Reducing Risk by Segmentation

Michael Todorov Todinov
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Michael Todorov Todinov: Oxford Brookes University, Oxford, UK

International Journal of Risk and Contingency Management (IJRCM), 2017, vol. 6, issue 3, 27-46

Abstract: The paper provides analysis of the various mechanisms through which the segmentation improves reliability and reduces technical risk and presents a classification of risk-reduction techniques based on segmentation. On the basis of theoretical arguments and examples, it is demonstrated that segmentation increases the tolerance of components to flaws causing local damage, reduces the rate of damage accumulation and damage escalation and reduces the hazard potential. The paper also demonstrates that segmentation essentially replaces a sudden failure on a macro-level with gradual deterioration of the system on a micro-level through non-critical failures. It is demonstrated that segmentation can even reduce the likelihood of a loss from opportunity bets and the likelihood of erroneous conclusion from imperfect tests. Finally, a comprehensive classification of methods and techniques for reducing risk, based on segmentation, has been proposed.

Date: 2017
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