Deformation softening is quite often observed during hot working of different alloys. Steels, aluminium, titanium or nickel alloys can demonstrate a decrease in flow stress under active deformation at constant temperatures and strain rates. Though the background microstructural mechanisms as well as the softening rates can be quite different, the treatment of such processes requires special attention. Deformation softening can cause significant non-uniformity of the metal flow resulting in flow localization, formation of shear bands and variation of the microstructure across the workpiece. This paper is devoted to the investigation of the specific issues which arise in this respect in FEM simulation of processes involving softening. The possible role of softening in shear band formation is studied using numerical simulation and physical modelling. The effect of the softening rate on the probability of flow localization is discussed. The interplay of deformation softening with the stain rate and temperature sensitivity is demonstrated using as an example the simulation of Equal Channel Angular Pressing (ECAP). An approach to account for the deformation softening in FEM simulations via process modelling of the microstructure refinement is proposed.