A Bayesian Model for Rare Event Risk Assessment Using Expert Judgment about Paired Scenario Comparisons

When challenged with understanding complex, technological systems, managers often use analysis to characterize risk. Managers use this information to design projects, develop policy, and allocate resources in order to mitigate system risk. This paper presents a Bayesian risk analysis methodology for combining expert judgment with the manager’s prior system knowledge to allow identification of risk mitigation opportunities. The model is demonstrated through a study of the nation’s largest passenger ferry system and the results compare favorably with previous classical analyses. Hence, this methodology might be useful to engineering managers for rare event risk analysis in other applications and other disciplines as well.