Question 2

Johnson Chemicals is considering two options for its supplier portfolio. Option 1 uses two local suppliers. Each has a unique-event risk of 5.4%, and the probability of a super-event that would disable both at the same time is estimated to be 1.4%. Option 2 uses two suppliers located in different countries. Each has a unique-event risk of 14%, and the probability of a super-event that would disable both at the same time is estimated to be 0.18%.

a) The probability that both suppliers will be disrupted using option 1 is __ enter your response here (round your response to five decimal places).

b) The probability that both suppliers will be disrupted using option 2 is __ enter your response here (round your response to five decimal places).

c) Which option would provide the lowest risk of a total shutdown? Option 1 or Option 2