Explain how the Risk Breakdown Structure (RBS) can be used to support the risk management plan

A crucial element of risk management is the Risk Breakdown Structure (RBS), which is an effective tool used to identify and organize risks into categories. Similar to the work breakdown structure used in project management, the RBS enables project managers to efficiently manage risks associated with different aspects of a project. It supports the risk management plan by providing a structured approach to risk identification, analysis, and response planning.

I. Understanding Risk Breakdown Structure (RBS)

The Risk Breakdown Structure is a hierarchical depiction of risks, starting from the overall project risk and breaking down into detailed risk categories, usually in terms of project areas or sources of risk. Risks are usually classified under technical, external, organizational, and project management categories.

For example, in a software development project, ‘technical risks’ might include complexities in design or potential technical failures; ‘external risks’ could be changes in market demand or government regulations; ‘organizational risks’ might include resource constraints or budget cuts, while ‘project management risks’ can encompass planning errors or communication gaps.

II. RBS in Risk Identification

Risk Identification involves determining which risks might affect the project and documenting their characteristics. The RBS supports this process by providing a categorised framework within which potential risks can be identified.

Using an RBS, a project team can go step-by-step, analyzing each category and sub-category to ensure all potential risks have been identified. For example, under the ‘technical risks’ category, a division can be made into software risks and hardware risks, and each of these can be assessed for potential risks.

III. RBS in Risk Analysis

Once risks have been identified, they need to be analyzed to evaluate their impact and probability of occurrence. The analysis allows prioritization of risks based on their potential impact on project objectives.

The RBS again proves useful in this step as the structured outline allows risks to be analyzed based on their categories. The category-wise division helps in grouping and comparing similar risks. For instance, you may find that software risks are more significant and frequent than hardware risks when implementing a new IT system.

IV. RBS in Risk Response Planning

After risks have been identified and analyzed, strategies are developed to manage these risks. The strategies could involve risk avoidance, transference, mitigation, acceptance, or opportunity exploitation.

RBS supports this risk response planning by allowing the team to develop strategies based on risk categories. Specific strategies can be developed for different risk categories.

For example, technical risks can have the response strategy of employing more skilled resources or using more reliable technology. For organizational risks like budget cuts, the strategy might be to negotiate for increased funding or to prioritize project tasks based on importance and impact.

In conclusion, the Risk Breakdown Structure is a valuable instrument in risk management

It provides a structured, systematic approach to identifying, analyzing, and planning responses to project risks, thus making risk management more effective. By focusing on risk categories, identifying and managing similar risks becomes a more efficient process that can greatly contribute to the successful completion of a project. For professionals preparing for the PMI Risk Management Professional (PMI-RMP) exam, understanding and applying the RBS is a crucial skill to master.