Measure and Failure Cost Analysis: Selecting Risk Treatment Strategies

DS 58-3: Proceedings of ICED 09, the 17th International Conference on Engineering Design, Vol. 3, Design Organization and Management, Palo Alto, CA, USA, 24.-27.08.2009

Year: 2009
Editor: Norell Bergendahl, M.; Grimheden, M.; Leifer, L.; Skogstad, P.; Lindemann, U.
Author: Gericke, Kilian; Klimentew, Lars; Blessing, Lucienne
Series: ICED
Section: Design Organization and Management
Page(s): 61-72


Project Risk Management is used to prevent projects to fail. Despite its proven use, barriers still exist that hinder implementation and use by inexperienced persons. One barrier is the additional effort required by the process of Project Risk Management itself. An additional barrier is the lack of systematic support of important steps like the selection of an appropriate risk treatment strategy. The decision which strategy to select is a challenging task due to the uncertain character of the addressed issue. The trade-off of the perceived additional efforts caused by a method must be addressed by an enhancement of the cost-benefit ratio of the applied methods and implemented risk treatment measures. Decision making using the proposed Measure and Failure Cost Analysis (MFCA) method enables the Risk Manager to compare the arising costs of different risk treatment strategies caused by an occurring risk and risk treatment measures. It is based on a de-escalation principle which analyzes the course of the impact of an event. The method compares the reaction rate of different strategies and proposes the favorite one.

Keywords: Project Risk Management, Risk Treatment, Strategy


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