Subject: RISK Management

Question 3 (6 marks)

Read the case study below and answer the questions that follow:

Galaxy Computers is a manufacturer of high-end business laptops. The company has also launched a few gaming laptops. In a recent meeting, risks that the company is facing were listed on the agenda.

Components are procured from several suppliers. These suppliers test all components before they are shipped to Galaxy. All completed laptops are thoroughly tested to ensure that they are working. All laptops are fully guaranteed against failure for three years. On average, Galaxy needs to repair two out of every thousand laptops sold under warranty.

The company has three strategically located warehouses around the country. Severe weather and heavy rainfall caused flooding and damage at one of the companys warehouses. All the inventory at the warehouse had to be written off and most of the equipment had to be replaced.

Galaxy has struggled to gain market share from competitors who specialise in gaming laptops. Customers trust these brands and tend to be very loyal. The gaming laptop segment is highly competitive and profit margins are significantly lower than in the business laptop segment.

3.1 For each of the risks outlined in the scenario, propose a suitable risk mitigation strategy (reduce, transfer, retain or terminate) and recommend how Galaxy Computers can use the strategy to manage the risk.