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 tool, whereas 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.

References:

[1] Course – Practical RMP with Primavera Risk Analysis, by Satya Narayan Dash.

[2] Course – RMP Live Lessons, Guaranteed Pass or Your Money Back, Satya Narayan Dash.

[3] Course – RMP 30/40 Contact Hours Online, Satya Narayan Dash.

20 NEW PMI-RMP Multi-Response Free Questions and Answers (Part - 2)

 

This is in continuation of the earlier series of questions for the mutlti-response or multi-answer questions for the PMI-RMP® examination. I call them multi-response, multi-choice quesitons.

I'd strongly suggest that you take both the parts together when you try to attempt the questions. That way you will get a feel of questions and how to answer them. Do note that these are not verbatim  questions from PMI-RMP exam, however, these questions covers the areas needed for the exam. These questions are taken from the following courses and book:

• RMP Live Lessons – Guaranteed Pass or Your Money Back
• RMP 30/40 Contact Hours – Full Moneyback Guarantee
• I Want To Be A RMP, 2nd Edition, 2022 updated with latest exam pattern 

Again do note that the PMBOK 7th edition is a reference for the new RMP exam. It's explicitly listed in the exam content outline (RMP-ECO). 

The RMP Live Lessons course also comes with a dedicated  full-length question for this purpose (PMBOK7 and ECO).

In this part, we will have final 10 multi-answer/response questions. I hope you are able to do most of the questions on your own! If not, do send a mail as noted below.

[This series - Part - 1]

Subscribe to the site (top-right corner) for fresh updates.

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Question – 11: For a project, the risk manager has all the planning related work, implementing the risk responses and currently monitoring the risks. For certain risks, while monitoring, the plan is to trigger a response based on analysis. Which of the following can be used (choose two)?

A. Affinity diagrams.

B. Contingency planning.

C. Variance analysis.

D. Residual impact analysis.

E. Trend analysis.

Question – 12: Which of the following are not correct about reserve analysis (choose two)?

A. Informs the amount of reserves remaining to the amount of risk remaining at any time in the project.

B. Use in both Perform Quantitative Risk Analysis and Monitor Risks process.

C. Can be plotted with a cause-and-effect diagram.

D. Burndown charts can be used to represent the reserve remaining.

E. Tells if the remaining reserve is adequate.

Question – 13: For a project, a number of risk related activities, but conditions ones, are added with changes to the project schedule. These have been approved and integrated, which in result in updates to (choose two):

A. Project schedule.

B. Project schedule management plan.

C. Project management plan.

D. Project schedule baseline.

E. Project resource management.

Question – 14: A planning session is ongoing in order to build a common understanding of the risk approach between stakeholders and to gain agreement for managing risks in a project, which will be part of the portfolio. The output of this meeting can have which of the following (choose two):

A. Introduction, Portfolio description, Stakeholder risk appetites.

B. Identified risks, Risk owners, Risk Response Owners.

C. Project description, Criteria for success, Thresholds and corresponding definitions.

D. Communications management plan, Risk breakdown structure, Contingency plans.

E. Risk management organization, Roles, responsibilities, and authority, Risk management techniques and guidelines for use.

Question – 15: Risk identification is about all of the following, except (choose two):

A. Develop a comprehensive list of all known uncertainties that could project objectives.

B. Use various tools and techniques such as variance analysis and trend analysis to identify new risks.

C. Write the risk statements in a three-part statement for clarity.

D. Use matrix method-based techniques such as analytical hierarchical process (AHP) to identify risks.

E. Remove biases and an array of human behavior patterns stand in the way of identifying unknown risks.

Question – 16: An example of unknown-known can be all of the followings, but (choose two):

A. A known fact.

B. A hidden assumption.

C. A hidden fact.

D. An unknowable.

E. An ignored assumption.

Question – 17: Delphi technique is one of the core techniques used to identify various uncertainties in a project and hence, associated risks. However, one of the key stakeholders opposes and outlines a number of reasons about its drawbacks. Why can this stakeholder be right (choose two)?

A. Limited to technical risks.

B. Iterative and hence gets unnecessarily refined.

C. Removes sources of bias.

D. Dependent on actual expertise of experts.

E. Can't be used for reserve estimation.

Question – 18: A project is getting closed. The risk manager and team members have tried to manage the risks to a large extent possible, but still some of the risks remained. As the project draws to a closure, what should be done with these risks, except (choose two)?

