Homework 8: Risk Mitigation Strategies,
Due Friday 10/30 at 12pm (noon)
CSCI 510, Fall 2015
30 points
In Homework 7, the MedFRS project selected Company L to develop, produce, and
field test the First Responder Workstations (FRWs), and train the first-responder
personnel in their use. (As you will recall, Company L is a subcontractor to the
overall MedFRS project.)
Company L identified two candidate approaches for developing and producing the
FRWs. The Bold approach B will give them a profit of $600K if it succeeds and a
20% higher performance for the MedFRS FRWs, but a loss of $100K if it fails. The
Conservative Approach C will give them a profit of $200K for sure.
Company L identified two levels of prototyping that would buy information to
reduce the risk of proceeding with no information. Prototype X would cost $20K
and reduce the risk of B failing from $100K to $50K. Prototype Y would cost $40K
and reduce the risk from $100K to $20K.
Company L selected Prototype X, which indeed cost $20K and reduced the risk
exposure of selecting the Bold approach from $100K to $50K. The prototype also
identified further insights that could be used to develop a further $10K prototype
that could reduce the risk exposure of selecting the Bold approach from $50K to
$20K. However, it would delay the delivery date of the MedFRS FRWs by 2 months,
which could seriously affect the MedFRS project’s schedule for the FRWs becoming
operational.
Identify candidate MedFRS value propositions on the relative priorities of on-time
FRWs delivery, additional 20% FRW performance, risk exposure of going Bold,
MedFRS willingness to provide Company L with a risk reserve for proceeding with
or without the further prototype, and Company L willingness to accept the risk of
developing the further prototype, that would lead to adopting the strategies of Risk
Avoidance (8 points), Risk Transfer (8 points), Risk Reduction (8 points), and Risk
Acceptance (6 points). See Section 15.2.2 in the ICSM book for examples of choosing
which of the four strategies to apply.
To clarify: Your homework should consist of four answers, one for each strategy:
Risk Avoidance, Risk Transfer, Risk Reduction, and Risk Acceptance. Each answer
should consider the overall situation posed above; furthermore, you can assume
additional aspects of the situation that would be plausible in such a situation; for
example, you could assume that the MedFRS project overall was behind schedule.
The answer for each strategy should include these parts: identify the relevant
aspects of the overall situation, including any assumption(s) you’ve made; explain
the key value proposition (what stakeholder has what value); and describe the
chosen course of action (which should be an example of the strategy and should
support the stakeholder’s value).
(Well-explained variations OK)
(8 points) Risk Avoidance. The MedFRS FRW project can’t afford to be late in
delivering the FRWs. It would be better to avoid the risks of going Bold and to
choose the Conservative FRW architecture, and to consider the Bold approach and
its 20% superior performance later.
(2 points for identifying aspects of overall situation, 3 for key value propositions, 3
for chosen course of action)
(8 points) Risk Transfer. The MedFRS FRW project can afford to be late in
delivering the FRWs, as some other parts of the project are encountering delays as
well. The project is willing to provide Company L with a budget of $10K for the
prototype, and a risk reserve of $50K if the prototype indicates that an additional
$50K will be necessary to make the Bold approach work and to achieve the 20%
performance payoff.
(2 points for identifying aspects of overall situation, 3 for key value propositions, 3
for chosen course of action)
(8 points) Risk Reduction. The MedFRS FRW project can afford to be late in
delivering the FRWs, as some other parts of the project are encountering delays as
well. The project is willing to provide Company L with a budget of $10K for the
prototype to reduce the risk exposure from $50K to $20K, and an award fee of $50K
if Company L can make the Bold approach work and achieve the 20% performance
payoff.
(2 points for identifying aspects of overall situation, 3 for key value propositions, 3
for chosen course of action)
(6 points) Risk Acceptance. Company L sees enough value in the Bold approach to
be willing to pay $10K for the second prototype and an additional $20K to make the
Bold approach work and achieve the 20% performance payoff, and to patent the
solution to provide a competitive advantage for future competitive procurements.
The MedFRS FRW project is willing to accept this approach and the 2-month delay
in delivering the FRWs, as some other parts of the project are encountering delays
as well.
(2 points for identifying aspects of overall situation, 2 for key value propositions, 2
for chosen course of action)