The material provides the information on risk assessment at Level 2. Written by Muqi Wulan.
Engineering design is a process involving creative and corrective steps. Selection and evaluation methods as well as tests and calculations help to identify and prevent risky problems. When the designers get awareness of the uncertainty or risk in design, it is possible for them to avoid severe technical and economic breakdowns by managing risk (Pahl et al 2007: 521).
What is a risk?
If you risk nothing, then you risk everything. There have been many definitions for risk. The well-recognised definition is that a risk is “the probability that a particular adverse event occurs during a stated period of time, or results from a particular challenge. As a probability in the sense of statistical theory, risk obeys all the formal laws of combining probabilities” (Royal Society 1992: 2). Risks exist only when a hazard exists. Table 1 lists six classes of hazards to which society is subject. Categories 3 and 4 directly related to engineering areas whilst categories 2, 5 and 6 provide design constraints (Dieter & Schmidt 2009: 669).
Table 1 – Classification of societal hazards
Table 2 specifically summarises the sources of possible risks (shown in the left column) which may cause the failures in product design and process development.
Table 2 – Possible risks in product design and development with measures to mitigate them (Pahl et al 2007: 520)
Risk Management (RM) process
Risk management process can generally be divided into four phases: risk identification, risk assessment, risk mitigation and risk communication (Mullai 2008: 83). These phases are carried out sequentially. However, risk management is a dynamic process. When a new risk is detected, it is necessary to respond to the change and perform re-evaluation effectively.
• Risk identification, which identifies all the possible risks, and presents them in quantitative or qualitative forms.
• Risk assessment, which compares the identified risks on assessment criteria, and determines the level of significance of each risk.
• Risk mitigation, which generates strategies to control and mitigate the identified risks. Table 2.2 shows possible mitigating measures (in the right column) to prevent the product and process related failures.
• Risk communication, which links other three phases and enables risk management in a dynamic and iterative way.
Figure 1 – A complete process of risk management (Mullai 2008: 83)Figure 2.1: A complete process of risk management (Mullai 2008: 83)
Risk assessment
Risk assessment is the step of risk management after possible risk sources have been analysed and identified. According to (Dieter & Schmidt 2009: 673), risk assessment is “an imprecise process involving judgement and intuition”. Different approaches to risk assessment have adopted the same method of risk calculation, as follows (Mitchell 1995: 115):
Risk (n) = P(n) × L(n) (1)
where n is an event causing a risk, P(n) is probability that event n will occur and L is severity of the loss (impact) caused by the event. Therefore, at the stage of risk assessment, it is very important to estimate the probability of occurrence of possible risks identified, and the severity of the loss or impact by these risks.
Risk Priority Number (RPN) is one of most popular method to assess the risk associated with the potential problems identified through the analysis. It is commonly used in the method of Failure Modes and Effect Analysis (FMEA). There are three quantitative factors to be considered: the severity of each effect of failure or risk, the probability of occurrence for each cause of failure or risk, and the likelihood of detecting the failure or risk. Then the ratings of the three factors are combined into a risk priority number (RPN) as shown below (Dieter & Schmidt 2009: 708).
RPN = Severity x Occurrence x Detection (2)
Since the rating of each factor is from 1 to 10, the value of RPN can vary from a maximum of 1000, the greatest risk, to a minimum of 1. If the RPN is larger than 125, the risk is considered critical. For detailed description of RPN, please refer to the material: Failure Modes and Effect Analysis (FMEA).
RPN uses numerical measures to rate in the quantitative form. To handle the imprecision in probabilistic estimation better, fuzzy based risk assessment employs linguistic terms to describe the probability and severity of adverse impacts of risks.
Summary
Risk assessment is to evaluate potential risks in technological systems. The probabilistic method is adopted to estimate risks by characterising two main factors: probability of occurrence of each risk and severity of loss of the risk.
References
Dieter, G.E., Schmidt, L.C. (2009) Engineering design, 4th edn. New York: McGraw-Hill
Mitchell, V.W. (1995) ‘Organisational risk perception and reduction: A literature review’. British Journal of Management 6(2), 115-133
Mullai, A. (2008) ‘Risk management system – A conceptual model’. in Supply Chain Risk, A Handbook of Assessment, Management, and Performance. ed. by Zsidisin, G.A. and Ritchie, B. New York: Springer
Pahl, G., Beitz, W., Feldhusen, J. and Grote, K. H. (2007) Engineering design: a systematic approach. 3rd edn. London: Springer
Royal Society (1992) Risk: analysis, perception and management. London: Royal Society
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