Managing Risk in Organizations

Events Plus Inc. Events Plus Inc. is a company that organizes semin" rel="nofollow">inars. Each year, it holds some 120 semin" rel="nofollow">inars dealin" rel="nofollow">ing with busin" rel="nofollow">iness management and public sector management themes. In order to encourage early enrollments to its semin" rel="nofollow">inars, Events Plus offers 20 percent discounts to participants who register for a class up to six weeks in" rel="nofollow">in advance of the date of the semin" rel="nofollow">inar offerin" rel="nofollow">ing. Because this is an attractive discount, popular classes usually experience heavy levels of sign-ups before the six-week pre-semin" rel="nofollow">inar cut-off poin" rel="nofollow">int. Less popular courses experience weaker levels of sign-ups. Table 1 shows data collected on 110 semin" rel="nofollow">inar offerin" rel="nofollow">ings that were tracked by Events Plus over the past year and a half. Lookin" rel="nofollow">ing at the data, Events Plus fin" rel="nofollow">inds that in" rel="nofollow">in 22 cases, enrollments were so strong at the six-week marker that they covered all anticipated semin" rel="nofollow">inar costs. Typically, these classes resulted in" rel="nofollow">in decent profits, although in" rel="nofollow">in two cases the class had to be cancelled owin" rel="nofollow">ing to in" rel="nofollow">instructor illness. In 33 cases, enrollments were reasonably good at the six-week marker and covered 70-95 percent of the semin" rel="nofollow">inar costs. The semin" rel="nofollow">inars usually experience some profit, although on ten occasions classes could not be held owin" rel="nofollow">ing to in" rel="nofollow">insufficient enrollments. In 55 cases, enrollments were weak at the six-week marker, coverin" rel="nofollow">ing less than 70 percent of anticipated semin" rel="nofollow">inar costs. Often, these classes did not break even and in" rel="nofollow">in a number of cases resulted in" rel="nofollow">in substantial losses. On 22 in" rel="nofollow">instances, they were cancelled owin" rel="nofollow">ing to poor enrollments. Break even at six-week marker? Hold semin" rel="nofollow">inar? 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 in" rel="nofollow">information contain" rel="nofollow">ined in" rel="nofollow">in this table to track enrollment strength course-by-course. That is, decision-makers use this historical data to determin" rel="nofollow">ine the viability of current semin" rel="nofollow">inar offerin" rel="nofollow">ings. At the six-week pre-course marker, managers review enrollments and classify a semin" rel="nofollow">inar accordin" rel="nofollow">ing one of three categories: Break even as of today; almost break even as of today; and not-near-to-breakin" rel="nofollow">ing-even as of today. Questions 1. Create a decision-tree that will help guide us in" rel="nofollow">in determin" rel="nofollow">inin" rel="nofollow">ing what action to take when we review student enrollments at the six-week, pre-course marker. 2. Senior management is reviewin" rel="nofollow">ing past attendance at semin" rel="nofollow">inars. They want to have an overall understandin" rel="nofollow">ing of how their semin" rel="nofollow">inar marketin" rel="nofollow">ing efforts are doin" rel="nofollow">ing. So they ask the followin" rel="nofollow">ing questions, which you should answer: a. What is the probability that Events Plus will reach the break-even poin" rel="nofollow">int at the six week marker and ultimately hold the semin" rel="nofollow">inar? b. What is the probability that Events Plus will nearly reach the break-even poin" rel="nofollow">int at the six-week marker and ultimately hold the semin" rel="nofollow">inar? c. What is the probability that Events Plus will not reach the break-even poin" rel="nofollow">int at the six-week marker, but win" rel="nofollow">inds up holdin" rel="nofollow">ing the semin" rel="nofollow">inar nonetheless? 3. Assume the cost of preparin" rel="nofollow">ing for a typical semin" rel="nofollow">inar (in" rel="nofollow">includin" rel="nofollow">ing advertisin" rel="nofollow">ing cost) is $32,000 and revenue after preparation cost have been netted out is $20,000. When semin" rel="nofollow">inars are cancelled, the preparation costs are lost entirely. a. If at the six-week marker we fin" rel="nofollow">ind that we have reached a break-even poin" rel="nofollow">int, what is the expected monetary value associated with decidin" rel="nofollow">ing to hold the semin" rel="nofollow">inar? Does it make good busin" rel="nofollow">iness sense to go ahead and hold the semin" rel="nofollow">inar? b. If at the six week marker we fin" rel="nofollow">ind that we are near to reachin" rel="nofollow">ing a break-even poin" rel="nofollow">int, what is the expected monetary value associated with decidin" rel="nofollow">ing to hold the semin" rel="nofollow">inar? Does it make good busin" rel="nofollow">iness sense to go ahead and hold the semin" rel="nofollow">inar? c. If at the six week marker, we fin" rel="nofollow">ind that we clearly have not reached the break-even poin" rel="nofollow">int, what is the expected monetary value associated with decidin" rel="nofollow">ing to hold the semin" rel="nofollow">inar? Does it make good busin" rel="nofollow">iness sense to go ahead and hold the semin" rel="nofollow">inar? 4. When Events Plus begin" rel="nofollow">ins preparin" rel="nofollow">ing to offer a semin" rel="nofollow">inar, what is the probability that the semin" rel="nofollow">inar will actually be held?