Identifying and managing project risks are critical tasks for project managers. From a project management perspective, risks must be managed from the start of a project until its completion; therefore, the Risk Breakdown Structure (RBS) is an important tool that project managers use to successfully complete projects. Assume that you are a project manager assigned a project to set up a food bank facility for your local community within a two-month period, starting from today. Develop a risk breakdown structure that identifies sources of project risks. Consider Figure 11-4 below and the tasks that might be associated with this project.

QUESTION

Identifying and managing project risks are critical tasks for project managers. From a project management perspective, risks must be managed from the start of a project until its completion; therefore, the Risk Breakdown Structure (RBS) is an important tool that project managers use to successfully complete projects. Assume that you are a project manager assigned a project to set up a food bank facility for your local community within a two-month period, starting from today. Develop a risk breakdown structure that identifies sources of project risks. Consider Figure 11-4 below and the tasks that might be associated with this project.

1. Identify the risks in the form of “cause-risk- effect,” as described below:

One of the most common risk-identification mistakes is considering things to be risks when they are not. One approach is to treat anything with a probability of greater than 80 percent as a certainty. “Lack of resources” is not a risk, nor is “not enough time to complete the project.” If it is known that the length of time required to complete a project is shorter than the time allocated, then this is not a risk—it’s a fact. Such facts should be addressed in the project management plan through crashing, fast tracking, re-estimating, removing scope, using other forms of schedule compression, and bringing the situation to management, but not as part of risk management.

“To differentiate risks from facts and to adequately define risks, use the ‘cause-risk- effect’ format for naming risks: As a result of (definitive cause), (uncertain event) may occur, which would/could/may lead to (effect). Such definition of risks provides enough information for the team to follow the rest of the project management process. See the following examples of risks in the cause-risk-effect format:

1. As a result of lack of clear direction for the scope of work for the XYZ component, there could be rework and wasted efforts, which could delay the project completion from two to four weeks.
2. As a result of the amount of work the customer is trying to accomplish on many projects during this project’s completion, a delay in the response to our requests for approvals may occur, which could result in a two-week delay in project completion. Effects could relate to project objectives, project constraints, and risk tolerances.” (Mulcahy, 2003, p. 90)

2. Discuss and analyze the importance of each of the four types of risk identified in Figure 11-4 (technical, management, commercial, and external).

3. Create a risk breakdown structure and attach as an appendix (see attached sample and use the blank RBS linked under this assignment in Module 2).

4. Discuss the importance of creating an RBS.

(Source: PMI, 2017, Figure 11-4)

Your well-written paper should meet the following requirements:

• Be 3-4 pages (900-1200 words) in length, not including the cover page, references page, or appendix. (Remember that the appendix follows the references page.)
• Be formatted according to the CSU-Global Guide to Writing & APA. (Links to an external site.)
• Cite a minimum of three sources to support your responses, two of which should be current academic, peer-reviewed, scholarly sources. Note: Current research in this class means the most recent five-year period. Although research older than five years may be used, it will not count toward the assignment requirement. The CSU-Global library is a great place to find these resources. Additionally, in the Module 1 lecture material, you were reminded of what constitutes academic, peer-reviewed, scholarly sources and how to find them in the CSU-Global Library.
• Demonstrate thoughtful consideration of the ideas and concepts that are presented in the course, and provide new thoughts and insights related directly to this topic.

Refer to the Critical Thinking Assignment grading rubric below for more information on assignment expectations and grading.

References

Mulcahy, R. (2003). Risk management: Tricks of the trade for project managers: A course in a book. Minneapolis, MN: RMC Pub.

Project Management Institute. (2017). A guide to the project management body of knowledge: (PMBOK® guide) (6th ed.). Newtown Square, PA, USA: Project Management Institute.

ANSWER

Risk Breakdown Structure for Setting Up a Food Bank Facility

Introduction

As a project manager assigned to set up a food bank facility for the local community within a two-month period, it is essential to identify and manage project risks effectively. The Risk Breakdown Structure (RBS) is a valuable tool for project managers to identify potential risks and develop appropriate risk management strategies. This paper will develop a risk breakdown structure for the food bank project, discuss the importance of each of the four types of risks identified in Figure 11-4 (technical, management, commercial, and external), and explain the significance of creating an RBS.

