Measuring the Risk of Shortfalls in Air Force Capabilities

The U.S. Air Force seeks to measure and prioritize risk as part of its Capabilities Review and Risk Assessment (CRRA) process. The goal of the CRRA is to identify capability shortfalls, and the risks associated with those shortfalls, to influence future systems acquisition. Many fields, including engineering, medicine and finance, seek to model and measure risks. This research utilizes various risk measurement approaches to propose appropriate risk measures for a military context. Specifically, risk is modeled as a non-negative random variable of severity. Four measures are examined: simple expectation, a risk-value measure, tail conditional expectation, and distorted expectation. Risk measures are subsequently used to weight the objective function coefficients in a system acquisition knapsack problem