Risk analysis in engineering and economics

✍ Scribed by Ayyub, Bilal M

• Publisher: CRC Press, Taylor & Francis
• Year: 2014
• Tongue: English
• Leaves: 642
• Series: A Chapman & Hall Book
• Edition: 2. ed
• Category: Library

✦ Table of Contents

Risk Analysis in Engineering and Economics, 2nd Endition......Page 4
Contents......Page 8
Preface......Page 18
Structure, Format, and Main Features......Page 19
Acknowledgments......Page 22
Author......Page 24
1.1 Societal Needs and Demands......Page 26
1.2 Historical Perspectives on the Origins of Risk Analysis and Management......Page 27
1.3 Risk Types with Varying Impacts: From Nuisances to Existential......Page 30
1.4 Systems Framework......Page 38
1.5 Knowledge......Page 44
1.6 Cognition and Cognitive Science......Page 48
1.7.1 Evolutionary Nature of Knowledge......Page 49
1.7.2 Classifying Ignorance......Page 53
1.7.3 Ignorance Hierarchy......Page 55
1.7.4 Mathematical Models for Ignorance Types......Page 61
1.8.2 Subjective Uncertainty......Page 63
1.9.1 Abstracted System Aspects......Page 66
1.9.2 Nonabstracted System Aspects......Page 67
1.9.3 Unknown System Aspects......Page 68
1.10 Exercise Problems......Page 69
2. Terminology and Fundamental Risk Methods......Page 72
2.2.1 Systems, Events, Scenarios, and Failure Modes......Page 74
2.2.2 Hazards and Threats......Page 75
2.2.4 Performance, Probability, and Reliability......Page 77
2.2.5 Exposure, Consequences, and Contingency......Page 78
2.2.6.1 Definition......Page 79
2.2.6.2 Risk Matrices or Heat Maps......Page 82
2.2.6.3 Risk Quantified Using Loss or Impact Probability Functions......Page 85
2.2.7 Asset Security and Protection......Page 88
2.2.8 Risk Management and Communication......Page 91
2.3.1 Risk Studies......Page 95
2.3.3 Qualitative versus Quantitative Risk Assessment......Page 96
2.3.4 Risk-Based Technology......Page 97
2.3.5 Risk Assessment Methodologies......Page 98
2.4.1 Risk Categories and Breakdown......Page 102
2.4.2 Identification of Risk Events and Factors......Page 105
2.4.3.1 Events and Causal Factor Analysis with Barrier and Change Analyses......Page 114
2.4.3.2 Cause-and-Effect Analysis Using Ishikawa Diagrams......Page 116
2.4.3.3 Events and Causal Factors Analysis, and Pareto Analysis......Page 117
2.4.4 Precursor Event Analysis......Page 119
2.5.1 Introduction......Page 121
2.5.4 Swiss Cheese Model......Page 125
2.5.5 Failure Mode and Effects Analysis......Page 127
2.5.6.1 Event Trees......Page 135
2.5.6.2 Fault and Success Trees......Page 139
2.5.6.3 Common-Cause Scenarios......Page 145
2.5.6.5 Probability and Decision Trees......Page 147
2.6 Human-Related Risks......Page 149
2.6.1 Human Errors......Page 150
2.6.1.2 Human Error Quantification......Page 151
2.6.3 Game Theory for Intelligent Threats......Page 152
2.7.1 Political and Country Risks......Page 159
2.7.2 Economic and Financial Risks......Page 161
2.7.5 Operational Risks......Page 163
2.8.1 Risk Acceptance......Page 164
2.8.1.1 Risk Conversion Factors......Page 167
2.8.1.2 Farmer’s Curves......Page 169
2.8.1.4 Magnitudes of Risk Consequence......Page 171
2.8.1.6 Risk Comparisons......Page 173
2.8.2 Rankings Based on Risk Results......Page 174
2.8.4 Decision Analysis......Page 175
2.8.5 Benefit–Cost Analysis......Page 176
2.8.6 Countermeasures and Mitigations......Page 177
2.9 Data Needs of Risk Methods......Page 179
