Developing a risk-assesment methodology in the U.K.defence industry

As a leading defence equipment company, the Dynamics Divisionof British Aerospace Defence Company (BAeDef(DD)) has experiencedthe worst effects of post-Coldwar defence cuts, a global recession,and a determination by the U.K. Government to achieve greatervalue for money in defence procurement. The major tenet of thisnew approach to defence prwurement was 'eyes on, hands off',promoting a shift of the management of project risks from theMinistry of Defence (MOD) to industry. Initial industry reactionwas sceptical but bxame increasingly compliant as tenderingrequirements included visibility of contractors' risk assessment.This paper describes the risk-assessment methodology createdby BAeDef(DD) to meet these changed conditions. The human and organizational aspects of these developments onrisk have helped create a pro-active risk-management cultureat BAeDef(DD). Continuous assessment of project risks providesthe impetus for wider thinking beyond risk-taking or risk-aversionpreferences, leading to greater realism in planning. Decisionsto implement risk resolution measures require competence incost-benefit analysis. The conditions to foster this new behaviourare better-informed senior management, with the rejection ofbad news eliminated at all levels, and the laying of a pathto becoming a learning company.