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Reactive and Proactive Software Risk Management

Pankhuri Goel
Last Updated: May 13, 2022

Introduction

A "risk" is a situation that could result in a loss or threaten the project's progress but still hasn't happened. The process of identifying risks and implementing solutions to limit their impact on the project is known as risk management. Risk management's objective is to prevent accidents or substantial losses.

Reactive risk management aims to minimise the impact of potential dangers and accelerate an organisation's recovery, but it anticipates that threats will occur at some point. 

Proactive risk management seeks to identify risks and mitigate them from arising, to begin with. Proactive risk management is a discipline that an organisation must practice and embed into its overall business strategy, not a process or a program. It can't be defined in a day, and it can't be done alone. It is a constant process until it becomes ingrained in the organisation's risk culture.

Reactive Software Risk Management

A firefighting scenario is frequently used to visualise reactive risk management. Reactive risk management kicks in when an accident occurs or concerns are discovered following an audit. The incident is being investigated, and actions are being taken to avert future occurrences. In addition, steps will be taken to minimise the impact of the incident on the profitability and long-term viability of the company.

Reactive risk management gathers and documents all past incidents to identify the errors that created the problem. The reactive risk management strategy is used to advise and execute preventive measures. This is the earlier model of risk management. Due to the unpreparedness for new errors, reactive risk management can cause substantial delays in the workplace. The lack of preparation complicates the resolution process because the cause of the disaster necessitates inquiry, and the solution is expensive and requires dramatic transformation.

Below are the measures included in reactive risk management:

  • Preventing possible incidents from occurring
  • Mitigating the effects of incidents
  • Preventing minor dangers from becoming more serious
  • Keeping important business activities running in the face of incidents
  • Identifying the fundamental cause of each incident and rectifying it
  • Keeping an eye on the situation to make sure it doesn't happen again

Proactive Software Risk Management

In contrast to reactive risk management, proactive risk management aims to identify all relevant risks before an incident happens. The current organisation must deal with an age of fast environmental change brought on by technological advancements, deregulation, intense competition, and raising public awareness. As a result, risk management based on previous accidents is not a suitable decision for any company. As a result, new risk management thinking was required, paving the way for proactive risk management.

"Dynamic, closed-loop feedback control strategy based on measurement, surveillance of the current safety level, and planned explicit target safety level with a creative intellectuality" is the definition of proactive risk management. The description refers to the adaptability and inventiveness of humans who are concerned with safety. Humans are a source of error, but they can also be an essential source of security for proactive risk management. Furthermore, the closed-loop technique relates to the establishment of operating boundaries. These limits are thought to provide a safe level of competency.

The accidental analysis is a component of proactive risk management, in which accident scenarios are created and essential personnel and stakeholders who could cause an accident are identified. As a result, prior accidents are also significant in proactive risk management.

The following are included in the proactive risk management strategies:

  • Identifying existing risks to the enterprise, business unit, or project
  • Crafting a risk-response strategy
  • Organising identified threats into categories based on the severity of the danger
  • Evaluating risks to decide the best course of action for each.
  • Putting in place the essential controls to keep risks from becoming threats or events
  • Continuously monitoring the threat environment.

Difference Between Reactive and Proactive Risk Management

Proactive risk management is a versatile, closed-loop feedback control technique based on measurement and observation. In contrast, reactive risk management is a response-based risk management approach that is dependent on accident analysis and audit-based discoveries.

The way risks are analysed, disclosed, and mitigated distinguishes a proactive risk management approach from a reactive approach. It entails thoroughly examining a situation or evaluating processes to identify potential risks, identifying risk drivers to understand the root cause, estimating probability and impact to prioritise risks, and formulating a contingency plan fittingly. Risk managers must learn to analyse the strength of the organisation's innovation component and use that knowledge appropriately to combat existing and new risks in order to achieve this. Also, to engage in strategic risk usage, focus on utilising the expertise of experienced risk managers.

Now we'll compare and contrast the two approaches to risk management.

Definition

Reactive risk management: A response-based risk management strategy based on accident analysis and audit-based discoveries.

Proactive risk management: Adaptive, closed-loop feedback control technique based on measurement, observation of the current safety level, and predicted explicit target safety level with creative intellectuality.

Purpose

Reactive risk management: Reactive risk management intends to minimise the probability of similar or identical accidents occurring again in the future.

Proactive risk management: Proactive risk management aims to decrease the likelihood of an accident occurring in the future by identifying activity boundaries where a breach can result in an accident.

Time Frame

Reactive risk management: Reactive risk management is exclusively based on the study and response to previous accidents.

Proactive risk management: Before identifying solutions to avoid risks, proactive risk management employs a hybrid strategy of past, present, and future prediction.

Flexibility

Reactive risk management: Reactive risk management's methodology does not account for humans' abilities to anticipate, develop, and resolve issues, making it less adaptable to changes and obstacles.

Proactive risk management: Proactive risk management entails creative thinking and foresight. Furthermore, eliminating the accident is primarily dependent on the accident source, which is a human attribute. As a result, it is highly adaptable to changing environments.

Frequently Asked Questions

  1. Why do we need to manage risks?
    Risk management is required by organisations to:
    → Boost their chances of succeeding.
    → Controlling potential losses.
    → Reduce the severity of a loss.
    → Assist in making good use of their resources.
    → Encourage continual progress.
    → Reduce the number of unexpected events.
    → Quickly grasp new opportunities.
    → Soothe the worries of stakeholders.
     
  2. What does Risk Management Prioritization involve?
    Risk management prioritization consists of:
    → Risk identification
    → Risk assessment
    → Risk treatment (acceptance, avoidance, mitigation, transference)
    → Risk monitoring
    → Continuous improvement
     
  3. Which risk management technique is more advisable, keeping in mind our current technological environment?
    Nowadays, proactive risk management is highly recommended, and current firms are adopting it.
     
  4. Write a short note about Predictive Risk Management.
    It's all about forecasting future risks, events, and dangers, as the name implies. Some of the predictive elements may sound like proactive or reactive techniques.

    Predictive risk management aims to: 
    → Determine the likelihood of risk in a circumstance using one or more variables
    → Consider probable future risks and their likelihood.
    → Prepare for the risk controls that will be required.

Conclusion

We learned about reactive and proactive software risk management in this article. We also infer from this article how these two software risk management techniques work and are different.

We hope this blog has helped you enhance your knowledge. If you want to learn more, check out our articles on Risk Analysis in Software Development - Coding Ninjas CodeStudioProject Management Activities - Coding Ninjas CodeStudio and Project Management Tools - Coding Ninjas CodeStudio. Do upvote our blog to help other ninjas grow.

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