StrategicObjective: Improve the fiscalcompetitiveness of B. Cooper Movie Studio Corp.
Operations Objective:Reduce operating costs by $200 million for the following fiscalyear, while at least maintaining current revenue stream from moviesales
Unit ofMeasure: Total operating costs for Cooper’s Movie Studio
RiskTolerance: $190-$210 million reduction in total operating costs for Cooper’smovie studio segment
Risk
Inherent Risk
Residual Risk
Likelihood
Impact (on oper. costs)
Risk Response Alternatives
Likelihood
Impact
Poor behavior by others in the industry results in Congresspassing costly new legislation that regulates the behavior of allmovie studios *
30%
$80,000,000
A – Share Cooper’s effective marketingprocesses with competitors to help mitigate poor industrybehavior
20%
$80,000,000
B – Lobby Congress on behalf of the movieindustry generally and Cooper in particular
15%
$50,000,000
C – Take no action in response to possible newregulation
30%
$80,000,000
* Two of Cooper’s biggest competitorscurrently are being sued for allegedly marketing their R-ratedmovies (The Hangover and Wedding Crashers) tounderage youths on a consistent and deliberate basis.
Requirements:
Calculate the effect on Cooper’s operatingcosts that would be expected from choosing risk response A.Show your calculations.
Calculate the effect on Cooper’s operatingcosts that would be expected from choosing risk response B.Show your calculations.
Calculate the effect on Cooper’s operatingcosts that would be expected from choosing risk response C.Show your calculations.
Based on your responses to requirements 1-3, which risk responseshould Cooper choose? Explain your reasoning.
Finally, assume that the cost of implementing risk response A is$3,000,000 and the cost of implementing risk response B is$13,000,000. Which of these two responses, A or B, should Cooperchoose? Explain your reasoning.
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