A Risk Assessment Methodology for Divesting Military Capabilities to Allied Nations

The United States spent over $400 billion dollars on national defense in 2005. Even with support for the war on terrorism still strong, it is doubtful that the U.S. can sustain such a level of defense investment. One strategy to offset the increasing burden of defense spending is to divest the procurement and/or sustainment of individual defense capabilities to allied nations. The decision to divest any capability, however, introduces risk. This thesis presents a methodology to quantify the risk of the decision to divest a military capability to an allied nation, where risk is defined as the set of risk scenarios, likelihoods and consequences possible under each decision alternative. Risk scenarios are composed of combinations of contingencies that require the capability considered for divestiture. The likelihood of each risk scenario is calculated as the product of the likelihoods of its constituent contingency events. The consequence of each risk scenario is calculated as the sum of the consequences of its constituent contingency events. Once the risk of each decision alternative is quantified this information can be used to rank alternatives and identify the scenarios that contribute most to the risk of each alternative.