How much risk can you afford?

Decisions during the design and development of complex engineering equipment primarily involve trade-offs between cost and risk. However slight, there will always exist some chance that a item of equipment will not function as planned for the specified duration. Usually this incurs some financial penalty, charged to the producer. The majority of research into reliability modelling has focused on measuring the likelihood of such an occurrence and formally highlighting alternatives towards minimising it. The alternatives are compared in an ad hoc manner through consideration of the trade-offs between the penalties associated with failures in the field and the expense of development programmes prior to market release. The extension of reliability assessment models to formally incorporate the financial costs associated with 'unreliability' is much neglected. In this paper, we develop a theoretical framework to formally model the costs associated with failures experienced during operation and reliability development programmes. Such models should more effectively support cost-benefit decisions during the design and development of equipment. We illustrate the practical aspects of the model through an example.