Developing a risk-assessment methodology in the UK defence industry

As a leading defence equipment company, the Dynamics Division of British Aeropsace Defence Company (BAeDef(DD)) has experienced the worst effects of post-Coldwar defence cuts, a global recession, and a determination by the UK Government to achieve greater value for money in defence procurement. The major tenet of this new approach to defence procurement was ‘eyes on, hands off’, promoting a shift of the management of project risks from the Ministry of Defence (MoD) to industry. Initial industry reaction was sceptical but became increasingly compliant as tendering requirements included visibility of contractors' risk assessment. This paper describes the risk-assessment methodology created by BAeDef(DD) to meet these changed conditions. The human and organizational aspects of these developments on risk have helped create a pro-active risk-management culture at BAeDef(DD). Continuous assessment of project risks provides the impetus for wider thinking beyond risk-taking or risk-aversion preferences, leading to greater realism in planning. Decisions to implement risk resolution measures require competence in cost–benefit analysis. The conditions to foster this new behaviour are better-informed senior management, with the rejection of bad news eliminated at all levels, and the laying of a path to becoming a learning company.