You tasks for this week are to:

• Read "The Risk Equation" included in the Readings area.
• Evaluate the "Test a software application ..." scenario and at least one other of the listed scenarios and apply the risk equation each. Explain your assumptions and show your calculations.
• You will then critically evaluate the tangible (financial, operational, etc.) and intangible (political, security, reputation, etc.) aspects of the situation and then state your action recommendation.
• Please explain how you came to your conclusions.
• Due by the end of Week 7

Risk Assessment ExamplesTest a software application for production readiness or put into production?

Your company has determined that it is time to roll out a custom software application that you and your team have been developing for over a year. This application has enterprise-wide implications in that if it works well the entire organization will run more efficiently but if there are problems those problems can interfere with a large part of daily operation at varying possible levels of disruption. Your management wants to roll out the application with minimal testing because they are feeling pressure from the executive committee to show results for the ongoing development investment.

Members of your team feel that more testing is needed before the application is ready for production. Your team's analysts have developed some estimates of how much a disruption could cost the company in profits, the likelihood of it happening and the amount of time it would take to correct the error.

They have prepared these estimates and they are included in the table below. Comprehensive testing of the application is estimated to require 60 days and cost around $125,000.

How would you evaluate the situation?

How would you evaluate the financial aspects of this decision?

What are the direct, tangible factors that influence your decision?

What are the intangible ones?

How would you determine the uncertainties involved?

Would you do the testing or release it to production as is? What would you do?

Use the following information as part of your analysis.

Without Testing	Cost to Comp/Hr	Likelihood	Hrs to Fix	Frequency
Minor	$10,000	80%	3 to 7	>10
Major	$30,000	35%	6 to 15	4 or less
With Testing	Cost to Comp/Hr	Likelihood	Hrs to Fix
Minor	$10,000	30%	3 to 7	5 or less
Major	$40,000	10%	6 to 15	1 or less

Losing job with severance or come on as contractor no severance?

Your company is downsizing and your job is currently in jeopardy. Assume that you are currently earning $100,000 per year and have been with the company for 15 years. You are two years from retirement age. The company had decided to outsource your position to someone overseas and want you to train your replacement. They have offered you two options: be laid off and accept 9 months of severance at your current salary or be transferred to a contracting company where you will earn $120,000 per year, six month minimum contract period, doing the equivalent of your current job but as a subcontractor with the additional responsibility for training your replacement. How would you evaluate the situation? How would you evaluate the financial aspects of this decision? What are the direct, tangible factors that influence your decision? What are the intangible ones? How would you determine the uncertainties involved? What would you do?

Get extra insurance for your rental car?

You are renting a car at the airport and they ask you if you want to buy the supplemental insurance during your rental period. They will charge you $20 per day for the insurance and you are renting for 14 days. You talked to your insurance agent who told you that you have your normal car insurance coverage while driving a rental just as though it were your own car. Your policy carries a $500 deductible. What would you do? How would you analyze the financial aspects of this decision? What additional information would you like to have to help you make this decision? How would you evaluate the situation? What are the direct, tangible factors that influence your decision? What are the intangible ones? How would you determine the uncertainties involved? What would you do?

Buy a new car or repair your old one?

You are the owner of a car that is 8 years old and has over 100,000 miles on it. The car has traditionally been very reliable but has cost you over $3000 in repairs over the past 6 months. The repairs included engine work, new brakes, air conditioning repair and a new radiator. You estimate that the car is worth around $8,000 if you sold it today. It has 96,000 miles on it. If you were to buy another car today that is comparable to the one you currently drive it will cost you around $25,000 which becomes a monthly payment of $450 over 60 months. What additional information would you like to have to help you make this decision (make it up for this scenario)? How would you evaluate the situation? How would you evaluate the financial aspects of this decision? What are the direct, tangible factors that influence your decision? What are the intangible ones? How would you determine the uncertainties involved? Would you repair your current car or buy a new one? What would you do?