Understanding the Risk Breakdown Structure (RBS)
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There’s nothing that can delay a project quite like exposure to risk. Unforeseen and unaccounted-for circumstances can result in project delay, failure, or overspending, making the end result less beneficial and worthwhile.
Fortunately, proper project risk management and risk mitigation can aid in preventing project hindrances from occurring. One such example of risk management is implementing the risk breakdown structure (RBS), which analyzes all of the potential hurdles a project might face throughout its lifespan. This tool proves to be a helpful and effective means of minimizing project risk.
In this article, we’ll cover everything you need to know about the risk breakdown structure, including more information about how it is useful, as well as how to create an RBS.
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What Is a Risk Breakdown Structure?
A risk breakdown structure is a type of graph or flowchart that attempts to account for all the risk exposure a project faces as it unfolds. Typically, a risk breakdown structure is a hierarchical representation of risk, starting with high levels and broad categories of risk and moving down to more specific, detailed risks.
The point of the risk breakdown structure is help project managers to brainstorm and document a project’s risk exposure — everything that might affect the proper progression of a project. This planning tool can help a company or project team be better prepared for the likeliest to the unlikeliest of risks, so the project deliverables will be as close to the original expectations as possible.
How to Use a Risk Breakdown Structure
There are several components to creating or reading a risk breakdown structure successfully, all of which are outlined below.
Risk Identification Aid
Risk identification is one of the most integral parts of a risk breakdown structure, and involves a project manager making a list of the potential risks a project faces. They will also evaluate the likelihood of each risk actually occurring. Risk identification sits on the upper levels of the hierarchical structure.
Project risk assessment involves categorizing the listed items of risk by significance, from minor to major severity. One precise method of risk assessment is assigning each list item a P-I score (probability and impact), where these two separate numerical scores are multiplied to find a specific risk “score” or value.
Risk assessment ultimately examines the type of risk exposure, most significant sources of risk, root causes of risks, the correlation between risks, and potential risk management techniques.
Risk reporting entails project managers sharing the risk breakdown structure with senior management and other project stakeholders to alert them of the potential obstacles a project might face. These reports may include:
- Total number of risks
- Total risk scores
- Risk trend analysis presented via graphs
As a result, project managers can be made aware of risk management processes that are already in use by the organization.
If RBS was used on previous company projects, risk exposure on a current project may be effectively compared to those completed in the past, as risk breakdown structures all use a common framework. This structure allows project managers to make a direct comparison between projects and risks.
Read more: Types of Risk in Project Management
Risk Identification Strategies
When drafting a list of potential project risks, there are several risk identification strategies that a project manager or team can employ.
Brainstorming, or holding a risk identification workshop, can be a perfectly effective strategy for risk identification — especially if used for the top one or two levels of a risk breakdown structure. Typically, brainstorming involves list-making in the early stages of creating an RBS. List items can then be categorized and broken down further.
All project documents should be evaluated to pinpoint areas of risk. Document reviews are part of the detailed identification process and deliver enough detail to properly assess risk.
A SWOT analysis looks at four major areas to evaluate the likelihood of project success. These include:
- Strengths: Internal factors that set a project up for success, usually pertaining to business resources or technology
- Weaknesses: Internal factors that may prove to be hindrances to project success, such as not enough resources or untrained employees
- Opportunities: Factors outside of a business or team’s control that could lead to further project success, such as discounted services or materials that make the project less expensive than originally anticipated
- Threats: External factors that could be detrimental to a project’s success, such as a natural disaster that could cause delays or interruptions
Nominal Group Technique
A nominal group technique is collaborative and involves each team member writing their ideas or observations on sticky notes to be presented to the room and further discussed with co-workers. Participants can follow up with additional sticky notes as ideas come to them during the process.
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Risk Breakdown Structure Template Example
Most risk breakdown structure models follow a similar flow, though they can be tweaked according to business, team, or project needs. If you want to get started, here is a generic RBS template that you can reference. And to learn more about project management, check out TechRepublic Academy!
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