The optimal size of a diversion structure should be carefully studied to ensure economic viability and safety during construction. In practice, to determine the size of a diversion structure, design flood frequency is selected as the suggested return period presented by the design standard, which is presented differently. This study proposes a methodology for the design of a diversion structure with a concrete cofferdam adopting risk analysis to reflect the more practical hazard and risk of diversion structure during dam construction. The proposed methodology is based on a risk-based least-cost design process and risk analysis. The optimization result is presented as the lowest expected monetary value, which accounts for construction cost, reconstruction cost, and delay liquidated damage with the failure probability and recovery cost with the overflow probability. This methodology was applied to the case study of the Gulpur hydropower project in Pakistan. The results showed that the optimal design flood frequency is 1 year for a recovery cost of USD 0.5 mil. and 1~2 years for a recovery cost of USD 1.0~2.0 mil. with 3, 4, and 5 years of the usage period of the diversion structure. Furthermore, 2~10 years is the optimal value for a recovery cost of USD 3.0~4.0 mil. These results indicated that the optimal design flood frequency increases as the recovery cost and usage period of the diversion structure increase. The results of the study reveal that the recovery cost and the period of use of the diversion structure affect the design flood frequency of the diversion structure. From a design perspective, the period of use is determined by the construction period of the project or the construction method, whereas the recovery cost depends on the countermeasure method. Therefore, after preparing a proactive plan and estimating the recovery cost, the design flood frequency for the diversion structure should be determined.