Risk breakdown structure

Risk breakdown structure
See also
Process of risk management Integration of risk management Risk response strategies Risk assessment methodology Risk management models Construction risk management Risk of software Measure risk Construction project risk

A Risk Breakdown Structure (RBS) is a tool used in project management to identify and organize potential risks for a project. It is a hierarchical breakdown of all the risks associated with a project, including categories, subcategories, and individual risks. It provides an organized view of risks and helps to identify interrelationships between risks. A RBS typically follows the project’s Work Breakdown Structure in order to identify risks associated with each project component. It is used to document and track risks throughout a project’s life cycle, helping to ensure they are addressed in a timely manner.

Example of risk breakdown structure

• Risk Breakdown Structure Example 1:

Project: Construction of a new office building

High-Level Category: Legal Sub-Category 1: Regulatory Compliance Individual Risk: Building does not meet local building codes

Sub-Category 2: Liability Individual Risk: Contractors are not properly insured

High-Level Category: Financial Sub-Category 1: Budget Individual Risk: Project is over budget

Sub-Category 2: Funding Individual Risk: Funding sources are unreliable

High-Level Category: Environmental Sub-Category 1: Air Quality Individual Risk: Pollutants from construction materials exceed legal limits

Sub-Category 2: Water Quality Individual Risk: Runoff from construction site contaminates local water supply

• Risk Breakdown Structure Example 2:

Project: Launch of a new website

High-Level Category: Technical Sub-Category 1: Security Individual Risk: Website is vulnerable to cyber attacks

Sub-Category 2: Performance Individual Risk: Website is slow to load

High-Level Category: Design Sub-Category 1: Usability Individual Risk: Navigation is confusing for users

Sub-Category 2: Visuals Individual Risk: Website design is outdated and looks unprofessional

High-Level Category: Marketing Sub-Category 1: Reach Individual Risk: Limited audience due to inadequate promotion

Sub-Category 2: Conversion Individual Risk: Low conversion rate due to lack of compelling content

Best practices of risk breakdown structure

1. Clearly define the scope of the project: A Risk Breakdown Structure should be created within the context of the project’s scope. This helps ensure that all potential risks associated with the project are identified and documented.
2. Establish risk categories: Establishing categories to organize risks helps to identify and prioritize risks. Categories should be based on the project’s scope and objectives.
3. Brainstorm and brainstorm again: Brainstorming is a powerful tool to identify potential risks associated with the project. It is important to brainstorm multiple times to ensure all risks are identified and documented.
4. Assign risk owners: Assigning risk owners is important to ensure risks are properly addressed. Risk owners should be knowledgeable and have the authority to take action if needed.
5. Monitor and review risks: It is important to monitor and review risks on a regular basis to ensure they are being addressed in a timely manner. This helps to ensure the project remains on track.
6. Update the RBS: As the project progresses, the Risk Breakdown Structure should be updated to reflect new risks, changes in risk levels, and actions taken to address risks.

When to use risk breakdown structure

A Risk Breakdown Structure (RBS) is a tool used in project management to identify and organize potential risks for a project. It is typically used in the following situations:

• At the beginning of a project to identify potential risks and develop a plan to mitigate them.
• During the project to track risks and identify new risks as they arise.
• At the end of the project to review the effectiveness of the risk management plan.
• For project audits to verify that potential risks have been identified and addressed.

Types of risk breakdown structure

A Risk Breakdown Structure (RBS) is a tool used in project management to identify and organize potential risks for a project. There are four main types of RBS:

• Event-based - This type of RBS focuses on potential events that could occur during the project. These events are grouped according to their likelihood of occurring and their potential impact on the project.
• Cause-and-effect - This type of RBS links potential causes with their potential effects. It is used to identify potential risk areas and potential solutions.
• Risk-based - This type of RBS focuses on the risk itself. It categorizes risks by their potential severity and likelihood of occurrence.
• Threat-based - This type of RBS identifies potential threats to the project and assesses their potential impact. It is used to develop countermeasures and strategies to mitigate the risks.

Advantages of risk breakdown structure

A Risk Breakdown Structure (RBS) provides several advantages when it comes to project risk management. It enables an organized view of all the potential risks associated with a project, helping to identify interrelationships between risks. Additionally, it helps to ensure that all risks are addressed in a timely manner and tracked throughout the project’s life cycle. Furthermore, it can be used to generate a risk register, which is a document that outlines all the risks associated with a project and how they will be managed. Finally, it can help to identify areas of high risk and can be used to generate mitigation strategies. *Organizes and identifies risks associated with a project.

• Helps to ensure that risks are addressed in a timely manner.
• Allows for the generation of a risk register.
• Provides visibility into areas of high risk and helps to generate mitigation strategies.

Limitations of risk breakdown structure

A Risk Breakdown Structure (RBS) is a tool used in project management to identify and organize potential risks for a project. However, it has several limitations. These include:

• The RBS does not provide a comprehensive analysis of all risks associated with the project. It does not identify or measure the impact of individual risks or their interrelationships.
• It also does not provide information on how to address or mitigate risks.
• It may not be able to identify certain risks until they occur, meaning that it may not be effective in helping to anticipate and prevent risks.
• Implementing a RBS can be time consuming and costly, especially for complex projects.
• It can also be difficult to keep the RBS up to date as the project progresses, particularly if any changes are made to the project scope.

Suggested literature

• Hillson, D. (2003). Using a risk breakdown structure in project management. Journal of Facilities management, 2(1), 85-97.
• Sigmund, Z., & Radujković, M. (2014). Risk breakdown structure for construction projects on existing buildings. Procedia-Social and Behavioral Sciences, 119, 894-901.