
 Financial Risks:
o Budget overruns, unexpected costs, or poor financial planning.
o Example: Project exceeding budget due to scope creep.
 External Risks:
o Dependencies on third-party services, vendors, or regulatory changes.
o Example: Delays in receiving data from external API providers.

3. Risk Management Process (15 minutes)

Step 1: Risk Identification

 Goal: Identify all possible risks in the project.

 Methods:
o Brainstorming sessions
o Interviews with stakeholders
o Historical data from previous projects
o Checklists

Activity:
Ask students to list 5 potential risks for a new software project they are working on. Discuss
the possible consequences of each risk.

Step 2: Risk Assessment (Qualitative & Quantitative)

  Qualitative Assessment:
o Probability and Impact Matrix
 High, Medium, Low risk in terms of probability and impact.
 Quantitative Assessment:
o Risk Exposure (cost, time)
o Use of tools like Monte Carlo simulation for predicting risk outcomes.

Example:
For a new website launch, a high probability of a feature being delayed may result in high
impact on the schedule.

Step 3: Risk Mitigation/Response Planning

 Mitigation Strategies:
o Avoid the risk (e.g., changing technology stack)
o Reduce the impact (e.g., allocating extra resources to critical tasks)
o Transfer the risk (e.g., insurance, outsourcing)
o Accept the risk (e.g., low-priority issues with minimal impact)

Activity:
Ask students to choose one risk from the previous activity and suggest mitigation strategies.
Discuss the pros and cons of each approach.

Step 4: Risk Monitoring and Control

 Continuous Monitoring:
o Regular risk reviews and updates.
o Use tools like JIRA, Risk Registers, and Risk Dashboards to track and
monitor risks throughout the project lifecycle.
 Adjustments:
o Adapt to new risks as the project evolves, especially in Agile projects where
changes occur frequently.

4. Tools for Risk Management (10 minutes)

 Risk Register:
A document where all identified risks, their assessments, and responses are tracked.
 Risk Matrix:
A visual tool to assess and prioritize risks based on their probability and impact.
 JIRA:
JIRA has features to track risks and link them with tasks and stories in your project.
  Monte Carlo Simulation:
A statistical tool that helps in calculating the probability of different outcomes based
on input values (e.g., time, resources).

5. Best Practices in Risk Management (5 minutes)

 Early identification of risks: Start identifying risks at the project initiation phase.
 Involve the entire team: Everyone should be part of the risk identification and
mitigation process.
 Regular updates: Risk management should be an ongoing process, reviewed at each
project phase.
 Clear communication: Ensure all stakeholders are aware of risks and mitigation
plans.

6. Case Study and Discussion (10 minutes)

 Present a real-world case study of a software project that faced significant risks, how
they were managed, and what the outcome was.

Example:
A major e-commerce website launch was delayed due to unexpected third-party service
failures. How could risk management have been better applied to avoid this issue?

Conclusion and Q&A (5 minutes)

 Recap:
o Understanding risks, their impact, and proactive risk management is crucial
for project success.
 Q&A:
Open the floor for any questions or discussion points.

Takeaway Assignment:

 Task:
Write a brief risk management plan for a project you are working on or planning to
work on. Identify 5 risks, assess them, and suggest mitigation strategies.

Q1. Probability and Impact Matrix

You are managing a project with the following risks identified:

 Risk Probability Impact (on cost or schedule)
Delay in Third-Party Vendor Delivery High (80%) High (30% schedule delay)
Team Member Illness Medium (50%) Medium (15% cost overrun)
Technology Stack Compatibility Issues Low (20%) High (25% schedule delay)

Q:

1. Calculate the Risk Exposure for each risk by

multiplying Probability and Impact (as a percentage).
2. Which risk should you prioritize?

Q2. Risk Mitigation Strategy Cost

You are considering two options to mitigate a high-priority risk related to Team Member
Illness (see Q1). The mitigation strategies are:

 Option 1: Hire an additional backup resource at a cost of $10,000.

 Option 2: Purchase health insurance for $5,000 for critical team members.

The current Risk Exposure for this issue is 15% (as seen in Q1).

Q:

1. What is the expected cost impact without mitigation?

2. Calculate the Expected Cost of Mitigation for both options. Which option offers
better value?

Q3. Risk Impact on Project Budget

A software project has a total budget of $200,000. The following risk is identified:

 Risk: Unexpected Technology Failure

o Probability: 30%
o Impact on budget: 20%

Q:
What is the Expected Monetary Value (EMV) of this risk?

Q4. Monte Carlo Simulation

A project manager is evaluating the likelihood of finishing the project on time. Three possible
scenarios have been estimated:
  Scenario 1: 70% chance of finishing in 6 months.
 Scenario 2: 20% chance of finishing in 7 months.
 Scenario 3: 10% chance of finishing in 8 months.

Q:
Calculate the Expected Completion Time (ECT) for this project using Monte Carlo
simulation.

Q5. Risk Response Plan Budget Allocation

For a software project, the following risks have been identified:

 Risk: Vendor failure, Probability: 25%, Impact: 15% cost overrun

 Risk: Scope creep, Probability: 40%, Impact: 20% cost overrun

The project budget is $500,000.

