Risk and Control Measures

A company faces a penalty of $\displaystyle \pounds 8000$ if a job is delayed.
The probability of a delay is $\displaystyle 0.2$.
Calculate the expected cost of the delay.

A photographer must refund a client's $\displaystyle \pounds 1500$ fee if the photographs are late.
State one direct cost and one indirect cost the photographer would face.

Explain what is meant by a control measure.

A designer buys a tablet for $\displaystyle \pounds 2400$.
The probability of breaking it within two years is $\displaystyle 0.06$.
(a) Calculate the expected cost of breaking the tablet.
(b) A two-year protection plan costs $\displaystyle \pounds 130$. Determine whether the designer should buy it. Use your working to justify your answer.

A firm will be fined $\displaystyle \pounds 4500$ if a job is late.
The probability of it being late is $\displaystyle 0.22$.
(a) Calculate the expected cost of being late.
(b) Hiring extra staff would remove the risk completely at a cost of $\displaystyle \pounds 700$. Determine whether the firm should hire them. Use your working to justify your answer.

A company faces a penalty of $\displaystyle \pounds 20000$ if a project is delayed.
The probability of a delay is $\displaystyle 0.3$.
A control measure costing $\displaystyle \pounds 2000$ would reduce the probability of a delay to $\displaystyle 0.1$.
Determine whether the company should use the control measure. Use your working to justify your answer.

A control measure removes a risk completely, but costs more than the expected cost of the risk.
Explain whether a company might still choose to take it.