A. Include a summary of any risks or issues encountered on the project and how they were addressed.

B. Check the risk register and close all the risk before closing the phase.

C. Move the content of the risk register into the lessons learned register.

D. Hand-over the remaining risks into the next phase of the project.

E. Check the risk report in order to see the status of high-priority risks.

Question – 19: For a multi-geographical project under a satellite program, a project manager is currently collecting the performance information. In addition to it, which of the following can be done, except (choose two)?

A. Checking the status of the risks that have already been identified.

B. Evaluating whether or not the impact can be contained within the limits of the project budget.

C. Verifying whether any known risk has not occurred or is not about to occur.

D. Monitoring the status of all actions implemented to respond to the detection or occurrence of a risk.

E. Adding additional activities or work packages to update the project’s baselines or product backlog.

Question – 20: For a project, the risk owner has been monitoring the actions to determine the effectiveness and to identify if any secondary risks have arisen. The risk action owners while informing the status of response actions say that the undertaken actions are closed. What should the risk owner do next (choose two)?

A. Check if the risk has been effectively dealt with.

B. Inform the project manager about it and close the risk.

C. Determine if any additional actions need to be planned and implemented.

D. Keep the risk in the register and manage the risk through subsequent risk management processes.

E. Immediately perform an audit of this risk to determine the effectiveness of response.

[This series - Part - 1]

Subscribe to the site (top-right corner) for fresh updates. 

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The question set is available in the embedded document below. The answers are also part of this document. You can scroll to see the content. 

For all answers, subscribe to this site and send a mail (from your GMail id) to managementyogi@gmail.com.

RMP Live Lessons - Guaranteed Pass:

• RMP Live Lessons Course - Guaranteed Pass or Your Money Back

RMP 30/40 Contact Hours Online:

• RMP 30/40 Contact Hours Online - Full Moneyabacl Guarantee

Book for RMP Exam:

• New Book for RMP Exam Prep: I Want To Be A RMP, 2nd Edition

20 NEW PMI-RMP Multi-Response Free Questions and Answers (Part - 1)

The Risk Management Professional (RMP®) exam from PMI® has various types of questions, including the multi-response questions. Indeed, if you are appearing for the latest RMP exam in 2024 and beyond, then you will face both multi-choice and multi-response questions. There is a subtle difference between the two.

Multi-choice questions: There will be four radio-button choices. ONLY one of the choices will be correct. I call it single-response, multi-choice question. These questions are relatively not that difficult. But considering PMI, the standard will be high. 

Multi-response questions: There will be usually five choices with check-boxes on the left, where you can select the right answers. In this case, there will be more than one correct answer. I call these multi-response, multi-choice questions. These are also called mutli-answer questions. These questions, compared to multi-choice questions, will be relatively difficult. 

These questions are taken from the following courses and book:

• RMP Live Lessons – Guaranteed Pass or Your Money Back
• RMP 30/40 Contact Hours – Full Moneyback Guarantee
• I Want To Be A RMP, 2nd Edition, 2022 updated with latest exam pattern 

To answer these questions, you need to have:

• Understanding of the Standard for Risk Management in Portfolios, Programs and Project. This is the main reference for the RMP exam.
• Understanding on the concepts of uncertainties, complexties, ambiguities and risks from both PMBOK Guide 7th edition and PMBOK 6th edition. Yes, PMBOK 7th edition is an explicit reference for the latest RMP exam!
• Ability to apply your understanding in the real-world in a varieties of situations and scenarios.
• Good understanding of the PMI-RMP exam content outline (ECO), the latest one released in March/April 2022.

In this part, we will have 10 such multi-answer/response (or multi-response, multi-choice) questions. 

You will be seeing such questions for the first time. As noted earlier, RMP exam takers are already facing such questions. 

I hope you enjoy doing the questions and it helps in your PMI-RMP exam.

[This series - Part - 2]

Subscribe to the site (top-right corner) for fresh updates. 

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Question – 1: One of the principles of risk management is to foster a culture to embrace risk management. Such a culture: (choose two)

A. Identifies threats rather than ignoring them.

B. Identifies opportunities rather than ignoring them.

C. Identifies opportunities by cultivating a positive mindset within an organization.

D. Identifies both threats and opportunities by allocating the right resources.

E. Focuses on most impactful risks first.

Question – 2: Which of the following are not correct about risk attitude (choose two)?

