Analyzing alternate risk response options

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Reference no: EM131800527

Analyzing Alternate Risk Response Options

Strategic Objective: Improve the fiscal competitiveness of B. Cooper Movie Studio Corp.

Operations Objective: Reduce operating costs by $200 million for the following fiscal year, while at least maintaining current revenue stream from movie sales

Unit of Measure: Total operating costs for Cooper's Movie Studio

Risk Tolerance: $190-$210 million reduction in total operating costs for Cooper's movie studio segment

Risk	Inherent Risk			Residual Risk
Risk	Likelihood	Impact (on oper. costs)	Risk Response Alternatives	Likelihood	Impact
Poor behavior by others in the industry results in Congress passing costly new legislation that regulates the behavior of all movie studios *	30%	$80,000,000	A - Share Cooper's effective marketing processes with competitors to help mitigate poor industry behavior	20%	$80,000,000
			B - Lobby Congress on behalf of the movie industry generally and Cooper in particular	15%	$50,000,000
			C - Take no action in response to possible new regulation	30%	$80,000,000

* Two of Cooper's biggest competitors currently are being sued for allegedly marketing their R-rated movies (The Hangover and Wedding Crashers) to underage youths on a consistent and deliberate basis.

Requirements:

Calculate the effect on Cooper's operating costs that would be expected from choosing risk response A. Show your calculations.

Calculate the effect on Cooper's operating costs that would be expected from choosing risk response B. Show your calculations.

Calculate the effect on Cooper's operating costs that would be expected from choosing risk response C. Show your calculations.

Based on your responses to requirements 1-3, which risk response should Cooper choose? Explain your reasoning.

Finally, assume that the cost of implementing risk response A is $3,000,000 and the cost of implementing risk response B is $13,000,000. Which of these two responses, A or B, should Cooper choose? Explain your reasoning.

Reference no: EM131800527

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