How do you design failure cost analysis in LLM systems?

Failure cost analysis quantifies financial, latency, and user impact of LLM errors to prioritize mitigation strategies.

Not all LLM failures are equal. Systems classify failures by cost: hallucination in legal systems has higher cost than FAQ errors. Cost analysis includes compute waste, user churn risk, compliance risk, and operational overhead. This helps prioritize engineering investments like guardrails or fallback systems.