A. Driven by perception and evidenced by observable behavior.

B. Must range from risk seeking to risk averse.

C. Individuals will have inconsistent attitudes towards risks.

D. Not always stable or homogenous.

E. It's the degree to which an individual accepts risks in anticipation of reward.

Question – 3: A risk manager and team members are identifying various sources of uncertainties at the individual project task level and also overall project level. While doing so, they are currently focusing on the quantitative assessment of various project constraints such as cost, schedule, scope, quality among others. Which of the following cannot be inputs for this purpose (choose two)?

A. Cost estimates.

B. Duration estimates.

C. Requirement estimates.

D. Resource estimates.

E. Resource requirements.

Question – 4: Risk management planning process is not only important from the process perspective, but also strategy perspectives. Which of the following are not the purposes of this process (choose two)?

A. Gain a better understanding of individual risks. 

B. Have a numerical estimate of the overall effect of risk on the objectives.

C. Develop the overall risk management strategy.

D. Decide how the risk management processes will be executed. 

E. Integrate risk management with all other activities.

Question – 5: Considering team members are new to the project and risk management is quite new, which of the following are the key success factors for risk identification (choose two)?

A. Risks linked to objectives.

B. Agreed upon definition of risk terms.

C. Complete risk statement.

D. Appropriate risk data model. 

E. Available resources, budget and schedule for responses.

Question – 6: Considering risk owner and risk action owner, which are not correct? (choose two)

A. Risk owner is responsible for monitoring the risk.

B. Risk owner is responsible for selecting and implementing an appropriate risk response strategy.

C. Risk action owner reports the risk owner about the status of the risk response actions.

D. Risk action owner is responsible for finding out the effectiveness of a response.

E. Risk action owner owns the response actions, whereas risk response owner owns the response.

Question – 7: A project has been following the project management body of knowledge (PMBOK) guide's process group model of initiating to closing to manage a project, of which risk management is an integral part. Considering the planning process group of the five process groups, which of the following are considered?

A. Understanding of high-level risks that might impact project objectives.

B. Selection of overall risk management approach for the project.

C. Risk management integration with quality management and execution of stakeholder engagement strategies.

D. Risk management being part of every process in the planning process group.

E. Handing over the remaining known risks prior to closure of the project.

Question – 8: A risk manager is evaluating the effectiveness of risk management processes as documented in the risk management plan. The purposes of the audit can be (choose two):

A. Risk management rules are being carried out as specified.

B. Residual risks response planning is properly taken. 

C. Risk management strategy is iterative and integrative.

D. Risk management related lessons are documented properly. 

E. Risk management rules are adequate for monitoring and controlling the work.

Question – 9: The risk breakdown structure (RBS) is a hierarchical framework of potential sources of risk and used in risk identification. RBS can be used for all of the following situations, except (choose two):

A. Can be used in association with brainstorming.

B. Ensures coverage of all types of risk. 

C. Lowest level of RBS is known as the risk package.

D. Tests for blind spots or emissions.

E. Used for evaluating current risks as well as identifying new risks.

Question – 10: In a meeting for risk identification, the risk manager wants to allow all participants to speak their mind and contribute to the discussion. This is to identify as many risks as possible and to stimulate creativity. Which of the following tools and/techniques will help the risk manager the most (choose two)?

A. Brainstorming.

B. Checklist.

C. Prompt list.

D. Document analysis.

E. Delphi technique.

[This series - Part - 2]

Subscribe to the site (top-right corner) for fresh updates. 

*********

The question set is available in the embedded document below. The answers are also part of this document. You can scroll to see the content. 

For all answers, subscribe to this site and send a mail (from your GMail id) to managementyogi@gmail.com.

RMP Live Lessons - Guaranteed Pass:

• RMP Live Lessons Course - Guaranteed Pass or Your Money Back

RMP 30/40 Contact Hours Online:

• RMP 30/40 Contact Hours Online - Full Moneyabacl Guarantee

Book for RMP Exam:

• New Book for RMP Exam Prep: I Want To Be A RMP, 2nd Edition

PMBOK 7th Edition: Principles, Performance Domains and Artifacts – How Do They Plug and Play Together? (Part - 2)

I'd strongly recommend that you go through the first part of this series on PMBOK's principles (PR) and performanc domains (PD) before proceeding with this one. This part is about artifacts and interactions among the PRs, PDs and Artifacts. 