Q:

1. What is the Expected Monetary Value (EMV) for each risk?

2. Calculate the total expected cost for both risks.

✅ Answer Key
Q1:

1. Risk Exposure = Probability × Impact

o Delay in Third-Party Vendor Delivery: 0.8 × 30% = 24% risk exposure
o Team Member Illness: 0.5 × 15% = 7.5% risk exposure
o Technology Stack Compatibility Issues: 0.2 × 25% = 5% risk exposure
2. Priority: The Delay in Third-Party Vendor Delivery should be prioritized because
it has the highest risk exposure (24%).

Q2:

1. Expected Cost Impact = $200,000 × 15% = $30,000 (without mitigation)

2. Expected Cost of Mitigation:
o Option 1: $10,000 (hiring backup resource)
o Option 2: $5,000 (health insurance) The health insurance option offers better
value ($5,000 vs $10,000).
Q3: Expected Monetary Value (EMV) = Probability × Impact on Budget

 EMV = 0.30 × 20% × $200,000 = $12,000

Q4: Expected Completion Time (ECT) = (0.7 × 6) + (0.2 × 7) + (0.1 × 8) = 4.2 + 1.4 + 0.8
= 6.4 months

Q5:

1. EMV for each risk:

o Vendor failure: 0.25 × 15% × $500,000 = $18,750
o Scope creep: 0.40 × 20% × $500,000 = $40,000
2. Total Expected Cost = $18,750 + $40,000 = $58,750

Monte Carlo Simulation in Risk Management

Monte Carlo Simulation is a statistical method used to understand the impact of risk and
uncertainty in decision-making processes. It's widely used in risk management to predict
the likelihood of different outcomes in projects by simulating the behavior of uncertain
variables.

How Monte Carlo Simulation Works

Monte Carlo involves running simulations many times (often thousands or millions)
with randomly generated values for uncertain parameters. It provides a range of possible
outcomes and their probabilities rather than a single outcome.

Basic Steps:

1. Define the variables that are uncertain (e.g., project cost, schedule, resource
allocation).
2. Assign probability distributions to these uncertain variables. (e.g., Normal,
Uniform, Triangular distributions).
3. Run multiple simulations, each time selecting random values for the uncertain
variables based on their distributions.
4. Analyze the output to determine the probability of different outcomes.

Example of Monte Carlo Simulation for Project Completion Time

Let’s say you are estimating the completion time for a software project. You have three
potential scenarios, each with different probabilities and estimated durations:
  Scenario 1: 70% chance to finish in 6 months.
 Scenario 2: 20% chance to finish in 7 months.
 Scenario 3: 10% chance to finish in 8 months.

Now, let's calculate the Expected Completion Time (ECT) using Monte Carlo simulation.

Step-by-Step Example

Step 1: Define Uncertain Variables

The uncertain variable here is the project completion time, which can range between 6, 7,
and 8 months.

Step 2: Assign Probability Distributions

Each scenario is associated with a probability:

 70% chance of 6 months.

 20% chance of 7 months.
 10% chance of 8 months.

Step 3: Run Simulations

 We will run 1000 simulations (you can do this with software or a manual process) by
randomly selecting a completion time based on the defined probabilities.
 In each simulation, the selection is random but follows the predefined probabilities.

Step 4: Analyze the Results

Once the simulations are completed, we can summarize the results to find the expected
completion time and other useful statistics like variance and probability distribution of the
outcomes.

For this specific example, the expected completion time can be calculated manually before
doing full simulations, as shown below.

Manual Calculation of Expected Completion Time (ECT)

Formula:

ECT=(P1×T1)+(P2×T2)+(P3×T3)ECT=(P1×T1)+(P2×T2)+(P3×T3)

Where:

 P1, P2, P3 = Probabilities of each scenario

 T1, T2, T3 = Corresponding times (6 months, 7 months, 8 months)
Substituting values:

ECT=(0.7×6)+(0.2×7)+(0.1×8)ECT=(0.7×6)+(0.2×7)+(0.1×8)ECT=4.2+1.4+0.8=6.4
monthsECT=4.2+1.4+0.8=6.4months

Thus, the Expected Completion Time (ECT) is 6.4 months.

Using Monte Carlo in Practice

In practice, software like Excel, Python, or specific Monte Carlo simulation tools (such
as @RISK or Crystal Ball) can be used to run a larger number of simulations (often
thousands) to generate a distribution of possible outcomes and more detailed insights into
project risks.

Example in Python

You can simulate the Monte Carlo process using Python's numpy library. Here’s a basic
example:

python
CopyEdit
import numpy as np
import matplotlib.pyplot as plt

# Define the possible outcomes and their probabilities

outcomes = [6, 7, 8]
probabilities = [0.7, 0.2, 0.1]

# Run 1000 simulations

simulations = np.random.choice(outcomes, size=1000, p=probabilities)

# Calculate Expected Completion Time

ect = np.mean(simulations)
print(f"Expected Completion Time: {ect} months")

# Plot the distribution of outcomes

plt.hist(simulations, bins=10, edgecolor='black')
plt.title('Monte Carlo Simulation: Project Completion Time')
plt.xlabel('Completion Time (months)')
plt.ylabel('Frequency')
plt.show()

This will give you the distribution of completion times and the mean (which is the Expected
Completion Time).

