Page 18 - CIMA OCS Workbook May 2019 - Day 1 Tasks

CIMA MAY 2019 – OPERATIONAL CASE STUDY

4 RISK AND UNCERTAINTY

EXERCISE 4(A) – KEY RISKS

Question Your response

Identify four significant areas
of risk for VitaMine.

EXERCISE 4(B) – USING EXPECTED VALUES
Grace Lukas (Research and Design Manager) is considering the possibility of introducing a new
breakfast ‘cereal topper’ aimed at children, to ensure they have sufficient vitamins and calcium
for healthy growth. The plan would be to run the idea as a pilot study for 3 months, using a single
national retailer. If successful, then the option could be offered through all sales channels.
Melanie Tan is concerned about the risks, so a range of scenarios have been discussed and
outcomes have been estimated as follows:

Scenario I probability = 0.6 profit of E$50,000

Scenario II probability = 0.3 profit of E$12,000

Scenario III probability = 0.1 loss of E$25,000

Calculate the expected value of the profit and comment on the acceptability of the project.

14 KAPLAN PUBLISHING