Use a Risk Breakdown Structure (RBS) to Understand Your Risks

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 management chapter of A Guide to the Project Management Body of Knowledge (PMBOK® Guide, Project Management Institute, 2000). These identification techniques, however, tend to produce an unstructured list of risks that often does not directly assist the project manager in knowing where to focus risk management attention. Qualitative assessment can help to prioritize identified risks by estimating probability and impacts, exposing the most significant risks; but this deals with risks one at a time and does not consider possible patterns of risk exposure, and so also does not provide an overall understanding of the risk faced by the project as a whole. In order to understand which areas of the project might require special attention, and whether there are any recurring risk themes, or concentrations of risk on a project, it would be helpful if there were a simple way of describing the structure of project risk exposure. In any situation where a lot of data is produced, structuring is an essential strategy to ensure that the necessary information is generated and understood. The most obvious demonstration of the value of structuring within project management is the Work Breakdown Structure (WBS), which is recognized as a major tool for the project manager because it provides a means to structure the work to be done to accomplish project objectives. 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