THE RISK BREAKDOWN STRUCTURE (RBS) AS AN AID TO EFFECTIVE RISK MANAGEMENT

Abstract

Risk identification often produces nothing more than a long list of risks, which can be hard to understand or manage. The list can be prioritised to determine which risks should be addressed first, but this does not provide any insight into the structure of risk on the project. Traditional qualitative assessment cannot indicate those areas of the project which require special attention, or expose recurring themes, concentrations of risk, or “hot-spots” of risk exposure. The best way to deal with a large amount of data is to structure the information to aid comprehension. For risk management, this can be achieved with a Risk Breakdown Structure (RBS) – a hierarchical structuring of risks on the project. The RBS can assist in understanding the distribution of risk on a project, aiding effective risk management. Just as the Work Breakdown Structure (WBS) has been the project manager’s greatest tool because it scopes and defines the work, so the RBS can be an invaluable aid in understanding the risks to the project. The WBS forms the basis for many aspects of the project management process; similarly the RBS can be used to structure and guide the risk management process. This paper presents the concept of the RBS, and gives a number of examples drawn from different project types and industries. The benefits of using the RBS are then outlined, including as an aid for risk identification or risk assessment, comparison of projects, providing a framework for cross-project risk reporting, and structuring lessons to be learned for future projects. The Risk Breakdown Structure has the potential to become the single most valuable tool in assisting the project manager to understand and manage risks to his project. This paper shows how to use the RBS to gain these benefits.