This series: Part - 1

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PMBOK7 Artifacts *** UPDATED ***

The way to connect the dots and understand this article is also to know the artifacts. An artifact can be an output, a project document, or even a project deliverable.

Considering risk and uncertainty, we mainly have three artifacts:

• Project Risk Management Plan: How to identify, assess, respond, manage, and monitor the risks in a project.
• Project Risk Register: List of identified risks in a project, also known as the Risk Log.
• Project Risk Report: Summary of individual and overall project risks.  

Similarly, when considering other aspects such as Delivery PD, Project Work PD, or Measurement PD, there can be a number of artifacts.

How Do They All Plug and Play Together? *** UPDATED ***

So far, we learned about the PRs, PDs, and artifacts. The final part of the PMBOK7 puzzle is to understand how all these work in unison. This is how.

• For every project, while all principles are present, a few principles will be predominantly applied.
• The degree of application of the principles and the way they are applied can vary. It can be based on organizational context, deliverables, project team, stakeholders, etc.
• Performance domains are also present in every project, but then again, we don’t focus on all aspects of the PDs throughout the lifecycle of the project.
• The way PDs relate and apply differ for each project.
• Principles chosen for a project guide the behavior of the project team and project stakeholders, whereas performance domains chosen for the project are areas to demonstrate that behavior.
• PRs influence and shape the PDs to achieve desired outcomes
• The artifacts are used, applied, and can also come from the PDs. 
• Models and methods are also applied on the project to achieve desired outcomes. 

An Example – Risk PR, Uncertainty PD and Artifacts

To understand better, let’s combine the Risk PR, Uncertainty PD, and the associated artifacts. I’ll also inform you of the models and methods involved in this interaction, shown in the figure below. 

Let’s interpret the above figure:

• Principles guide the behavior of the people involved in the project. For example, the Risk Principle guides what to do with the uncertainties and risks in the project.
• Domains are broad areas of focus to demonstrate that behavior. For example, the Uncertainty PD is a broad area of focus to demonstrate how risk responses are optimized.
• The Models are applied on the PDs. For example, considering Uncertainty PD, Stacey’s diagram (a complexity model) can be applied. Another complexity model applied is the Cynefin framework.
• The Methods are also applied to the PDs. For example, the probability and impact matrix is a method that can be applied to the Uncertainty PD.
• The deliverables and artifacts are from the PDs. For example, the risk register and risk report are artifacts from the Uncertainty PD.

That’s it! Was it difficult to understand?

If you have read sincerely and understood so far, you have absorbed the very essence of the new PMBOK Guide.

Video – Key Notes on PMBOK7 *** NEW ***

Now, it’s time to note and recap certain key points with respect to the PMBOK7 principles, domains and artifacts. I’ve prepared this below video [duration: 04m:11s] for your understanding. Reference for this video has been taken from my RMP Live Lessons course.

Guidance for PMP and RMP Exams 

The most common questions I receive in my regular interactions with management practitioners are with respect to the RMP and PMP exams. PMBOK, 7th edition has taken a paradigm shift compared to the PMBOK, 6th and the practitioners want to know their usages and needs in the new versions of the PMP exam.

Is PMBOK7 needed for the RMP Exam?

The short answer is yes.

Elaborating further, one of the RMP exam’s explicit reference sources is the new edition of the PMBOK 7th edition, which has a principle-based standard. This is well-complemented with the PMBOK 6th edition, which is a process-based standard. For your RMP exam, you must refer to both, because the main source of the exam is the Foundational Standard for Risk Management in Portfolios, Programs, and Projects, which follows a process-based approach with a set of risk management principles.

Is PMBOK7 needed for the PMP Exam?

The short answer is no.

You’ve probably seen many sites, portals, and exam preparatory courses inform on the PMBOK Guide, 7th edition as a must-read. In reality, at the time this article is written, it’s a should- or could-read. Nevertheless, knowing the latest management principles, practices, and artifacts is a good idea. Recent PMP and RMP success stories in 2023 from my management sessions confirm that.

Conclusion *** UPDATED ***

To wrap up this article, principles by their very nature are self-evident, true, and real. For example, the principle of “Demonstrate leadership behaviors” applies not only to the project manager but also to every team member.

Principles will light up the path for your practices. Why so? Because a project is almost always executed in an uncertain environment. In other words, your path will be uncertain and sometimes dark and you won’t know how to proceed. Principles act like rays of light guiding your path in an uncertain project terrain. While principles are guidelines, practices are real-world usages. These practices are performed with activities and functions in the performance domains that we have reviewed here.

