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Risk Reduction as the Product of Model Assessed Reliability, Confidence, and Consequence

This paper presents our methodology for verification and validation (V&V) of models, coupled to quantification of risk and risk reduction, and the use of risk, quantified as a dollar value, in the value-engineering and decision trade-off process. We begin by defining a simple measure of quantified risk, as the numerical product of three basic terms: the lower-bound model assessment of a product's reliability, multiplied by the confidence level used in the assessment, multiplied by the actuarial consequence value of the risk or risk reduction. We discuss our process for obtaining each of these three terms, and of other terms needed to complete the quantification process. An explosives impact test example is used to show the effects of model choice, data, and uncertainty methods on the resulting quantified risk reduction value. We then show how we use the quantified risk reduction value in a benefit/cost ranking method of value engineering. In this way, we can follow the simulation results from our explosive impact model all the way from V&V to risk to the investment trade-off decision process. Naturally, the nature of most such methodologies is still evolving, and this work represents the views of the authors and not necessarily the views of Lawrence Livermore National Laboratory.