What is a risk breakdown structure?

A risk breakdown structure (RBS) is a type of diagram or table used by project managers to identify risks and potential hazards associated with a project. It is a breakdown of the risk system as a whole, starting with the highest risk and breaking them down into different risks.

What are the benefits of using a risk assessment system for your project?

The purpose of the risk breakdown system is to help project managers plan and respond to risks throughout the life of the project.

By creating different levels of risk, all parties involved in the project can easily communicate with each other in tasks such as risk management planning, identification, analysis, response planning, and management.

In addition, knowing the different risk factors of a project helps to break down the project into smaller, more manageable, and easier-to-set goals.

Some of the benefits of using a risk breakdown system for your project include:

  • Plan and organize critical risks so that they are prioritized and resources can be allocated accordingly
  • Identify the risks at the beginning of the work life cycle and the risks that may affect each other
  • Assist in developing a project risk management plan by identifying potential risks and their causes
  • Provide a process to monitor and improve risk throughout the project’s life cycle
  • Communicate risks clearly and concisely to stakeholders
  • Find areas where future work can be improved

Create a risk breakdown plan for your business in four steps

The best way to create a risk mitigation plan for your business will vary depending on the specific company. Although the result may vary, there are a few steps you can follow.

1. Identify potential risks

When starting to identify the type of risk, it is important to understand where the risk may come from. There are many risks beyond the control of an organization that is difficult to prevent but still require awareness and preparation. To identify the risks in your work, it is important to reduce the risks, which may include:

  • External: Risks beyond the organization, such as the economy, natural disasters, and political unrest
  • Internal: under the control of the organization, such as poor financial management, poor decision-making, and employee turnover
  • Functionality: production issues, supply chain disruptions, and IT disruptions
  • Strategy: failure of new products, loss of market share, and competitive pressure
  • Finance: the money of an organization, credit, cost of goods and services, profit, and liquidation of the organization
  • Technology: data breaches, cyber-attacks, system failures, and incompatible or outdated technology.
  • Compliance: non-compliance with laws, regulations, contracts, or codes of conduct

2. Assign subcategories to each risk

With any type of damage hazard, you want to be as specific as possible so that you are well prepared. It is not enough to choose the right type of music for your business, you have to break them into categories.

3. Note any risks

After you have assigned all relevant risks to the department and department, you need to analyze and measure them. By conducting risk assessment and risk reporting, you can prioritize those that need immediate attention. A common way for project managers to categorize risk is to measure probability (P) and impact (I). It is likely to be a risk that occurs, and the impact is assessed to what extent it will affect the progress or results of the project. You can choose how to measure each of these factors, but it is common to have three to five options for probability and three for impact.

4. Build your system

Once you have gathered all your departments in different departments and assigned points for different risks identifying opportunities and important levels, the next step is to add all the data in a table so that all stakeholders can access the information.

When creating an RBS chart, it’s important to keep a few things in mind:

Arrange the table in a way that makes sense like by grouping risks by type or process
Use symbols and colors to distinguish between different types of hazards so the diagram is easy to understand
Include all relevant information for each risk, such as name, description, and potential impact
Review and update your RBS regularly as risks may change, become irrelevant and new ones may arise.

Of course, it is possible to create a risk analysis program in a program such as Microsoft Excel, but for detailed information, keeping this data in an Excel sheet can be very time-consuming. Instead, turn to project management software.