I hope you now have a big picture as well as a zoomed-in view of the PRs, PDs, artifacts, and how they all fit together. As always, your thoughts, views, and comments are welcome. Please share them in the comment section below.

This series is concluded.

This series: Part - 1

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This article is dedicated to the memory of my father, the late Harendra Nath Dash, who passed away four years ago on June 11, 2019. It’s a tribute to him, my mother, and their teachings.

Thank you, dear readers, for reading this piece. And, wish you a very happy new year, 2024.

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This article was first published by MPUG on June 13, 2023. This an updated and refined version. 

References

[1] RMP Live Lessons – Guaranteed Pass or Your Money Back, by Satya Narayan Dash

[2] RMP 30/40 Contact Hours with Money Back Guarantee, by Satya Narayan Dash

[3] I Want To Be A RMP: The Plain and Simple Way To Be A RMP, Second edition, by Satya Narayan Dash 

[4] Project Management Body of Knowledge (PMBOK) Guide, 7th Edition, by Project Management Institute (PMI)

PMBOK 7th Edition: Principles, Performance Domains and Artifacts – How Do They Plug and Play Together? (Part - 1)

Over a decade and a half ago my father and mother visited me in a different city, nearly a thousand miles away from home. Being very young, with few years of work experience, I was struggling to cope with the work pressure, compounded by no family or family friends in a new city with a totally different culture, language, food, and even clothing. My father was very concerned and tried to help in as many ways as he could. He even brought breakfast for me. One day, in jest, I told him that I’ll follow a set of principles to make my work and schedule better. A stern and tough father from the outside, but soft inside, he smiled and said: “Can you follow just a few? Try it. It’s hard!”

But why is following a set of principles so hard? As I’ve seen, in project-program-portfolio management, the primary reason is the constraints. For a project, it’s usually the scope, time, and cost, whereas for the programs it’s the delivery of benefits, and for the portfolio, it’s about the value and value optimization, capacity, and capability.  

In addition, saying is always easier than doing. Having principles written in a notebook or project board is always easier than following them. Talking about results from principles is far easier than actually delivering the results!

In this article, however, we will not only learn the principles (PR), performance domains (PD), and associated artifacts, we will also see several examples and applications. Towards the end, I’ll demonstrate how all these fit together. 

This series: Part - 2

PMBOK7 Principles (PR) *** UPDATED ***

A principle is a fundamental norm or truth. Now, before getting into the project management principles (PR) informed in the Project Management Body of Knowledge (PMBOK®) Guide, 7th edition, let’s understand certain top points on these principles of project management.

1. Principles are not prescriptive in nature, unlike the principles in a profession. They are not laws of project management. They are intended to guide the behavior of the team members and stakeholders.
2. Principles of project management serve as guidelines for decision-making and problem-solving in a project.
3. Principles can but don’t necessarily reflect morals. Values defined in PMI®’s Code of Ethics reflect morals. The values of PMI are responsibility, respect, fairness, and honesty.
4. In total, there are four values and 12 principles. The 12 principles are aligned with the four values and complement them, like the principles and values of Agile Manifesto.
5. Principles are internally consistent, meaning that no principles contradict other principles. However, in practice, principles can overlap.

The twelve project management principles (PR) are noted in the below table. Each principle has a principle statement, a principle label, or principle tag(s). I’ve outlined only a simplified part of the principle statement in the table. 

As shown in the above table, there are 12 PRs with principle labels and simplified PR statements. There is also a complete PR statement. For example:

• Complete Principle Statement: Continually evaluate exposure to risk, both opportunities and threats, to maximize positive impacts and minimize negative impacts on the project and its outcomes.
• Simplified Principle Statement: Optimize risk responses.
  It’s the tenth PR in the above table.
• Principle Label/Tag: Risk.

If you are preparing for your Risk Management Professional (PMI-RMP)® or Project Management Professional (PMP)® examinations, you have to remember all the principles, labels and understand the principle statements. Indeed, for latest RMP exam from 2022, the PMBOK 7th edition has been explicitly listed as a reference.

PMBOK7 Performance Domains (PD) *** UPDATED ***

Next, let’s understand the performance domains (PD). PMI defines a PD as follows:

A group of related activities that are critical for the effective delivery of project outcomes.