Applications of Monte Carlo Simulation in Risk Management

Monte Carlo simulations are valuable in risk management for:

  Estimating project completion times with uncertainties.
 Predicting cost overruns and budget risks.
 Analyzing resource utilization in uncertain environments.
 Financial risk modeling and investment decisions.

Key Takeaways

 Monte Carlo Simulation helps in making better decisions under uncertainty.

 It provides a probabilistic view of the future, offering insights into the likelihood of
different outcomes.
 It is widely used in software projects, especially for schedule management, cost
estimation, and resource allocation.

Here are five potential risks for each of the systems you mentioned:

1. Hospital Management System (HMS)

1. Data Privacy and Security

 Risk: Unauthorized access to patient data due to security vulnerabilities or breaches.

 Impact: Legal consequences, loss of patient trust, and financial penalties (e.g.,
HIPAA violations).
 Mitigation: Implement strong encryption, access control, and regular security audits.

2. System Downtime

 Risk: Hospital system downtime due to server failure or software bugs.

 Impact: Disruption of critical services, delays in patient care, and potential loss of
patient data.
 Mitigation: Implement redundancy, backup systems, and a disaster recovery plan.

3. Compliance with Healthcare Regulations

 Risk: Non-compliance with healthcare regulations (e.g., HIPAA, GDPR).

 Impact: Legal penalties, loss of accreditation, and reputational damage.
 Mitigation: Regular audits and updates to the system to ensure compliance.

4. Integration Issues

 Risk: Difficulty in integrating with other healthcare systems, such as lab management
or pharmacy systems.
 Impact: Delays in patient care, incomplete records, and inefficiencies in workflows.
 Mitigation: Thorough testing and adherence to industry standards for system
integration.

5. User Training and Adoption

  Risk: Resistance to using the system by healthcare professionals due to insufficient
training.
 Impact: Low adoption rates, operational inefficiency, and errors in patient records.
 Mitigation: Comprehensive user training and ongoing support for hospital staff.

2. E-commerce Website

1. Payment Gateway Failures

 Risk: Issues with payment processing due to problems with the payment gateway.
 Impact: Loss of sales, customer frustration, and damaged reputation.
 Mitigation: Regular testing of payment gateways, multiple payment options, and a
reliable backup system.

2. Security Breaches

 Risk: Cyber-attacks (e.g., hacking, data breaches) leading to loss of customer data or
financial information.
 Impact: Legal repercussions, loss of customer trust, and financial losses.
 Mitigation: Implement strong encryption, regular security audits, and two-factor
authentication.

3. Inventory Management Issues

 Risk: Incorrect stock levels or delayed updates in inventory.

 Impact: Overselling or underselling, customer dissatisfaction, and financial losses.
 Mitigation: Real-time inventory management system and automated alerts for stock
levels.

4. Website Downtime

 Risk: Website crashes or downtime due to server overload, bugs, or cyber-attacks.

 Impact: Loss of sales, negative customer experience, and damage to brand reputation.
 Mitigation: High availability hosting, performance optimization, and load balancing.

5. Regulatory Compliance

 Risk: Failure to comply with data protection laws (e.g., GDPR, CCPA) and e-
commerce regulations.
 Impact: Legal fines, loss of customer trust, and reputation damage.
 Mitigation: Regular compliance checks and updates to privacy policies.

3. Banking System

1. Fraud and Cybercrime

  Risk: Fraudulent transactions or cyber-attacks (e.g., phishing, identity theft) targeting
banking systems.
 Impact: Financial losses, loss of customer trust, and legal consequences.
 Mitigation: Implement strong encryption, fraud detection systems, and multi-factor
authentication.

2. System Downtime and Performance Issues

 Risk: Banking system outages, especially during high-traffic times, or slow

performance due to high user load.
 Impact: Disruption of services (e.g., online banking, transactions), customer
dissatisfaction, and financial loss.
 Mitigation: Scalable infrastructure, disaster recovery plans, and continuous
performance monitoring.

3. Regulatory Compliance and Auditing

 Risk: Non-compliance with financial regulations (e.g., Anti-Money Laundering,

Know Your Customer).
 Impact: Fines, legal action, and loss of reputation.
 Mitigation: Regular audits, compliance checks, and real-time transaction monitoring.

4. Data Breaches

 Risk: Unauthorized access to sensitive customer data such as bank accounts and
transaction history.
 Impact: Legal penalties, customer trust issues, and reputational damage.
 Mitigation: Encryption, secure data storage, and strong access controls.

5. Customer Service Issues

 Risk: Poor customer service or long response times, especially during system outages
or high-demand periods.
 Impact: Customer dissatisfaction, loss of customers, and negative public perception.
 Mitigation: Implement 24/7 customer support, user-friendly self-service options, and
timely resolution processes.