Rabby Industries Ltd manufactures computer software. Late last year, it launched Budget Smart, a program that allows users to manage their finances from their home computers. It shipped 1 000 000 units to stores around Canada. As a result of an extensive advertising campaign and favourable reviews in the media, sales have been very good. About 600 000 units have already been sold, and the rest are moving quickly from store shelves. Recently, however, Rabby’s engineers discovered a problem. After 18 months in use, the program causes damage to some types of home computers. At this point, the full extent of the problem remains unknown. For instance, it is not clear which types of systems will be affected. It is clear, however, that in at least some situations, the defect will irreversibly erase the entire hard drive, and all of the computer’s information
will be lost.

Rabby has not yet received any customer complaints. The company knows, however, that the situation will soon change. It is therefore concerned about a number of things. It is distressed by the thought of damaging customers’ computers. It is worried that it might be forced into bankruptcy if it is held liable in a large number of cases. And it is worried that it might even be financially ruined by a small number of claims. Since it is still a relatively new company in a highly competitive field, it could be wiped out by bad publicity.

Discuss Rabby’s situation from a risk management perspective. Explain the process of risk management and identify several responses that the company might consider.