How does applying a Risk Breakdown Structure Help with Risk Management?

Posted by in project management software

A good project manager should be able to manage the risks of a project effectively and keep the project on track. Easier said than done, right?

A risk breakdown structure approach is used across the globe as a helpful tool for achieving this.

Basically a risk breakdown structure creates a hierarchical overview of all identified risks in a project. Not only does it create a hierarchical overview, you will also have a logical bundling or categorization of the types of risks you expect to encounter during the lifecycle of a project.

What is a risk?

“A risk is anything unplanned or unforeseen that can have a negative impact on the project’s costs, timing or quality.”

Identifying risks is a start, but not the complete picture for risk management. At the very least you need to:

    – Identify the risk
    – Categorize/classify the risk
    – Analyze the risk
    – Make decision on the way to approach the risk

Not every risk requires corrective or protective actions. For every risk you need to ask yourself the question if removing or managing this risk is a value add activity for this project.

Some identified risks are so minor that the negative impact is less than the added cost to manage this risk.

So for each risk type you need to identify how this risk affects project schedule or cost (or both).

How does applying a Risk Breakdown Structure Help with Risk Management?

When you start off with a risk breakdown structure it is Important to train yourself to be as specific as possible: what is the specific issue of concern?

What specifically is the problem, where and when does it occur and what is the extent of the impact of this problem / risk.

As the structure is visualized as a hierarchical structure, being as specific as possible helps with identifying where in the hierarchy this issue or problem sits.

“How to eat an elephant”

By creating this hierarchical structure you simplify components of the risk and you can start chipping away at removing the risk from your project. We’ve heard it all before… ‘how to eat an elephant? One bite at a time… ‘

In this case it is true that when you create a risk breakdown structure the sub-risks don’t look so overwhelming and time-consuming. Keeping the risks at a higher level in the hierarchy might create a culture of non-action. The risk seems so massive and difficult to manage that the project manager rather chooses to do nothing.

Questions to ask at this stage are:

– What is the smallest subset of the problem we can usefully solve? Think about ways to prevent errors and rework so you can move the project forward in an effective manner.
How will the probabilities and impact of risk items be assessed?
– How could these risks affect the overall outcome of the project in probabilistic terms of cost and schedule?
– Has anyone else (internal or external to the organization) attempted to solve this problem before? If so, what can we learn from that experience?
– Have all non-recommended alternatives been analyzed in sufficient detail?

As you can see – all these questions are meant to break down the issues and risk items to a manageable level so we can analyze and deal with these issues at hand.

These are just examples, a sub-set of a large amount of questions you need to ask about the risks and issues that impact your project. These questions however will help you with finding the right issues to address and will avoid the costly mistake of spending time and money on issues that are too large and complex to manage.

It also avoids spending resources on trying to reinvent the wheel, by trying to come up with a solution for an issue when somebody else has already successfully gone through this exercise before.

Be the smart project manager and learn from other projects and how they managed their risks and issues, both internally and external to the organization.

Having said all this – using a Risk Breakdown Structure may not be appropriate for your type of project. As project manager you need to keep an open mind around the tools and methodologies you use to achieve the expected deliverables of your project.

An experience project manager will ask the question: “What would happen if we didn’t do a Risk Breakdown Structure?”

In other words, is using a risk breakdown structure required and are there any easy-to-implement alternatives to the Risk Breakdown Structure?

Should you choose to utilize the risk breakdown structure approach, make sure everybody on your project team understands what this means and what is asked of them. You may need to look in some basic training for your team.

And last – but no least – have ONE person accountable in your team for risk management and mitigation. The risk manager is the person who is responsible for implementing the risk breakdown structure within your project (but doesn’t necessarily perform all the tasks involved).

This person is your one stop shop to identify how risks are identified, structured, analyzed and managed, with or without the use of a risk breakdown structure.

Guest Post by Ivanka Menken, CEO The Art of Service, author of the Risk Breakdown Structure Standard Requirements.
Bio Ivanka Menken:

Ivanka Menken is a serial entrepreneur and the owner and Co-Founder of The Art of Service since 2000.

Ivanka specialises in creating organisations that manage their services in a sustainable and customer driven manner. With 20+ years of management consultancy experience and an education degree, Ivanka has been instrumental in many organisational change management projects in The Netherlands, USA, Canada, New Zealand and Australia for both government agencies and private corporations. Ivanka believes that education and training is at the foundation of every successful enterprise.

Ivanka is an accredited PRINCE2 Project Management trainer, course author and consultant.

Ivanka has been a guest lecturer for a number of Queensland universities on the subject of IT Service Management and Organisational Change Management and proudly featured as one of “Australia’s 50 Influential Women Entrepreneurs” in 2016.

While running The Art of Service, Ivanka authored a number of publications on IT Service Management, Cloud Computing and Customer Service. She also completed her Entrepreneurial Masters Program at MIT and served on the board as the second ever female President of the local Entrepreneur’s Organization chapter.

Link to Risk Breakdown Structure book authored by Ivanka Menken: