The increased complexity of modern system designs and demands for quicker time to market have made safety-related verification and validation of such systems more challenging. Incorporating safety and risk considerations at the early stages of design is one way to acquire a more robust initial design for novel systems. Inductive fault analysis has its significance at final stages of design, e.g., verification and validation. However, to preclude certain system failure states—especially for the systems with high failure consequences, a designer would innately prefer to trace back and remedy the causes of failure, as compared to a more cumbersome activity of identifying the faults individually and sifting the combinations that lead to the failure of interest. The work presented in this paper is aimed at the development of a backward failure propagation methodology for analyzing the origins of functional failures in a conceptual design of systems including but not limited to nuclear, mechanical, aerospace, process, electrical/electronics, telecommunication, automotive, etc. This method allows the designer to achieve a robust early design based on the analyses of the system’s functional dependencies before proceeding to the detailed design and testing stages. The insights provided by the analysis at the conceptual design stage also reduce redesign efforts, testing costs, and project delays. The proposed method is a functional analysis approach that extends the Integrated System Failure Analysis for backward failure propagation. When provided with an abstract system configuration, a system’s functional model, and a system’s behavioral model, it utilizes a known functional state (typically a failure) to acquire system component modes and the states of other functions. The method includes inversion of the functional failure logic and component behavioral rules using propositional logic and deductive analysis to assess valid states of a system that satisfy the given initial conditions. To test the method’s scalability, we applied the proposed method to a simplified representation of the secondary loop of a typical pressurized water reactor.