Risk Analysis in Engineering and Economics

642 Pages·2014·12.658 MB·English

by  Bilal M. Ayyub

Risk Analysis
in Engineering
and Economics
SECOND EDITION

Risk Analysis
in Engineering
and Economics

S E C O N D E D I T I O N
Bilal M. Ayyub
University of Maryland
College Park, USA
CRC Press
Taylor & Francis Group
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Contents
Preface ..........................................................................................................................................xvii
Acknowledgments ......................................................................................................................xxi
Author .........................................................................................................................................xxiii
1. Introduction .............................................................................................................................1
1.1 Societal Needs and Demands .....................................................................................1
1.2 Historical Perspectives on the Origins of Risk Analysis and Management ........2
1.3 Risk Types with Varying Impacts: From Nuisances to Existential ........................5
1.4 Systems Framework ....................................................................................................13
1.5 Knowledge ...................................................................................................................19
1.6 Cognition and Cognitive Science..............................................................................23
1.7 Ignorance as Knowledge Deficiency ........................................................................24
1.7.1 Evolutionary Nature of Knowledge ............................................................24
1.7.2 Classifying Ignorance ...................................................................................28
1.7.3 Ignorance Hierarchy ......................................................................................30
1.7.4 Mathematical Models for Ignorance Types ................................................36
1.8 Aleatory and Epistemic Uncertainties .....................................................................38
1.8.1 Inherent Uncertainty .....................................................................................38
1.8.2 Subjective Uncertainty ..................................................................................38
1.9 Knowledge and Ignorance in System Abstraction .................................................41
1.9.1 Abstracted System Aspects ..........................................................................41
1.9.2 Nonabstracted System Aspects ....................................................................42
1.9.3 Unknown System Aspects ............................................................................43
1.10 Exercise Problems .......................................................................................................44
2. Terminology and Fundamental Risk Methods ..............................................................47
2.1 Introduction .................................................................................................................49
2.2 Risk-Related Terminology and Definitions .............................................................49
2.2.1 Systems, Events, Scenarios, and Failure Modes ........................................49
2.2.2 Hazards and Threats .....................................................................................50
2.2.3 Uncertainty and Ignorance ...........................................................................52
2.2.4 Performance, Probability, and Reliability ..................................................52
2.2.5 Exposure, Consequences, and Contingency ..............................................53
2.2.6 Risk ..................................................................................................................54
2.2.6.1 Definition .........................................................................................54
2.2.6.2 Risk Matrices or Heat Maps ..........................................................57
2.2.6.3 Risk Quantified Using Loss or Impact Probability
Functions .....................................................................................60
2.2.7 Asset Security and Protection ......................................................................63
2.2.8 Risk Management and Communication .....................................................66
2.3 Risk Assessment ..........................................................................................................70
2.3.1 Risk Studies ....................................................................................................70
2.3.2 Risk Identification, Analysis, and Evaluation ............................................71
2.3.3 Qualitative versus Quantitative Risk Assessment ....................................71
vii
viii Contents
2.3.4 Risk-Based Technology .................................................................................72
2.3.5 Risk Assessment Methodologies .................................................................73
2.4 Risk Events and Factors..............................................................................................77
2.4.1 Risk Categories and Breakdown ..................................................................77
2.4.2 Identification of Risk Events and Factors ...................................................80
2.4.3 Root Cause Analysis ......................................................................................89
2.4.3.1 Events and Causal Factor Analysis with Barrier and
Change Analyses ............................................................................89
2.4.3.2 Cause-and-Effect Analysis Using Ishikawa Diagrams .............91
2.4.3.3 Events and Causal Factors Analysis, and Pareto Analysis ......92
2.4.4 Precursor Event Analysis..............................................................................94
2.5 Risk Assessment Methods .........................................................................................96
2.5.1 Introduction ....................................................................................................96
2.5.2 Preliminary Hazard Analysis ....................................................................100
2.5.3 Risk Register .................................................................................................100
2.5.4 Swiss Cheese Model ....................................................................................100
2.5.5 Failure Mode and Effects Analysis ...........................................................102
2.5.6 Scenario Modeling and Logic Trees ..........................................................110
2.5.6.1 Event Trees ....................................................................................110
2.5.6.2 Fault and Success Trees ...............................................................114
2.5.6.3 Common-Cause Scenarios ..........................................................120
2.5.6.4 Sensitivity Factors ........................................................................122
2.5.6.5 Probability and Decision Trees ..................................................122
2.5.6.6 Logic Trees Compared .................................................................124
2.6 Human-Related Risks ...............................................................................................124
