In modern systems design and development, one of the key issues is considered to be related with how to reflect faithfully the stakeholder requirements including customer requirements therein, thereby successfully implementing the system functions derived from the requirements. On the other hand, the issue of safety management is also becoming greatly important these days, particularly in the operational phase of the systems under development. An approach to safety management can be based on the use of the failure mode effect and analysis (FMEA), which has been a core method adopted in automotive industry to reduce the potential failure. The fact that a successful development of cars needs to consider both the complexity and failure throughout the whole life cycle calls for the necessity of applying the systems engineering (SE) process. To meet such a need, in this paper a method of FMEA is developed based on the SE concept. To do so, a process model is derived first in order to identify the required activities that must be satisfied in automotive design while reducing the possibility of failure. Specifically, the stakeholder requirements were analyzed first to derive a set of functions, which subsequentially leads to the task of identifying necessary HW/SW components. Then the derived functions were allocated to appropriate HW/SW components. During this design process, the traceability between the functions and HW/SW components were generated. The traceability can play a key role when FMEA is performed to predict the potential failure that can be described with the routes from the components through the linked functions. As a case study, the developed process model has been applied in a project carried out in practice. The results turned out to demonstrate the usefulness of the approach.