Tuesday, January 23, 2024

Fundamentals of Risk Breakdown Structure (RBS)


A breakdown structure is what the name tells. It's basically a hierarchical decomposition and each lower level gives more details or information. One of the best-known breakdown structures is the Work Breakdown Structure (WBS). In this article, however, we will know more on the Risk Breakdown Structure (RBS). The Standard for Risk Management and the PMBOK 6th edition use RBS as a toolwhereas in the PMBOK 7th edition, it's an artifact and kept under Model-Methods-Artifacts (MMAs)

RBS is not a much-understood concept, but very useful in real-world risk management. But before you proceed further, I'll suggest that you read this article on WBS, to understand breakdown structure more.

Other Breakdown Structures in Management

Other than Risk Breakdown Structure, here are some of the breakdown structures that you need to know in Project Management, Program Management and  Agile management. This will be useful and helpful in your professional work.

  • Product Breakdown Structure (RBS): A hierarchical chart showing a product's components and deliverables. It's mainly used in Scope Management.
  • Organizational Breakdown Structure (OBS): A hierarchical chart showing the project organization. It’s mainly used in Resource Management. 
  • Resource Breakdown Structure (ReBS): A hierarchical chart showing the resources by category and type. Examples of categories can be personnel, material, equipment etc. Examples of type can be role 1 (engineer), role 2 (plumber), which can be further broken down into levels (Level 1 engineer). It’s also mainly used in Resource Management.
  • Story Breakdown Structure (SBS): A hierarchical chart showing the breaking down of epics into stories and finally into tasks. This is my term and I use it in an Agile context. You can learn more about it in this article on stories.

Initial Top Points 

I've used ReBS to distinguish between the Risk Breakdown Structure (RiBS). In this article, I'll use RBS acronym for risk breakdown structure. 

The Project Management Institute (PMI) gives a simple definition for the Risk Breakdown Structure (RBS):

"A hierarchical representation of potential sources of risk."

As it’s a representation of potential sources of risk, it’s widely used in risk identification, or specifically in the Identify Risks process

Following are the top points about RBS at this stage:

  • Can be generic or specific. Generic ones are used across projects, whereas specific ones are developed for a specific project.
  • Can be tailored, which is an extension of the previous point.
  • Can be broken down to any level, from Level 0 to Level N.
  • When broken down, each low level will give more information.

Levels in an RBS

As noted earlier, you breakdown into any levels while building an RBS. But you have to be careful. Don’t make it too fine-grained and hence, difficult to manage. 

Following are the levels in an RBS:

  • Level – 0 (L0): This is the project level, just like the WBS. After all, the project itself will have all potential sources of risk. But do note, not all project management literature considers L1 to be the project level.
  • Level – 1 (L1): Here we breakdown into the higher-level categorization of risks such as Technical, Political, Environmental, External, among others.
  • Level – 2 (L2): The one level below L1 and it has more information with respect to one of the previous categories. For example, considering Technical, it can be broken down into Scope, Requirements, Technology.
  • Level – 3 (L3): This is further refinement of the previous level. For example, consider Scope, it be “Scope definition”, “Scope change” etc. 

While breaking down, I’d generally suggest that you don’t go beyond L3, unless really needed.

Progressive Elaboration and Breaking of RBS

As is the used norm, a hierarchical chart is generally progressively elaborated. I hope you have read the previous linked article on WBS. I'll slightly change the definition of progressive elaboration in the context of RBS. 

"Progressive elaboration is the iterative process of increasing the level of detail in an RBS as more information is known about the project."

The definition is important, because building an RBS is not a one-time activity, but it’s developed and iterated over the project’s life cycle. If one finds more information and/or more categories of risks, then it should be added to the RBS.

In other words, during risk management strategy and planning, the first-cut of the RBS is available. However, if it's a multi-phase project or as you progress with respect to the project, the RBS will be updated. 

An Example

To understand more clearly, let’s take an example. A sample RBS (reference taken from PMI) is shown below.

Interpreting the above figure, one can say the followings:

  • Level – 0: The highest level and it’s the level of the project.
  • Level – 1: You have categories such as Technical, Management, Commercial etc. 
  • Level – 2: A further breakdown of each at Level – 1. For example, technical has been broken down into 'Scope', 'Requirement'.
  • Level – 3: L2 is further broken down with more information. For example, scope has been broken down to ‘Scope definition’, ‘Scope change’.
Another important point to note in RBS is that every element in the RBS is associated with the RBS Identifier (RBS ID), which uniquely identifies the elements. For example:
  • 1. Technical Risk
    • 1.1 Scope 
      • 1.1.1 Scope definition
      • 1.1.2 Scope change
    • 1.2 Requirements 
      • 1.2.1 Requirement definition
      • 1.2.2 Requirement change
  • 2. Envionmental Risk
    • 2.1 Market
    • 2.2 Industry changes
This is very much like the WBS IDs, where each element in the WBS is uniquely identified with the IDs such as 1.1, 1.2.2.

By this time, you would have realized that an RBS can not only be represented in a chart, but it can also be tree structure, tabular structure. The one shown above with RBS IDs is a tree structure, whereas the table shown before, depicts the RBS in a tabular structure.  

Final Words – Usage of RBS

Finally, as we reach this basic article, some more final key points with respect to the Risk Breakdown Structure. These are important to know!
  • The lowest level of RBS (available risk categories) can be used as a prompt-list to identify individual project risks. 
  • Along with this prompt-list, you can apply the brainstorming to get more information with respect to risks.
  • RBS can be used in combination with WBS to identify potential sources of risk. For example, the XYZ work package of WBS can be technical, environmental and political risk categories.
  • One can combine the results of qualitative risk analysis (specifically the Perform QLRA process) with the project’s RBS to show clusters of risks, which are coming from specific sources. 
I hope this article gives a foundational understanding on RBS and it helps in your work and preparing for the Risk Management Professional (RMP) Exam.


No comments:

Post a Comment

Sign- or Log-in and put your name while asking queries in comments. Any comment is welcome - comments, review or criticism. But off-topic, abusive, defamatory comments will be moderated or may be removed.