Concepts
Just as a robust architecture is important for the construction of a building, a well-designed Risk Breakdown Structure (RBS) is a cornerstone for effective project risk management. It plays an integral part in the preparation for the PMI Risk Management Professional (PMI-RMP) certification. The RBS is a hierarchical presentation of risks, organized by risk categories and subcategories that help in identifying and evaluating all potential project risks. One common type of RBS uses nominal classifications from the risk management plan. These classifications might include environment, organizational, project management, technical, etc.
Classification of Risks
- Environmental Risks – Environmental risks relate to factors such as weather, geographical location, and legal and regulatory compliance. For example, a construction project may face environmental risks due to unpredictable weather conditions or strict regulations related to environmental protection.
- Organizational Risks – These risks are associated with the internal structure, politics, and culture of an organization. A few examples could be employee turnover, management changes, or re-structuring within an organization. These risks can significantly impact the progress of a project.
- Project Management Risks – This class of risks is related to the planning and execution of the project. Frequent changes in project scope, unrealistic timelines, improper use of project management tools, and inadequate resource allocation are some of the risks under this category.
- Technical Risks – Technical risks comprise those associated with the technology used in the project. These risks may involve software or hardware failure, technological obsolescence, or complexity and novelty of the project technology.
Application of Risk Classification in Risk Breakdown Structure (RBS)
Risk Breakdown Structure (RBS) serves as a graphical representation of the classified risks, offering a structured view of the risk sources to facilitate focused risk identification. Here is a simple RBS example (represented as a tree diagram) using the four risk categories:
- [Environmental Risks]
- Weather Conditions
- Geographical Location
- Regulatory Compliance
- [Organizational Risks]
- Employee Turnover
- Management Changes
- Organizational Restructuring
- [Project Management Risks]
- Scope Change
- Unrealistic Timelines
- Inadequate Resource Allocation
- [Technical Risks]
- Hardware Failure
- Technological Obsolescence
- Complexity of Technology
Using RBS, risks are categorized in a systematic way which aids in identifying risks at different levels of the project. It helps in developing a risk management plan which is holistic and covers all aspects of project risk.
Therefore, effective risk classification in RBS is vital for a successful project. It allows for a comprehensive understanding and management of risks, which is a key aspect in preparing for the PMI Risk Management Professional (PMI-RMP) certification.
Answer the Questions in Comment Section
True or False: In the RBS, risks can be classified into environmental, organizational, project management, and technical categories.
- True
- False
Answer: True
Explanation: The RBS (Risk Breakdown Structure) uses different categories for risk classification, including those covering the environment, organization, project management and technical aspects, making potential risks easier to understand and manage.
Multiple Choice: Which of the following is NOT a category used in risk classification within the RBS?
- a) Environmental
- b) Organizational
- c) Managerial
- d) Technical
Answer: c) Managerial
Explanation: The standard categories used for risk classification in an RBS include environmental, organizational, project management, and technical. Managerial is not a standard category in this context.
True or False: The Risk Management Plan does not involve classifications from the RBS.
- True
- False
Answer: False
Explanation: The Risk Management Plan does indeed involve classifications from the RBS. It provides a structure for identifying and categorizing risks.
Multiple Select: Select all that applies to risk classification in the RBS.
- a) Helps in risk identification
- b) It is not necessary for risk management
- c) Aids risk monitoring and controlling
- d) Useless in risk response planning
Answer: a) Helps in risk identification, c) Aids risk monitoring and controlling
Explanation: Classification of risks in the RBS is vital for risk identification, monitoring, and control. It also aids in planning effective responses to each risk.
True or False: In a risk breakdown structure (RBS), risks are hierarchically organized into categories and subcategories.
- True
- False
Answer: True
Explanation: An RBS does hierarchically organize risks into categories and subcategories, facilitating more effective risk management.
Multiple Choice: The RBS helps in:
- a) Ignoring risks
- b) Specifying detailed risks
- c) Overlooking risk sources
- d) Neglecting risk categories
Answer: b) Specifying detailed risks
Explanation: The RBS plays a crucial role in specifying and detailing risks, making them easier to manage and control. It is not meant for ignoring or overlooking risks.
True or False: All risks in a project are technical in nature.
- True
- False
Answer: False
Explanation: Risks in a project can stem from various sources, not just technical issues. They can be environmental, organizational, or related to project management.
Multiple choice: Which category in the RBS would an unexpected technical glitch in the software fall under?
- a) Organizational
- b) Environmental
- c) Technical
- d) Project Management
Answer: c) Technical
Explanation: Technical category in RBS covers all the potential issues related to technologies and tools used in the project.
True or False: The RBS is a tool for risk identification only.
- True
- False
Answer: False
Explanation: While the RBS is a key tool for risk identification, it also aids in risk management, risk response planning, and controlling.
Multiple Choice: Who is responsible for performing risk classifications in the RBS?
- a) Stakeholders
- b) Project Manager
- c) Risk Management team
- d) Customer
Answer: b) Project Manager
Explanation: Typically, the Project Manager is responsible for performing risk classification in the RBS as they have in-depth knowledge of the project and its related risks.
Great insights on RBS classification! 👏 This is going to be really helpful for my PMI-RMP exam prep.
Agreed! The breakdowns really make it simpler to understand.
Can someone explain how environmental factors are classified differently in the RBS versus the risk management plan?
Sure! Environmental factors in the RBS are more narrowly focused on external risks like regulatory changes, while the risk management plan might include broader categories like socio-economic factors.
Also, in the risk management plan, environmental factors might be classified under external risks, whereas the RBS can have a dedicated section for them.
Thanks for this post! So helpful! 😊
Is there a specific reason why technical risks are often given a higher priority in the RBS?
Technical risks are critical because they can directly impact the project deliverables. Addressing them early ensures technical feasibility and can prevent costly delays.
I’m a bit confused about the organizational risks in RBS. How do they differ from project management risks?
Organizational risks pertain to the structure, culture, and processes within the organization, whereas project management risks are more about the methodologies and tools used in managing the project.
To add, organizational risks can include factors like company policies and stakeholder influence, which are not necessarily within the project manager’s control.
Very informative post. Appreciate the clarification on risk classifications.
Not entirely sure if I agree with the classification under environment. Seems a bit too broad.
While it may seem broad, a detailed breakdown within the environmental category can offer clarity.
Thanks a lot for this post! Super useful.