2.10.1 Risk Representation......Page 180
2.10.1.2 Exceedance Probability Distributions......Page 181
2.10.2 Risk Communication......Page 184
2.10.3 Risk Documentation......Page 186
2.11 Limitations and Pitfalls of Risk Assessment......Page 187
2.12 Exercise Problems......Page 188
3. System Definition and Structure......Page 196
3.2 Perspectives on System Definition......Page 197
3.3.1 Functional Analysis......Page 203
3.3.2 Requirements Analysis......Page 205
3.3.4 Contributing Factor Diagrams......Page 206
3.3.5 Decision Trees and Influence Diagrams......Page 208
3.3.5.4 Associated Probabilities and Consequences......Page 209
3.3.5.5 Tree Construction......Page 210
3.3.5.6 Influence Diagrams......Page 212
3.3.6 Bayesian Networks......Page 214
3.3.6.1 Variables......Page 215
3.3.6.4 Network Creation......Page 216
3.3.7.1 Systems Engineering Process......Page 230
3.3.7.2 Life Cycle of Engineering Systems......Page 233
3.3.7.3 Technical Maturity Model......Page 236
3.3.7.4 Spiral Development Process......Page 237
3.3.8 Black-Box Method......Page 238
3.3.9 State-Based Method......Page 240
3.3.10 Component Integration Method......Page 243
3.4.1 Introduction......Page 244
3.4.2 Knowledge and Information Hierarchy......Page 245
3.4.2.2 Data Systems......Page 246
3.4.2.5 Metasystems......Page 247
3.5 System Complexity......Page 248
3.6 Exercise Problems......Page 251
4. Failure Probability Assessment......Page 258
4.1 Introduction......Page 259
4.2.1 Performance Function and Integration......Page 260
4.2.2.1 Reliability Index......Page 261
4.2.2.2 Nonlinear Performance Functions and the Advanced Second Moment Method......Page 263
4.2.2.3 Equivalent Normal Distributions......Page 265
4.2.2.4 Correlated Random Variables......Page 266
4.2.2.5 Numerical Algorithms......Page 268
4.2.3.1 Direct Monte Carlo Simulation Method......Page 272
4.2.3.2 Conditional Expectation Simulation Method......Page 273
4.2.3.3 Importance Sampling......Page 274
4.2.3.4 Correlated Random Variables......Page 275
4.2.4 Time-Dependent Reliability Analysis......Page 279
4.2.5 Resilience......Page 284
4.3.1 Failure and Repair......Page 287
4.3.2 Types of Data......Page 288
4.3.3 Availability......Page 290
4.3.4.1 Exponential Distribution......Page 291
4.3.5 Hazard Functions......Page 292
4.3.6.1 Complete Data without Censoring......Page 294
4.3.6.2 Samples with Censoring......Page 299
4.3.6.3 Parametric Reliability Functions......Page 302
4.3.6.4 Parameter Estimation Using Loglinear Transformation......Page 303
4.3.6.5 Nonlinear Model Estimation......Page 305
4.3.6.6 Probability Plotting......Page 307
4.3.6.7 Assessment of Hazard Functions......Page 309
4.3.7 Case Study: Reliability Data Analysis of Hydropower Equipment......Page 312
4.3.7.1 Reliability Data......Page 313
4.3.7.2 Fitting Reliability Models......Page 314
4.3.7.2.1 Individual Univariate Models for the 12 POL and Power Combinations......Page 315
4.3.7.2.2 Bivariate Models Using POL Years......Page 317
4.4 Software Reliability......Page 318
4.5.1 Bayes’ Theorem......Page 321
4.5.2 Estimating Binomial Distribution......Page 322
4.5.3 Parameter Estimation for the Exponential Distribution......Page 327
4.6.1 System Failure Definition......Page 330
4.6.2 Series Systems......Page 331
4.6.3 Parallel Systems......Page 337
4.6.4 Series–Parallel Systems......Page 343
4.6.5 k-out-of-n Systems......Page 346
