Breakeven Cost Analysis for Asset Defense
Covert, R
MCR, LLC

Systems developed for users are assets that have monetary value. When assets are deployed, there are threats to their vulnerabilities that may result in destruction, degradation or other loss of capability. This loss of capability can also be expressed in monetary units. The response to protecting the asset or its value is through one or more mitigation schemes. Mitigation schemes may include insurance, protection or replacement of the asset. In some cases, it is difficult to determine the cost of an arbitrary mitigation scheme due to lack of cost drivers or historical analogs. In these cases, a probabilistic analysis of asset value and probability of destruction of the asset can be used to compute the breakeven cost of mitigation schemes. This method does not require detailed design information to compute the upper limit of costs that users should be willing to pay for asset risk mitigation.

In this presentation, the author introduces and explains a breakeven cost analysis technique to insure against loss that can be applied to a mitigation scheme based on insurance, protection or replacement of the asset. This technique is applicable to all types of unmanned systems and a variety of threats; however, it does not place a value on loss of life. The author shows how to use this technique to answer the following questions: "What are the financial limits of risk mitigation schemes?" and "Is it cheaper to protect, insure or replace an asset?"