Risk identification – What are the risks Telewonder faces if it obtains a contract to develop telecommunications capabilities in Slovobia? 2. Risk impact analysis – What are the consequences to Telewonder if the anticipated risks become real? 3. Risk response planning – What can Telewonder do to handle risks?

Mgt 253. Risk and Quality Management

Assignment 1

Telewonder in Slovobia

Slovobia is a former Soviet Republic. It has a population of 30 million people,
35% of whom are ethnic Russians and 65% of whom are Turkic Muslims.
Slovobia has identified the establishment of modern telecommunications capabilities as a high priority. Such capabilities are expected to cost 20 billion Slovars over a 5-year period. The official exchange rate is $1 = 10 Slovars. The black-market rate fluctuates wildly, but basically converges at $1 = 25 Slovars.
Slovobian authorities are hopeful that a low-interest International Development Association (IDA) loan can be obtained to cover a third of the anticipated project costs. They want the telecommunications contractor to supply credit for 10% of the project costs. The remaining funds will come from a variety of sources, including the Telecommunications Ministry and commercial banks.
Telewonder Telecommunications Corporation, an Australian provider of telecommunications services, has been approached by Muhammed Farsi — the Minister of Telecommunications — about its interest in bidding on the project. He informs
Telewonder that an RFP (request for proposal) will be issued shortly after Slovobia holds its first democratic election in history. Unfortunately, elections recently had to be rescheduled owing to a fundamentalist Muslim insurgency in the southwest portion of the country.

1. Risk identification – What are the risks Telewonder faces if it obtains a contract to develop telecommunications capabilities in Slovobia?
2. Risk impact analysis – What are the consequences to Telewonder if the anticipated risks become real?
3. Risk response planning – What can Telewonder do to handle risks?

Mgt253.Risk andQualityManagement



Slovobiais a former Soviet Republic. It has apopulation of 30 million people,

35%of whom are ethnicRussians and 65%of whom areTurkic Muslims.

Slovobia has identified the establishment ofmodern telecommunications capabilities as ahigh priority. Such capabilities are expected to cost 20 billion Slovars over a5-year period. Theofficialexchangerateis $1 =10 Slovars. Theblack-market rate fluctuates wildly, butbasicallyconverges at $1 =25 Slovars.

Slovobian authorities are hopeful that a low-interestInternational Development Association (IDA) loan can beobtained to cover a third ofthe anticipated project costs. Theywant thetelecommunications contractor to supplycreditfor10%of theproject costs. Theremainingfunds will comefrom a varietyof sources, including the Telecommunications Ministryandcommercial banks.

Telewonder Telecommunications Corporation, anAustralian providerof telecommunications services, has been approached byMuhammedFarsi–the Minister of Telecommunications– about its interest in biddingon the project. Heinforms

Telewonder that an RFP(request for proposal)willbeissued shortlyafter Slovobiaholds its first democratic election in history. Unfortunately,elections recentlyhad to be rescheduled owing to a fundamentalist Muslim insurgencyin the southwest portion ofthe country.

1. Risk identification–What arethe risksTelewonder facesif it obtains acontract to develop telecommunications capabilities in Slovobia?

2. Risk impact analysis– What are the consequences to Telewonder ifthe anticipated risks become real?

3. Risk response planning– What can Telewonder do to handle risks?

Events Plus Inc.

Events PlusInc. is acompanythat organizes seminars. Eachyear, it holds some

120 seminars dealingwith business management and publicsector management themes.

In order to encourageearlyenrollments to its seminars, Events Plus offers 20 percent discounts to participants who registerforaclass up to sixweeks in advanceof the date ofthe seminar offering.Becausethis isan attractivediscount, popularclasses

usuallyexperienceheavylevels of sign-ups before the six-week pre-seminar cut-off point.Less popularcourses experienceweaker levels of sign-ups.

Table 1 shows datacollected on 110 seminar offerings that weretracked by

Events Plus over thepastyear andahalf.Looking at thedata, Events Plus finds that in22 cases, enrollments wereso strongat thesix-weekmarker that theycoveredallanticipated seminar costs. Typically,these classesresulted indecent profits, although in two cases

the class had to becancelled owingto instructor illness.In 33 cases,enrollments were reasonablygoodat the six-week markerand covered 70-95 percent of the seminar costs. Theseminars usuallyexperiencesomeprofit, although on ten occasions classes could not beheld owingto insufficient enrollments.In 55cases, enrollments wereweak at thesix- week marker,coveringless than 70 percent of anticipated seminarcosts. Often, these classes did not breakeven and in a number ofcases resulted in substantial losses. On 22 instances, theywerecancelled owingto poorenrollments.

Breakevenat six-weekmarker? Holdseminar? Overall


Yes, 22 times (20%) Yes, 20 times (91%) 0.18
Yes, 22 times (20%) No, 2 times (9%) 0.02
Almost, 33 times (30%) Yes, 23 times (70%) 0.21
Almost, 33 times (30%) No, 10 times (30%) 0.09
No, 55 times (50%) Yes, 33 times (60%) 0.30
No, 55 times (50%) No, 22 times (40%) 0.20

Table 1

Events Plus uses the information contained in this tableto track enrollment strengthcourse-by-course. That is, decision-makers use this historical data to determine the viabilityof current seminar offerings.At the six-week pre-course marker, managers review enrollments and classifyaseminar accordingoneof three categories: Breakeven as of today; almostbreakeven as of today;and not-near-to-breaking-even as of today.


1. Create adecision-treethat will help guide us in determining what action to takewhen wereview student enrollments at thesix-week, pre-coursemarker.
2. Senior management is reviewingpast attendanceat seminars. Theywantto have an overallunderstandingofhow their seminar marketingefforts aredoing. Sotheyask the followingquestions,whichyou shouldanswer:

a. What is the probabilitythat Events Plus willreachthe breakeven point at the sixweek marker and ultimatelyhold theseminar?

b. What is the probabilitythat Events Plus willnearlyreach the breakeven point at thesix-week marker and ultimatelyhold the seminar?

c. What is the probabilitythat Events Plus willnotreach the break even pointat the six-week marker, butwinds up holdingthe seminar nonetheless?

3. Assume the cost of preparingfor atypical seminar(includingadvertising cost) is

$32,000 and revenueafter preparation cost have been netted out is $20,000. When seminars are cancelled, thepreparation costsarelost entirely.

a. Ifat thesix-week markerwefind that wehavereached abreakeven point, what is the expected monetaryvalueassociatedwith decidingto hold the seminar?Does itmakegood business senseto goaheadand hold theseminar?

b. Ifat the sixweek markerwefind that weare nearto reachingabreak even point, what is the expected monetaryvalueassociated with decidingto hold the seminar?Does itmakegood business sense togo aheadand hold the seminar?

c. Ifat thesixweek marker,wefind that weclearlyhave not reached thebreak even point, what is the expected monetaryvalueassociated with decidingto hold theseminar?Does itmakegood business senseto go aheadand hold the seminar?

4. When Events Plus begins preparingto offeraseminar, what is the probabilitythat the seminar will actuallybeheld?

George’s ThanksgivingTrip

Georgeis invited by his sister, Dorothy, to attend afamilyreunion duringthe Thanksgivingweekend.Dorothylives in Denver,NY, about 90 miles northeast of New York City. Georgelives in Washington, DC, about 215 miles south of NewYork City. Georgedecides to visitDorothyand to travel to her placebycar.

Theonlyproblem is that road trafficduringthe Thanksgivingholidays isterrible alongthe East Coast of the United States. Georgewould normallytravel toDorothy’s house bytakingInterstateHighway95. This is the major link connecting Washington and New York City. However, during Thanksgiving, thetrafficonI-95 is usuallybad, leading to majordelays.

Georgedecides to explore an alternate route to travelingto Dorothy’s. Thisroute would beafew miles longer. Also, hewould encountera60 mile segmentof road in a rural area,and he wouldhaveto travel slowlyon this segment. The goodfeature about the alternaterouteis thatitis unlikelyto suffer from Thanksgivingtraffic.

A map showingthetwo routes to Dorothy’s houseis offered inFigure1.

Based on hisexperiencein traveling along I-95 duringThanksgivingholidays, Georgehas developed agood senseof the likelihood ofdelays that hecanencounter on the journey. Table 1 shows theprobabilitydistributions he has created forallthe segments of his trip to Dorothyfor both theI-95route and the alternate route.


Usingthe information supplied in Figure1 and Table 1, determinetheexpected amountof time itwilltakeGeorgeto travel fromWashington, DC to his sister’s house, employingboth theI-95and alternateroute. SHOWYOUR WORK, DEMONSRATING HOW YOU ARRIVEDATTHE ANSWERSYOU PROVIDE.






NewYork City

Highway, 70 miles per hour

Rural road,40 miles per hour

Probability Distributions forTravel Times onJourney
Regular Route

(East Route)
Probability achieving schedule


longer than schedule


longer than schedule


longer than schedule


longer than schedule



Baltimore 0.7 0.3 0.0 0.0 0.0
Baltimore-New York
City 0.0 0.1 0.2 0.5 0.2
New York City-
Kingston 0.1 0.2 0.3 0.3 0.1
Home 0.8 0.2 0.0 0.0 0.0

Alternate Route

(West Route)
Probability of achieving schedule


longer than schedule


longer than schedule


longer than schedule


longer than schedule



Baltimore 0.7 0.3 0.0 0.0 0.0
Binghamton 0.9 0.1 0.0 0.0 0.0
Branch 0.9 0.1 0.0 0.0 0.0
E Branch-Sister’s
Home 0.8 0.2 0.0 0.0 0.0


MonteCarlo SimulationExercise


The equipment installation groupat Globus Enterprises isabout to makeacost estimateto determinehow much itwillcost to install a back-upgenerator at a government laboratoryfacility. Over theyears, this grouphas carried out morethan 100 such installations and has developed adatabasereflectingpast experience.Data on the distribution of cost for design work, buildingeffort, and testingeffort is provided in Table 1.







Design 9,000/30 10,000/40 12,000/30
Build 60,000/20 70,000/60 80,000/20
Test 18,000/20 20,000/50 24,000/30
Table 1. Historical Data on CostDistributions Thedata in the table picture the cost ofan effort and the percentageof times this cost is achieved. For example, 30%of

the time, “Design” cost $9,000; 40% ofthe timeitcost $10,000;

30%of thetime it cost $12,000.

00 16 45 84 18

83 28 82 36 91

95 14 80 68 34

54 55 13 20 70

57 68 61 37 30

09 81 24 55 21

Table 2. Two-digit RandomNumbers


1. Conduct a MonteCarlo simulation to create adistribution portrayingtotal estimated project costs. Employteniterations inyourcomputation. Displaythe distribution graphically.

2. On the average, how much does itcost to carryout this project?

3. What is the standard deviation ofthe distribution thatyougenerated (usetheformula: SD = ??(Xi– X-bar)2/N, whereSD=standard deviation, ? =squareroot symbol, ? = the summation sign, Xi=the ithvalue of X, X-bar=the mean of theX values, and N

= the number ofvalues being considered)? What information does the standard deviation offer us that helps usdevelop a better understandingof risk in this case? (For more help on computingstandard deviation, seebelow.)

4. Roughlywhat is the probabilitythat the project will cost morethan $105,000?
Computingstandarddeviationforfollowingnumbers:8, 4, 10,7,6
X X-bar
x- X-

bar Squared
8.00 7.00 1.00 1.00

4.00 7.00 -3.00 9.00

10.00 7.00 3.00 9.00

7.00 7.00 0.00 0.00

6.00 7.00 -1.00 1.00

Total= 35.00 20.00

Average=X-Bar= 7.00 4.00 (Sum Squared)/N= Variance

2.00 Sqrt(Variance)= StandardDeviation

Computingstandarddeviationforfollowingnumbers:6, 7, 5.5,8,8.5
X X-bar
x- X-

bar Squared
6.00 7.00 -1.00 1.00

7.00 7.00 0.00 0.00

5.50 7.00 -1.50 2.25

8.00 7.00 1.00 1.00

8.50 7.00 1.50 2.25

Total= 35.00 6.50

Average=X-Bar= 7.00 1.30 (Sum Squared)/N = Variance

1.14 Sqrt(Variance)= StandardDeviation

Notethatthespreadofnumbersinthefirstcaseaboveisgreaterthanthesecondcase,sothat standarddeviationinthefirstcase(SD= 2.00)isgreaterthaninthesecond(SD=1.14)

Murphy’s Lawat Travel-Rite

Mike Jones had worked at Travel-Rite as abus driver forfiveyears. Heenjoyed the job. In turn, Travel-Ritewas pleased with Mike, becausehewas courteous with clients and had aflawlesssafetyrecord.

Mike was drivingtwenty-fivetourists from Washington, DC to NewYorkCityon Interstate 95. Henoticedthat his fuel gaugeshowed that his twenty-nine passenger mini- bus was gettinglow onfuel, so hepulled into agas station alongthe highway. At the

fuel pump, hetold the station attendant to fill up thefuel tank. Ten minutes later, the tank was filled and Mikepulled out of thegas station. Thebus traveledabout twenty- five meters, and then theenginedied. Miketried futilelyto restart theengine.

It turned out that thegasstation attendant had accidentallyfilled thefuel tank with gasolineinstead of dieselfuel. Theonlywayto deal with this would beto drain the gasolineout of thefuel tank and to remove alltraces ofgasolinein the engine. Thegas station lacked this capability, so thegas station manager arranged to havethemini-bus towed to a nearbygarage. Meanwhile, Mike telephoned Travel-Rite’s headquarters to

tell them of his predicament. Theheadquarters staffarranged to havethetourists picked up byabus serviceoperating out of New York City. Two hours after thebus breakdown, the tourists resumed theirjourney.

Themini-bus was towedto thegarage,wheremechanics attempted to determine whethertheengine had been damaged bythegasoline. The chiefmechanictelephoned Travel-Riteheadquartersto deliverhis report andwas put in touch with Jennifer Chen, Travel-Rite’s president.

“There’s no problem cleaningup the engine,”he reported. “In fact, we’vealready got it working. However,you appear to haveaproblem with your transmission, because the bus won’t go into second gear. Welooked at thetransmission and sawthat it’s damaged.”

Jennifer was shocked tohear this and immediatelytelephoned the automobile dealerfrom whom she bought herbuses. When heheard thestory, heunderstood the natureof theproblem.

“Thetransmission was damaged when the bus was beingtowed,”hesaid. “The drivetrains of busesare abitcomplicated. You can’t justhook them up to a tow truck and start towingthem. Several steps haveto be taken to preparethem for towing, and obviouslythe tow truck driver didn’t do this.”

Jennifer feltsick. What began as an innocent refuelinghad turned into adisaster. Clients had been inconvenienced. Her newbus had been damaged. All thiswas happeningfar from headquarters, so resolution of thedispute with the gas station, tow truck company, andgaragewould haveto becarried out remotely.


1. From Travel-Rite’s perspective, to what extent is the incident described in this case an “act of God”as opposed to a controllableevent?
2. What general categoriesof risk arebeingencountered here(e.g., business risk)?


3. Howwouldyougoaboutconducting anexpost factorisk assessment ofthis incident?

What conclusions might resultfrom this assessment? What risk mitigation steps should betaken to avoidarepetition ofthis kind of event in the future?

PartA.Scattergram Exercise

Units Processed per Hour AverageNumber of Defects
300 50
400 42
500 40
600 55
700 80
800 95

The table onthe rightexaminesthe number defectsassociatedwithdifferent levelsfor processingwidgets.For example, whentheprocessingspeed reaches60widgetsper hour,anaverage of 65 defectsare encountered.Draw ascatterdiagramshowingthe relationshipbetweenprocessingspeed anddefects.Whatconclusionscanyou

derive fromthe diagram?
Part B. OfficeMove:Cause andEffect (Fishbone) Diagram Exercise

You arein chargeof managing aproject to relocate an officefrom onebuildingto another. Thenew buildingis located threekilometers from the old one.Your job is:

· to schedule themove

· to makesurethe old buildingis preparedforthemove (e.g., to reserveuseof elevators)

· to makesurethe new buildingis prepared for themove (e.g., to reserveuseof elevators)

· to makesure allemployees are awareof their responsibilities to help the moveto go well

· to handle allthe financial arrangements associatedwith the move

· to handle allcontractualarrangements associatedwith the move

· to arrangeforthe moving companyto pack, transport, and unpack thefurnishings beingmoved.

Usingthe information supplied here, create acause-and-effect diagram that describes the moveeffort.

Originally posted 2016-07-05 11:58:06. Republished by Blog Post Promoter