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Factor Reduction and Clustering for Operational Risk in Software Development

36 Pages Posted: 9 Jun 2016  

Faizul Azli Mohd-Rahim

University of Malaya (UM) - University of Malaya, Asia Europe Institute (AEI)

Chen Wang

University of Malaya (UM)

Halim Boussabaine

University of Liverpool

Hamzah Abdul-Rahman

International University of Malaya-Wales

Lincoln C Wood

University of Otago - Department of Management; Curtin University - School of Information Systems

Date Written: September 30, 2014

Abstract

Software development failures frequently emerge as a result of the failure to understand and identify risks. The aim of this paper is to identify the most salient risk factors present during a software development project’s life cycle, in terms of their occurrence likelihood and impact on cost overrun. A questionnaire was sent to 2000 software development companies, IT consultancy and management companies and web development companies in the United Kingdom, United States, mainland Europe, Canada, Australia, India, China, Japan and other Asian countries, asking respondents to evaluate a number of risk factors. Because many factors were closely related, we applied a factor reduction and clustering process to the results to allow a smaller number of crucial risk factors to be identified. The three main clusters of risk factors we identified are feasibility studies, project team management and technology requirements. While a feasibility study may be unlikely to take place, it can have a significant impact on project outcomes. In contrast, project team management is likely to occur but has a relatively small impact on outcomes in comparison with technology requirements. Professionals will need to apply checks and balances to these factors and generate risk mitigation plans to reduce the severity of project failures. Our results allow them to connect the probability of risk factor occurrence and overall impact, so they can focus their limited resources on reducing the most pertinent risks in their projects.

Keywords: Software Development, Risks

Suggested Citation

Mohd-Rahim, Faizul Azli and Wang, Chen and Boussabaine, Halim and Abdul-Rahman, Hamzah and Wood, Lincoln C, Factor Reduction and Clustering for Operational Risk in Software Development (September 30, 2014). Journal of Operational Risk, Vol. 9, No. 3, 2014. Available at SSRN: https://ssrn.com/abstract=2791627

Faizul Mohd-Rahim (Contact Author)

University of Malaya (UM) - University of Malaya, Asia Europe Institute (AEI) ( email )

Kuala Lumpur 50603
0
Kuala Lumpur, Malaysia 50603
Malaysia

Chen Wang

University of Malaya (UM) ( email )

University of Malaya, Faculty of Economics & Admin
Kuala Lumpur, 50603

Halim Boussabaine

University of Liverpool ( email )

Liverpool, L69 7ZA
United Kingdom

Hamzah Abdul-Rahman

International University of Malaya-Wales ( email )

Ground Floor, Block A, City Campus
Jalan Tun Ismail, Kuala Lumpur 50408
Malaysia

Lincoln Wood

University of Otago - Department of Management ( email )

Dunedin
New Zealand

Curtin University - School of Information Systems ( email )

Australia

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