4.7 Exercise Problems......Page 349
5. Failure Consequences and Valuations......Page 362
5.1 Introduction......Page 363
5.2.1 Cause–Consequence Diagrams......Page 364
5.2.2 Functional Modeling......Page 367
5.3.1 Values and Their Distinctions......Page 370
5.3.3 Economic Valuation......Page 371
5.4.1 Analytical Cost Estimation Models......Page 373
5.4.2 Empirical Models and Simulation......Page 375
5.4.3 Expert Opinions......Page 377
5.5 Loss of Human Life......Page 386
5.5.1 Willingness to Pay Method......Page 388
5.5.2 Human Capital Method......Page 394
5.5.3 Comparison the Willingness to Pay and Human Capital Methods......Page 395
5.5.4 War Fatality and Other Compensations......Page 396
5.5.5 Typical Values of Statistical Life......Page 397
5.5.6.2 Floodplains......Page 399
5.5.6.3 Demographics......Page 400
5.5.6.4 Simulating Dam Breach Inundation......Page 402
5.5.6.5 Dam Failure and Flood Fatalities......Page 403
5.6 Disability, Illness, and Injury......Page 407
5.7.1 Tort Liability......Page 409
5.7.2 Professional Liability......Page 410
5.8 Indirect Losses......Page 411
5.9 Public Health and Ecological Damages......Page 412
5.9.1 Toxicity Assessment......Page 415
5.10 Exercise Problems......Page 416
6. Engineering Economics and Finance......Page 420
6.1.1 Need for Economics......Page 421
6.1.3 Engineering and Economic Studies......Page 423
6.2 Fundamental Economic Concepts......Page 424
6.3 Cash Flow Diagrams......Page 425
6.4.1 Types of Interest......Page 426
6.4.2.1 Single-Payment, Compound-Amount Factor......Page 428
6.4.2.2 Single-Payment, Present-Worth Factor......Page 429
6.4.2.3 Equal-Payment-Series, Compound-Amount Factor......Page 430
6.4.2.5 Equal-Payment-Series, Capital-Recovery Factor......Page 432
6.4.2.6 Equal-Payment-Series, Present-Worth Factor......Page 433
6.4.2.7 Uniform-Gradient-Series Factor......Page 434
6.4.3.1 Compounding Frequency......Page 435
6.4.4 Summary of Interest Formulae......Page 436
6.4.5 Choosing a Discount Rate......Page 437
6.5.2 Equivalence Calculations......Page 438
6.5.3 Amortization Schedule for Loans......Page 440
6.6.2 Annual Inflation Rate......Page 441
6.6.4 Constant Dollars......Page 442
6.7.1 Present-, Annual-, and Future-Worth Amounts......Page 443
6.7.3 Payback Period......Page 444
6.8 Exercise Problems......Page 445
7.1 Introduction......Page 450
7.2 Philosophies of Risk Control......Page 451
7.3 Risk Aversion in Investment Decisions......Page 453
7.4.1 Risk Reduction or Elimination......Page 465
7.5 Risk Homeostasis......Page 466
7.6.2 Risk Actuaries and Insurance Claim Models......Page 468
7.6.2.1 Modeling Loss Accumulation......Page 470
7.6.2.2 Subjective Severity Assessment......Page 472
7.6.2.3 Computational Procedures and Illustrations......Page 473
7.7 Benefit–Cost Analysis......Page 475
7.8 Risk Financing......Page 481
7.9 Loss Exposure and Residual Risk......Page 482
7.10 Exercise Problems......Page 485
8. Data for Risk Studies......Page 490
8.2 Data Sources......Page 491
8.3.3 Industry Failure Databases and Statistics......Page 493
8.3.6 Challenges Associated with Data from Other Sources......Page 494
8.4.2 Theoretical Bases and Terminology......Page 496
8.4.3 Classification of Issues, Study Levels, Experts, and Process Outcomes......Page 498
8.4.4 Process Definition......Page 499
8.4.6 Selection of Study Level and Study Leader......Page 500
