risk-assessment-and-financial-impact-analysis-model by bighug

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									[Company Name] Risk Assessment and Financial Impact Model [Date]
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Risk area
Competitive

Potential risk
Contoso, Ltd. might introduce a superior offering on June 30 to compete with our #1 product line.

Number of annual incidents
1.00

Cost per incident
$1,850,000

Total annual cost
$1,850,000

Probability of occurrence
75.0%

Weighted cost
$1,387,500

Mitigating strategies & controls
Reduce price by 25% on May 31 to keep the volume stable.

Annual control cost
$1,150,000

Cost/benefit
$237,500

Decision summary
Monitor competitor progress and implement new strategy if required.

Owner
Kirk DeGrasse

$0

$0

$0

Economic/political

$0

$0

$0

$0

$0

$0

Regulatory/legal

Need to meet Sarbanes-Oxley 404 (SOX) compliance requirements by target date.

1.00

$15,000,000

$15,000,000

5.0%

$750,000

Establish SOX Compliance Office on January 15 to ensure compliance 30 days before required date.

$1,200,000

($450,000)

Despite negative cost/benefit, proceed with SOX compliance because of the company's high visibility.

Kim Ralls

$0

$0

$0

$0

$0

$0

Technological

Potential exists for hackers to compromise internal network and obtain confidential customer or employee information.

5.00

$4,000,000

$20,000,000

10.0%

$2,000,000

Upgrade firewall to latest version; install proxy server in Q2.

$750,000

$1,250,000

Continue to monitor technology to ensure Carol Philips that our company's and our clients' information is protected. Intrusion would have an enormous effect.

$0

$0

$0

$0

$0

$0

Operational

If a key parts supplier in Eastern Asia suddenly goes out of business, it will risk 25% of production.

1.00

$1,250,000

$1,250,000

75.0%

$937,500

Partner with alternate suppliers to reduce reliance on dominant supplier.

$937,500

$0

Begin negotiating terms with other key suppliers; take care not to lock into minimum volume agreements.

Michiko Osada

$0

$0

$0

$0

$0

$0

Financial

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

TOTALS

$22,100,000

$38,100,000

$5,075,000

$4,037,500

$1,037,500

Sample—Competitive risk Scenario: Contoso, Ltd. introduces superior offering in June to compete with our #1 product line.
Product X sales—year 1 Product X sales—year 2 Product X sales—year 3 Projected sales—year 4 First half sales weighting Second half sales weighting Second half sales at risk Number of units at risk Cost per unit Impact with no mitigation Sales reduction Reduced number of units sold Revised second half product sales Revenue impact Units 9 10 11 12 Dollars $5,000,000 5,500,000 6,000,000 $6,545,455 30% 70% $4,581,818 8.4 $500,000 Annual growth rate – 10% 9%

40% Note: based on market surveys 5.04 $2,749,091 ($1,832,727) Note: round to $1,850,000 for scorecard

Mitigation through price reduction Unit price reduction required to maintain volume Number of units at risk Revised second half product sales Revenue impact Mitigation of competitive impact with price reduction

25% Note: based on market surveys 8.40 $3,436,364 ($1,145,455) Note: round to $1,150,000 on scorecard $687,273

Sample—Operational risk Scenario: Key materials supplier in East Asia goes out of business, risking 25% of production for Product X.
Expected Product X revenues—2004 Cost of goods sold Labor Materials Other direct costs Total cost of goods sold Gross margin Margin contribution percentage Impact with no mitigation Reduction in materials availability Revised product sales Revenue impact $5,000,000 $1,000,000 2,000,000 500,000 $3,500,000 $1,500,000 30%

25% $3,750,000 ($1,250,000)

Mitigation through new supplier Reduction in materials availability Revised product sales Revenue impact Mitigation of impact with other suppliers Materials breakdown At-risk supplier All other suppliers Total materials costs % Contribution 25% 75%

19% $4,062,500 ($937,500) $312,500

Amount $500,000 1,500,000 $2,000,000 25%

Ability to mitigate materials loss through other suppliers


								
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