The purpose of this article is to consider system safety and reliability analysts to evaluate the risk associated with item failure modes. The factors considered in traditional failure mode and effect analysis (FMEA) for risk assessment are frequency of occurrence (O), severity (S) and detectability (D) of an item failure mode. Because of the subjective, qualitative and dynamic nature of the information and to make the analysis more consistent and logical, an approach using fuzzy logic and system dynamics methodology is proposed. In the proposed approach, severity is replaced by dependency parameter then, these parameters are represented as members of a fuzzy set fuzzified by using appropriate membership functions and they are evaluated in fuzzy inference engine, which makes use of well-defined rule base and fuzzy logic operations to determine the value of parameters related to system’s transfer functions. The fuzzy conclusion is then defuzzified to get transfer function for risk and failure rate. The applicability of the proposed approach is investigated with the help of an illustrative case study from the automotive industry.