(Coping with uncertainty) Stanton Industries manufactures Christmas orna¬ ments in its sole plant located in Wisconsin. Because the demand for the company’s products is very seasonal, the company builds inventory through¬ out the first nine months of the year and draws down inventory the last three months of the year as demand in those months greatly exceeds pro¬ duction capacity. The company recently designated a member of manage¬ ment to be Chief Risk Officer (CRO). This individual has been charged with developing strategies to manage the effects of uncertainty on the business. The CRO has identified the following major sources of uncertainty:

1. Financing costs of inventory.

2. The cost of resin, which is the main material used in production.

3. “Acts of Nature” which could harm or destroy the production facility.

4. The price to be realized for products.

5. The level of demand for the company’s products.

As a risk consultant, you have been retained by the CRO to develop strategies to deal with each of these major sources of uncertainty. In a re¬ port, outline your recommendations for each of the five major sources of uncertainty.

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