2.6.1 Human Errors ...............................................................................................125
2.6.1.1 Human Error Modeling ..............................................................126
2.6.1.2 Human Error Quantification ......................................................126
2.6.1.3 Reducing Human Errors .............................................................127
2.6.1.4 Human Reliability Assessment ..................................................127
2.6.2 Deliberate Human Threats .........................................................................127
2.6.3 Game Theory for Intelligent Threats ........................................................127
2.7 Political, Economic, and Financial Risks ...............................................................134
2.7.1 Political and Country Risks ........................................................................134
2.7.2 Economic and Financial Risks ...................................................................136
2.7.3 Market Risks .................................................................................................138
2.7.4 Credit Risks ..................................................................................................138
2.7.5 Operational Risks ........................................................................................138
2.7.6 Reputation Risks ..........................................................................................139
2.8 Risk Treatment and Control ....................................................................................139
2.8.1 Risk Acceptance ...........................................................................................139
2.8.1.1 Risk Conversion Factors ..............................................................142
2.8.1.2 Farmer’s Curves ............................................................................144
2.8.1.3 Method of Revealed Preferences ................................................146
2.8.1.4 Magnitudes of Risk Consequence .............................................146
2.8.1.5 Risk Reduction Cost-Effectiveness Ratio ..................................148
2.8.1.6 Risk Comparisons ........................................................................148
2.8.2 Rankings Based on Risk Results ...............................................................149
2.8.3 Strategy Tables ..............................................................................................150
Contents ix
2.8.4 Decision Analysis ........................................................................................150
2.8.5 Benefit–Cost Analysis .................................................................................151
2.8.6 Countermeasures and Mitigations ............................................................152
2.9 Data Needs of Risk Methods ...................................................................................154
2.10 Risk Representation, Communication, and Documentation ..............................155
2.10.1 Risk Representation .....................................................................................155
2.10.1.1 Fundamentals of Risk Representation ......................................156
2.10.1.2 Exceedance Probability Distributions .......................................156
2.10.2 Risk Communication ...................................................................................159
2.10.3 Risk Documentation ....................................................................................161
2.11 Limitations and Pitfalls of Risk Assessment .........................................................162
2.12 Exercise Problems .....................................................................................................163
3. System Definition and Structure .....................................................................................171
3.1 Introduction ...............................................................................................................172
3.2 Perspectives on System Definition .........................................................................172
3.3 Methods for System Definition ...............................................................................178
3.3.1 Functional Analysis .....................................................................................178
3.3.2 Requirements Analysis ...............................................................................180
3.3.3 Work Breakdown Structure ........................................................................181
3.3.4 Contributing Factor Diagrams ...................................................................181
3.3.5 Decision Trees and Influence Diagrams ...................................................183
3.3.5.1 Decision Trees ...............................................................................184
3.3.5.2 Decision Variables ........................................................................184
3.3.5.3 Decision Outcomes ......................................................................184
3.3.5.4 Associated Probabilities and Consequences ............................184
3.3.5.5 Tree Construction .........................................................................185
3.3.5.6 Influence Diagrams ......................................................................187
3.3.6 Bayesian Networks ......................................................................................189
3.3.6.1 Variables ........................................................................................190
3.3.6.2 Relationships in a Bayesian Model ............................................191
3.3.6.3 Inference ........................................................................................191
3.3.6.4 Network Creation .........................................................................191
3.3.7 Process Modeling Methods ........................................................................205
3.3.7.1 Systems Engineering Process .....................................................205
3.3.7.2 Life Cycle of Engineering Systems ............................................208
3.3.7.3 Technical Maturity Model ..........................................................211
3.3.7.4 Spiral Development Process .......................................................212
3.3.8 Black-Box Method ........................................................................................213
3.3.9 State-Based Method .....................................................................................215
3.3.10 Component Integration Method ................................................................218
3.4 Hierarchical Definitions of Systems .......................................................................219
3.4.1 Introduction ..................................................................................................219
3.4.2 Knowledge and Information Hierarchy ...................................................220
3.4.2.1 Source Systems .............................................................................221
3.4.2.2 Data Systems .................................................................................221
3.4.2.3 Generative Systems ......................................................................222
3.4.2.4 Structure Systems .........................................................................222
3.4.2.5 Metasystems ..................................................................................222