8.4.7.2 Selection of Experts......Page 502
8.4.8 Identification, Selection, and Development of Technical Issues......Page 504
8.4.9.1 Issue Familiarization of Experts......Page 506
8.4.9.3 Elicitation and Collection of Opinions......Page 507
8.4.9.4 Aggregation and Presentation of Results......Page 508
8.4.9.6 Documentation and Communication......Page 509
8.5 Model Modification Based on Available Data......Page 514
8.6 Failure Data Sources......Page 515
8.7 Exercise Problems......Page 516
9.1 Maintenance Methodology......Page 520
9.3 Partitioning of the System......Page 522
9.4 Development of optimal Maintenance Policy for Components......Page 523
9.4.3 Development of Condition States......Page 527
9.4.5 Maintenance Actions and Costs......Page 528
9.4.6 Transition Probabilities for Cases without Maintenance Actions......Page 529
9.4.7 Failure Consequences and Expected Failure Cost......Page 532
9.4.8 Transition Probabilities for Cases with Maintenance Actions......Page 533
9.4.9 Risk-Based Optimal Maintenance Policy......Page 534
9.5 Maintenance Implementation and Development of Risk-Ranking Scheme......Page 535
9.7 Implementation of Maintenance Strategies and Updating System......Page 536
9.8 An Application: optimal Maintenance Management of Ship Structures......Page 537
Appendix A: Fundamentals of Probability and Statistics......Page 548
A.1 Sample Spaces, Sets, and Events......Page 549
A.2 Mathematics of Probability......Page 551
A.3.1 Probability for Discrete Random Variables......Page 555
A.3.2 Probability for Continuous Random Variables......Page 556
A.4 Moments......Page 557
A.5.2 Binomial Distribution......Page 560
A.5.4 Poisson Distribution......Page 562
A.5.5 Negative Binomial and Pascal Distributions......Page 563
A.6 Common Continuous Probability Distributions......Page 564
A.6.2 Normal Distribution......Page 565
A.6.3 Lognormal Distribution......Page 567
A.6.4 Exponential Distribution......Page 568
A.6.5 Triangular Distribution......Page 569
A.6.7 Rayleigh Distribution......Page 570
A.6.9 Statistical Probability Distributions......Page 571
A.6.10 Extreme Value Distributions......Page 573
A.7 Summary of Probability Distributions......Page 576
A.8.1 Probability for Discrete Random Vectors......Page 578
A.8.2 Probability for Continuous Random Vectors......Page 579
A.8.3 Conditional Moments, Covariance, and Correlation Coefficient......Page 581
A.9.1 Probability Distributions for Functions of Random Variables......Page 583
A.9.2.1 Single Random Variable X......Page 585
A.10 Samples and Populations......Page 586
A.11.1 Estimation of Moments......Page 587
A.11.2 Method-of-Moments Estimation......Page 588
A.11.3 Maximum Likelihood Estimation......Page 589
A.12.1 Sampling Distribution of the Mean......Page 590
A.13 Hypothesis Testing for Means......Page 591
A.13.1 Test of the Mean with Known Population Variance......Page 592
A.13.2 Test of the Mean with Unknown Population Variance......Page 593
A.14 Hypothesis Testing of Variances......Page 594
A.14.1 One-Sample Chi-Square Test......Page 595
A.14.2 Two-Sample F Test......Page 596
A.15.1 Confidence Interval for the Mean......Page 597
A.15.2 Confidence Interval for the Variance......Page 598
Appendix B: Failure Data......Page 600
References and Bibliography......Page 614
Index......Page 628

✦ Subjects

Reliability (Engineering);Technology--Risk assessment;Technology -- Risk assessment