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the ability or necessity to trade one type of risk

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Unformatted text preview: lysis is the process of quantifying both the likelihood of occurrence and consequences of potential future events (or "states of nature" in some texts). The system engineer needs to decide whether risk identification and characterization are adequate, or whether the increased precision of risk analysis is needed for some uncertainties. In making that determination, the system engineer needs to balance the (usually) higher cost of risk analysis against the value of the additional information. Risk mitigation is the formulation, selection, and execution of strategies designed to economically reduce risk. When a specific risk is believed to be intolerable, risk analysis and mitigation are often performed iteratively, so that the effects of alternative mitigation strategies can be actively explored before one is chosen. Tracking the effectivity of these strategies is closely allied with risk mitigation. Risk mitigation is often a challenge because efforts and expenditures to reduce one type of risk may increase another type. (Some have called this the systems engineering equivalent of the Heisenberg Uncertainty Principle in quantum mechanics.) The ability (or necessity) to trade one type of risk for another means that the project manager and the system engineer need to understand the system-wide effects of various strategies in order to make a rational allocation of resources. Several techniques have been developed for each of these risk management activities. The principal ones, which are shown in Table 1, are discussed in Sections 4.6.2 through 4.6.4. The system engineer needs to choose the techniques that best fit the unique requirements of each project. A risk management program is needed throughout the project life cycle. In keeping with the doctrine of successive refinement, its focus, however, moves from the "big picture" in the early phases of the project life cycle (Phases A and B) to more specific issues during design and development (Phases C and D). During operations (Phase E), the focus changes again. A good risk management pro- gram is always forward-looking. In other words, a risk management program should address the project's...
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