Introduction to Risk Breakdown Structure PMP

Since every project comes with risks, every project manager should be well versed in the risk management process. Risk management involves identifying, assessing, and managing risks using established industry guidelines and best practice standards. Identifying risks can help project managers produce a list of all known potential risks. However, this list doesn’t help you decide where and how to prioritize risk management. For a Project Management Professional (PMP), a risk breakdown structure can help them better assess, understand, and organize a project’s risk exposure as a whole.

Use this Project Management Academy guide to the PMP exam risk breakdown structure (RBS) concept to support your project management expertise.

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Introduction to Risk Breakdown Structure PMP

When should you use “RBS” vs. “RiBS”? RiBS is sometimes used because RBS can also refer to Resource Breakdown Structure. However, the Project Management Institute (PMI) prefers to use “RBS” when referring to a risk breakdown structure.

A risk breakdown structure is a PMP exam-related document representing information about project risks. This tool makes it easier to capture and understand project risk data. In turn, this data helps organize any risk management work required to accomplish project objectives efficiently.

What is a Risk Breakdown Structure (RBS)?

According to PMI, in PMP exam terms, a risk breakdown structure is:

“A source-oriented grouping of project risks that organizes and defines the total risk exposure of the project. Each descending level represents an increasingly detailed definition of sources of risk to the project.”

In other words, an RBS is a type of organization breakdown structure (OBS) that provides the following information:

• A list of project risks with information organized from the highest to the lowest level
• Individual risks grouped by risk source
• Defined total risk exposure for the project
• Multiple levels of information with a corresponding increase in detail

A simple list of project risks lacks organization and depth of information. Ultimately, that simple list can add to the chaos or get lost in the shuffle. An RBS is a better solution that provides a hierarchy with multiple organization levels to promote effective risk management.

Why an RBS is important for your project

A risk breakdown structure helps provide organization and structure to your list of risks, making it an invaluable tool in understanding the potential risks your project may face. You can use the RBS to guide your risk management decisions and mitigate risks more efficiently.

Without an RBS, it can be challenging to keep track of all your potential risk sources and priority levels. The lack of organization and detail can expose you to otherwise avoidable or manageable risks.

When is Risk Breakdown Structure Created PMP

Create your RBS chart during the Project Risk Identification process. Since it is never too early to start thinking about project risks, this process should occur in the project’s early stages. Project managers are typically responsible for creating and updating this document, but the RBS can also delegate other responsibilities related to project risks.

Risk management should be ongoing through the entire project life cycle. Once you create your RBS, you should be using it throughout the whole project.

How to use the RBS in a Project?

An RBS has many potential use cases for all project stages. Here are some ways you can use the RBS in a project.

Use the RBS to identify risks

Lead your project team through risk identification activities using the RBS as a guide, such as brainstorming and organizing project risks by source or risk area. An RBS can also help you develop a checklist of generic risks for future projects based on past experiences. Having a clear and organized list of risks prevents the chance of overlooking any risks, risk sources, or other blind spots.

Use the RBS to assess risks

The lower levels of detail in an RBS can help you assess and prioritize risks. For example, one risk area may have a higher total number of risks, or another may have fewer but more critical risks. With this information, your RBS can provide insights into types of risk exposures, the most significant risk sources, risk relationships, and more.

Use the RBS to compare projects

Comparing projects can be challenging. An RBS provides common ground between projects so you can compare elements directly. You can use these project comparisons to choose which projects to pursue or prioritize your resources based on the relative risk exposures of each project.

Use the RBS for risk reporting

An RBS is an excellent tool for both high-level and detailed reporting. Whether reporting to senior management, clients, project team members, or other stakeholders, an RBS provides organized information about total risks and risk scores, risk responses, and more. Since you can use the RBS to compare projects, you can also use it for cross-project reporting.

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Examples of RBS

Since every project, sector, and industry has a unique set of challenges and potential risks, we recommend tailoring your RBS to your organization’s specific needs. You can use these sample RBS templates to start your own RBS chart.

RBS for Software Development

RBS for Construction Design            

RBS for Generic Project

Summary

For the PMP exam, your understanding of risk breakdown structures should include:

• What is a Risk Breakdown Structure?
• When should project managers create an RBS?
• Who is responsible for creating and updating an RBS?
• How can you use an RBS?

If you understand this information about the PMP concept of an RBS, you are in great shape for the PMP exam. Do you have any other questions about risk breakdown structures or other PMP exam topics? Reach out to your experts at the Project Management Academy today

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