Simply put, it’s a group of related activities. The top points about the performance domain are the following:

• The PDs are interactive in nature, i.e., all the PDs interact or talk to each other.
• The PDs are interrelated. Not a single PD stands on its own.
• PDs are interdependent. Notice that the word, it’s not dependent on each other or even a better form, i.e., independent of each other, but interdependent, which is the highest form of dependency!
• PDs have outcome-focused measures, not output focused. When we talk of output, it’s usually the end product or service, whereas when we speak of outcome, it’s what one can do with that product or service. 
• PDs overlap and interconnect with each other.
• PDs are present in every project, but the way in which they relate and interact may differ.
• PDs run concurrently in every project – single, multi-phased, or the way value is delivered.

Do note that although the definition of PD refers to a group of interrelated activities, the specific activities to be considered in each PD are determined by organizational context, project, deliverables, project team, and stakeholders, among others.

There are eight performance domains which are outlined in the below table. I’ve simplified the descriptions so they are easier to understand and remember.

As noted earlier, all eight PDs interact with each other, which is depicted in the below figure.

Specifically considering the Uncertainty PD, which is associated with Risk Management, the following figure can be inferred.

As shown, the Uncertainty PD works in collaboration with all other PDs. For example, considering Uncertainty and Measurement PDs, one can have a risk reserve burndown chart, which shows the amount of contingency reserve available compared to the amount of risk remaining in the project. It’s a variant of burndown charts and can be presented in the Dashboard.  

Principles and Performance Domains

Now you may be wondering how the PRs and PDs work together? This concept is very foundational to know as a project, program, portfolio, agile, or risk management practitioner.

The most important aspect of PR and PD synergy is this:

Principles guide the behavior of the people involved in the project. Performance domains, or simply domains, are broad areas of focus to demonstrate that behavior.

This is shown in the below figure.

Let’s take the example of Risk principle (PR – 10) and Uncertainty domain (PD – 8) to understand the above aspect.

The Risk PR guides the behavior of the people involved in the project and advises them to maximize opportunities, minimize threats to the project and optimize risk responses. Among others, the Risk principle also tells us to address risk continually, understand risk parameters such as risk attitude, risk appetite, and risk threshold, and subsequently manage and monitor risks in a project.

However, the Uncertainty PD is the broad area of focus to demonstrate what one learned with the Risk PR. Questions such as:

• How to maximize opportunities?
• How to minimize threats?
• How to plan and optimize the risk responses?
• Should one consider one risk or multiple risks?
• Should one consider individual risks, overall project risks, or both?

These questions are answered through demonstration in the Uncertainty PD. In addition, there are other areas such as volatility, ambiguity, and complexity (from the VUCA acronym) in the Uncertainty PD. Therefore, this PD becomes a “broad area of focus” to apply to the Risk PR.

This series: Part - 2

References

[1] RMP Live Lessons – Guaranteed Pass or Your Money Back, by Satya Narayan Dash

[2] RMP 30/40 Contact Hours with Money Back Guarantee, by Satya Narayan Dash

[3] I Want To Be A RMP: The Plain and Simple Way To Be A RMP, Second edition, by Satya Narayan Dash 

[4] Project Management Body of Knowledge (PMBOK) Guide, 7th Edition, by Project Management Institute (PMI)

Ten Myths and Facts – Contingency Reserve and Management Reserve

 

Management Reserve and Contingency Reserve are two widely used reserves in Project Management, Program Management. It can also be used in Portfolio Management and Agile Management, though the way there are used will be somewhat different. However, there are many misconceptions about these two reserves. In this article we will see what those myths are and check upon the facts. 

These explained in my courses such as:

• PMP Live Lessons, Guaranteed Pass or Your Full Money Back
• ACP Live Lessons, Guaranteed Pass or Your Full Money Back
• RMP Live Lessons, Guaranteed Pass or Your Full Money Back

The needed content is also available as part of the PMP 35 Contact Hours, RMP 30 Contact Hours, ACP 21 Contact Hours and CAPM 23 Contact Hours courses. 

Note: First go through the myths on your own and try to answer yourself. That way you will get a better value from this article.

Hope you are tried to do the exercise on your own first! I'll also suggest that you go through this article to learn more:

Article - Contingency Reserve and Management Reserve

Now, let's see the myths and facts. 

Myth – 1: Addition of contingency reserve to activity cost estimates (or activity duration estimates) will create a rubber baseline. 

