An Insight into Risk Breakdown Structure

In Project Management, the Risk Management process involves identifying, assessing and managing risks. Risk is a concept that denotes the defined probabilities of specific eventualities. These eventualities may have both beneficial and adverse impact. The objective of Risk management is to predict risks, assess their impact and plan in advance on the best possible manner to deal with it in the likelihood of its occurrence.

The primary point of identification and assessment in risk management is to understand the risk. Currently the Project Management Institute (PMI) has a standard practice for Risk Management which involves the usage of a tool to help any stakeholder involved to understand, identify and evaluate risk. This effective tool is called the Risk Breakdown Structure (RBS). It is a tool that gives an organized description of known risks and is arranged by a number of distinct categories and characteristics.

 

This tool can prove invaluable to Project and Risk Manager’s to understand the scope of recurring risks and concentrate more on the risks that will adversely impact the project status. This tool provides a means to structure the risks for addressing and tracking. Based on the PMI definition for Work Breakdown structure the Risk Breakdown structure definition can be considered as "A hierarchically organized depiction of the identified project risks arranged by risk category."

The potential value of placing risks in a structure such as RBS enables the concerned managers to easily identify, assess risks and develop a vigorous risk response plan. The total risk exposure of the project is more easily understood with this hierarchical representation.

 

The concept of RBS is fairly new. An RBS is broken into levels with each level providing a more detailed view of the identified risk. An example for creation of RBS for software development may have level 1 with technical aspects, level 2 with Requirements, Level 3, Functional Requirements and so on. After the project team has created the RBS, individual risks are identified and positioned in the RBS under a particular topic.

 

After the RBS initial phase is done it can be used as an input for qualitative risk analysis where probabilities, priorities and impacts are calculated. The RBS also serves as a comparison of risk factors across projects and as a reporting tool within the project. The first level of the RBS can be used as sanity check to ensure that all topics that may have risks are covered during risk identification process.

 

Qualitative Risk analysis is done after placing the risks in proper perception by categorization of risks correctly at various levels. A Risk score can be determined based on the priority, probability and impact of underlying risks. The RBS is significant tool in understanding risk exposure type, dependencies between risks, critical and less significant risks and correlations between risks. The risk response to the high probability, high impact risks can be concentrated upon easily by using the Risk topic groupings.

 

Thus instead of simply listing down the risks related to a project in a spreadsheet and analyzing, the RBS is a better tool to help understand, analyze and plan mitigating action items for risks. A successful risk response plan can go a long way in giving managers an upper hand on effective strategies to deal with unexpected situations.