Mgt 253. Risk and Quality Management

Question 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 Assignment1 TelewonderinSlovobia 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. Unfortunatelyelections 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? Assignment2 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. Typicallythese classesresulted indecent profits although in two cases the class had to becancelled owingto instructor illness.In 33 casesenrollments 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 markercoveringless 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 Probability 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. Assignment 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 followingquestionswhichyou 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 $32000 and revenueafter preparation cost have been netted out is $20000. 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 markerwefind 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? Assignment3 George’s ThanksgivingTrip Georgeis invited by his sister Dorothy to attend afamilyreunion duringthe Thanksgivingweekend.Dorothylives in DenverNY 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 areaand 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. Assignment 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. Figure1.TwoRoutesto George’sSister’sHouse Sister’sHouse UpstateNewYork 10miles Binghamton EastBranch 50miles 60miles Kingston 80miles 30miles NewYork City Scranton 130miles 175miles Legend Highway 70 miles per hour Baltimore Rural road40 miles per hour 40miles George’shouse WashingtonDC Probability Distributions forTravel Times onJourney Regular Route (East Route) Probability achieving schedule Probability 10% longer than schedule Probability 20% longer than schedule Probability 30% longer than schedule Probability 40% longer than schedule Segment Washington- 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 Kingston-Sister’s Home 0.8 0.2 0.0 0.0 0.0 Alternate Route (West Route) Probability of achieving schedule Probability 10% longer than schedule Probability 20% longer than schedule Probability 30% longer than schedule Probability 40% longer than schedule Segment Washington- Baltimore 0.7 0.3 0.0 0.0 0.0 Baltimore- Binghamton 0.9 0.1 0.0 0.0 0.0 Binghamton-E 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 Assignment4 MonteCarlo SimulationExercise EQUIPMENT INSTALLATION AT GLOBUSENTERPRISES 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. Cheapest ($/%) Usual ($/%) Expensive ($/%) Design 9000/30 10000/40 12000/30 Build 60000/20 70000/60 80000/20 Test 18000/20 20000/50 24000/30 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 $9000; 40% ofthe timeitcost $10000; 30%of thetime it cost $12000. 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 Assignment 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 $105000? Computingstandarddeviationforfollowingnumbers:8 4 1076 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 5.588.5 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 Notethatthespreadofnumbersinthefirstcaseaboveisgreaterthanthesecondcasesothat standarddeviationinthefirstcase(SD= 2.00)isgreaterthaninthesecond(SD=1.14) Assignment5 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 thegaragewheremechanics 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. Howeveryou 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. Questions 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)? Explainyouranswer. 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? Assignment6 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 houranaverage 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.

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