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Using Net Benefit to Evaluate Risk Response Alternatives Crazy Fan Guard Company provides security services to popular live sporting event venues. Crazy Fan management has
Using Net Benefit to Evaluate Risk Response Alternatives Crazy Fan Guard Company provides security services to popular live sporting event venues. Crazy Fan management has identified one of its top risks as the possibility that restrictions on premium close seating options will severely decrease its sales revenue by lessening the demand for its security services. The table below displays a description of this top risk, an inherent risk assessment, three risk response alternatives, and finally, a residual risk assessment. Inherent Risk Risk Response Residual Risk Impact Impact (on lost (on lost Risk Likelihood revenues) Alternatives Likelihood revenues) Premium close seating 25% $10,000,000 A-Invest in a business 10% $5,000,000 at future popular live process that focuses on sporting events is managing improved fan discontinued due to behavior at popular live viewer outrage over sporting events previous on-field security B-Form an alliance with 15% $10,000,000 violations (e.g., fans another security organization rushing court or field and to more effectively (e.g., making physical contact quickly and forcefully) with the athletes). remove fans who rush the field C-Take no action 25% $10,000,000 Crazy Fan Guard's management accounting team estimates that the incremental cost of implementing response A is $2,200,000, and the incremental cost of implementing response B is $700,000. Required: 1. Calculate the benefit of each risk response alternative A through C. If an amount is zero, enter "0". Benefit for A $ Benefit for B $ Benefit for C 2. Calculate the net benefit of each risk alternative A through C. Use minus sign to indicate the negative values. If an amount is zero, enter "0". Net benefit for A Net benefit for B Net benefit for C
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