Use a Risk Breakdown Structure (RBS) to Understand Your Risks
David Hillson, PhD, PMP, FAPM, MIRM, MCMI, Director of Consultancy, Project Management Professional Solutions Limited
Introducing the Risk Breakdown Structure (RBS)
The risk management process aims to identify and assess risks in order to enable the risks to be understood clearly and managed effectively. The key step linking identification/assessment of risks with their management is understanding. This is, however, the area where the project manager or risk practitioner gets least help from current guidelines or practice standards. There are many commonly used techniques for risk identification (see, for example, the risk ...view middle of the document...
The Project Management Institute defines a WBS as “A deliverable-oriented grouping of project elements that organizes and defines the total work scope of the project. Each descending level represents an increasingly detailed definition of the project work” (Project Management Institute, 2000, 2001). The aim of the WBS is to present project work in hierarchical, manageable and definable packages to provide a basis for project planning, communication, reporting, and accountability. In the same way, risk data can be organized and structured to provide a standard presentation of project risks that facilitates understanding, communication and management. Several attempts have
been made previously to organize various aspects of project risk, mostly concentrating on the sources from which risk arises. However, most of these are simple linear lists of potential sources of risk, providing a set of headings under which risks can be arranged (sometimes called a risk taxonomy). Examples include a generic risk taxonomy (Carter et al., 1994), and specific versions for construction projects (Akintoye & MacLeod, 1997), large projects (Jaafari, 2001), and international development projects (Kwak, 2001), as well as lists of risk categories or risk types in international standards and guidelines (for example, Godfrey, 1996; AS/NZS 4360:1999; BS6079-1:2000; IEC62198:2001). A simple list of risk sources does not provide the richness of the WBS since it only presents a single level of organization. A better solution to the structuring problem for risk management would be to adopt the full hierarchical approach used in the WBS, with as many levels as are required to provide the necessary understanding of risk exposure to allow effective management. Such a hierarchical structure of risk sources should be known as a Risk Breakdown Structure (RBS). Following the pattern of the WBS definition above, the RBS is defined here as “A source-oriented grouping of project risks that organizes and defines the total risk exposure of the project. Each descending level represents an increasingly detailed definition of sources of risk to the project.” The RBS is therefore a hierarchical structure of potential risk sources. The value of the WBS lies in its ability to scope and define the work to be done on the project; similarly the RBS can be an invaluable aid to understanding the risks faced by the project. Just as the WBS forms the basis for many aspects of the project management process, so the RBS can be used to structure and guide the risk management process.
Examples of RBS Structures
Some authors and practitioners have gone further in structuring risk than simply listing types of risk faced by a project. These have produced hierarchical structures under various names to describe sources of risk, or risk categories or types, though these are usually focused on a particular project type or application area. Examples include the “risk taxonomy” for software development...