Fact: Contingency reserve can be at the activity level or work package level etc. If it’s at the activity level, then it need not be at the work package level. The reserves from lower level estimates will get rolled up to the work package level. Hence, there is no chance of having a rubber baseline. 

As you can see in the above block representation, the contingency reserve can be at the activity level, or work package level. Otherwise, you can have an overall contingency reserve at the project level.

Myth – 2: Contingency reserve is not applicable for the project schedule, it’s only for the budget.

Fact: It’s applicable for both project schedule and project budget. You can have contingency reserve calculation while determining the duration estimates of tasks or cost estimates of tasks. 

Refer to the previous diagram to see overall contingency reserve.

Myth – 3: Any reserve can be tracked with a reserve burndown chart.

Fact: Usually, contingency reserve is tracked at the project level, but management reserve is not. The reason is simple. Project Managers know and manage the contingency reserve as it’s part of the performance measurement baseline. 

So, the reserve burndown chart that one creates and manages at a project level is with respect to the contingency reserve, not for management reserve.

Myth – 4: If the reserve is unused, then it can be part of project profit! 

Fact: This is another big myth propounded. But you can’t take the unused reserve as part of the profit. It’s meaningless because you have added the reserve for unforeseen circumstances. 

• Threats – if the reserve is unused then, it has to be removed or given back. 
• Opportunities – if the reserve increases because you exploited the opportunity, then yes, for this you can consider it to be a profit.

Re-read the previous line! In risk management, both threats and opportunities are considered, but the way they are treated will be different. 

Myth – 5: Reserves have little to no role to play in S-curve interpretation. 

Fact: In fact, it’s the other way around. You should be worried when the reserve starts getting depleted while doing your S-curve analysis. The Budget at Completion (BAC) in earned value calculation should include the contingency reserve (CR).

Sometimes the estimate at completion (EAC) can go beyond the available contingency reserve and may eat-up the management reserve (MR).

                                                                

As shown in the above S-curve, the trend for Actual Cost (AC) curve is upward and it may consume not only the contingency reserve, but also the management reserve for the project.

Myth – 6: Slack or float can be a replacement for contingency reserve.

Fact: Slack and reserve are two completely different concepts. Many confuse the two. 

Total slack is about how much time you can delay a task without delaying the project end date. Free slack, simply put, is how much you can delay a task without delaying any successor task. 

Reserve or allowance on the other hand protects you against the delay in the current activity, not next activity’s start date! 

Myth – 7: Contingency reserve and contingency response planning are one and the same thing. 

Fact: Contingency as we know is the reserve for known risks, but unknown amount of rework. It’s for risks which are accepted or known risks with active risk response strategies. 

Contingency planning, on the other hand, consists of two plans: Contingency Plan and Fallback Plan. Simply put, these two plans are Plan A and Plan B, respectively that we use in our day-to-day risk management. 

Myth – 8: Agile projects don’t have all these reserves available.

Fact: In Agile projects, too, you may require contingency and management reserves. Consider an Agile project with mandatory regulatory requirements and one of the needs to meet the budgetary regulations with earned value calculations. In such a case, you need to have the reserves. 

Myth – 9: Management Reserve is a budget category, and not applicable for Schedules.

Fact: This is another myth, which is widely circulated. While management reserve is usually a budget category, you can also have it for schedule. In fact, the definition of Management Reserve as per the PMI-PMBOK guide is this:

An amount of the project budget or project schedule held outside of the performance measurement baseline for management control purposes that is reserved for unforeseen work that is within the project scope.

Can you see that the management reserve can also be part of project schedule (not just budget)?

Myth – 10: Contingency Reserve and Contingency are one and the same thing.

Fact: Contingency is an event or occurrence that could affect something, e.g., a task, a work package or the execution of the project. Contingency reserve, on the other hand, is the time or money allocated for known-unknown risks. However, contingencies can be accounted for with reserves.

There are many other myths, which circulate on these two reserves. What are the other myths you think are not correct for contingency reserve and management reserve?

If you have any questions, suggestions or feedback, do share your comments in the comment section of this article.

References:

1. PMP Live Lessons, Guaranteed Pass or Your Full Money Back, by Satya Narayan Dash

2. ACP Live Lessons, Guaranteed Pass or Your Full Money Back, by Satya Narayan Dash

3. RMP Live Lessons, Guaranteed Pass or Your Full Money Back, by Satya Narayan Dash