Managing rare and undetectable events in risk assessment: The case of a satellite system launch project

Abstract

Assessing the wide diversity of risk types in large and complex projects using the traditional hyperbolic iso-risks curves may seem a simplistic and reductive approach, and evaluating the risk factor through the multiplication of likelihood and severity parameters results in defining as dangerous those risks that are associated either with rare but devastating consequences or with probable but minor effects. In this work, the authors aimed at focusing on those risks that, despite their low occurrence probability, may significantly compromise a project result. To this extent, a different formula has been used to compute the risk factor, keeping into account risk detectability and evaluating the potential consequences in four different domains (cost, time, performance, reputation). This approach has been validated on the case of a large industrial project related to the launch of an innovative mobile telecommunications system, collecting the experts' opinions in a primary Italian firm in aerospace industry.