Risks in “Cause-Risk-Effect” Format

To differentiate risks from facts and define risks adequately, the “cause-risk-effect” format can be used. The following risks are identified for the food bank project:

1.1 Technical Risk: As a result of inadequate scope definition for the food bank facility, there could be design rework and wasted efforts, which may lead to a delay in project completion by two to four weeks.

1.2 Management Risk: As a result of poor project management practices, such as ineffective coordination and communication, there could be delays in decision-making and approvals, leading to a potential two-week delay in project completion.

1.3 Commercial Risk: As a result of unfavorable contractual terms and conditions with suppliers, there could be delays in the procurement process, impacting the timely availability of resources and materials, thus extending the project timeline.

1.4 External Risk: As a result of unforeseen environmental/weather conditions, such as extreme weather events or natural disasters, there could be disruptions to construction activities and delivery schedules, causing project delays and cost overruns.

Importance of Four Types of Risks

a) Technical Risk: Technical risks are crucial as they address factors related to the project’s technical aspects, such as scope, requirements, and technical interfaces (6.4 Technical Risk Management, n.d.). Effective management of technical risks ensures that the project meets its objectives and delivers the desired outcomes within the allocated time and resources.

b) Management Risk: Management risks involve challenges related to project management, program/portfolio management, operations management, and organizational factors. Proper identification and mitigation of management risks are vital to ensure efficient project coordination, communication, and resource allocation.

c) Commercial Risk: Commercial risks encompass risks associated with contracts, procurement, supplies, vendors, and client stability. Managing commercial risks helps in ensuring smooth procurement processes, adherence to contractual obligations, and maintaining healthy relationships with stakeholders.

d) External Risk: External risks refer to factors beyond the project team’s control, such as legislative changes, exchange rates, environmental conditions, competition, and regulatory requirements. Addressing external risks enables the project team to anticipate and mitigate potential threats that may impact the project’s success.

Risk Breakdown Structure (RBS)

Please refer to the attached appendix for the Risk Breakdown Structure (RBS) developed for the food bank project. The RBS follows the structure provided in Figure 11-4, with Level 0 representing all sources of project risk and subsequent levels categorizing the risks into technical, management, commercial, and external domains.

Importance of Creating an RBS

The Risk Breakdown Structure (RBS) plays a crucial role in effective risk management for projects. Here are the key reasons why creating an RBS is important:

a) Comprehensive Risk Identification: The RBS provides a systematic framework to identify risks across different aspects of the project, ensuring that risks are not overlooked or underestimated. It allows project managers to consider risks from various angles and perspectives.

b) Structured Risk Analysis: The RBS enables the project team to analyze risks in a structured manner, categorizing them into different domains and levels. This helps in prioritizing risks based on their potential impact and likelihood, facilitating the allocation of appropriate resources and mitigation strategies.

c) Clear Communication: The RBS serves as a communication tool, allowing project managers to effectively communicate risks to stakeholders and team members. It provides a common language and understanding of risks, facilitating discussions and decision-making related to risk response strategies.

d) Risk Response Planning: By breaking down risks into specific categories and levels, the RBS helps in developing targeted risk response plans. It ensures that the identified risks are adequately addressed, and appropriate mitigation measures are implemented.

e) Proactive Risk Management: The RBS promotes proactive risk management by encouraging project managers to identify risks early in the project lifecycle. This allows for timely risk response planning, reducing the likelihood and impact of potential risks.

Conclusion

Managing project risks is crucial for successful project completion. The Risk Breakdown Structure (RBS) provides project managers with a valuable tool to identify and manage risks effectively. By using the “cause-risk-effect” format, project-specific risks can be identified and analyzed. The four types of risks identified in Figure 11-4 (technical, management, commercial, and external) are essential considerations for risk management. The developed RBS for the food bank project categorizes risks into these domains, enabling focused risk analysis and response planning. By creating an RBS, project managers can comprehensively address risks, enhance communication, and proactively manage potential threats to project success.

References

6.4 Technical Risk Management. (n.d.). 6.4 Technical Risk Management. NASA. https://www.nasa.gov/seh/6-4-technical-risk-management 

Mulcahy, R. (2003). Risk management: Tricks of the trade for project managers: A course in a book. Minneapolis, MN: RMC Pub. https://books.google.com/books/about/Risk_Management.html?id=wl7bQgAACAAJ 

Project Management Institute. (2017). A guide to the project management body of knowledge: (PMBOK® guide) (6th ed.). Newtown Square, PA, USA: Project Management Institute. https://www.pmi.org/pmbok-guide-standards/foundational/pmbok