Answer: Risk has five distinguishing characteristics:
Situational
Changes in a situation can result in new risks. Examples include, replacing a team member, undergoing reorganization, or changing a project's scope.
Time-Based
Considering a software development life cycle, the probability of risk occurring at the beginning of the project is very high (due to the unknowns), whereas at the end of the project the probability is very low. In contrast, during the life cycle, the impact (cost) from a risky event occurring is low at the beginning (since not much time and effort have been invested) and higher at the end (as there is more to lose).
Interdependent
Within a project, many tasks and deliverables are intertwined. If one deliverable takes longer to create than expected, other items depending on that deliverable may be affected, and the result could be a domino effect.
Magnitude Dependent
The relationship of probability and impact are not linear, and the magnitude of the risk typically makes a difference. For example, consider the risk of spending $1 for a 50/50 chance to win $5, vs. the risk of spending $1,000 for a 50/50 chance of winning $5,000 vs. the risk of spending $100,000 for a 50/50 chance of winning $500,000. In this example, the probability of loss is all the same (50%) yet the opportunity cost of losing is much greater.
Value-Based
Risk may be affected by personal, corporate or cultural values. For example, completing a project on schedule may be dependent on the time of year and nationalities or religious beliefs of the work team. Projects being developed in international locations where multiple cultures are involved may have a higher risk than those done in one location with a similar work force.
