Accounting Information Systems

A RESEARCH OF THE RISK MANAGEMENT BROUGHT ABOUT BY

BUSINESS DISRUPTIONS

INTRODUCTION

Risks of any kind can bring losses to business

The CFO faces an entrepreneurial risk , The Complete guide to risk management , Kit Sadgrove . Every business has management whose one purpose is decision making . Some decisions made by the management can cause the company to grow , increase in market share and earn great profits . On the other hand , some decisions may make the company to collapse or incur lots of losses

Therefore it is very important to measure risks

. This can be achieved through creating a list of options and then evaluating each option

Kloman defines risk as a discipline of dealing with uncertainty

From the information given , the CFO Synergein Corporation faces risk of downtimes caused by both internal (Internal computer systems problems and external factors (systems failures with ISP

Any company that 's does e business is prone to both the risks especially because they are man made

DATA ANALYSIS

ANNUAL ESTIMATIONS OF COST INCURENCEIS BY CFO CAUSED BY SYSTEM FALURES

CAUSE NO OF DOWNTIME INCIDENTS NO OF SYSTEM DOWNTIME HOURS (INCIDENTS X1 ) COST (HOURS X 10 ,000

Internal computer systems problems 50 50 500 ,000

External problems (system failures with ISP ) 50 50 500 ,000

Redundant computer and communication systems ISP support Annual current cost 150 ,000 100 ,000 250 , 000

Q . A This means that the company annual residual expected risk worth is Q . B If the company purchases and maintain more redundant computers and communication lines , at an annualized cost of 100 , 000 , to reduce the expected number of downtime incidents to 15 per year due to internal computer system , this would mean that the be 75 which would cost the company 750 , 000

Q .C Yes I would purchase the highest level of service from the ISP . This is because although it will increase costs , it would reduce the downtimes to only downtimes caused by redundant computers and communication line . This means customers will be satisfied with the company service which would attract more customers and increase revenue

Also the cost incurred against the risk reduced is very practical and attainable as indicated below -

service and the purchase maintenance of more redundant computers and communication lines would be only 15 annually which puts the risk worth of the company to 15 1 10000 150 ,000

The current cost of the purchase would be 100 ,000 for the computers and communication lines and 500 ,000 for the ISP guaranteed service giving a

So with an annual cost of 600 ,000 the company is risking 150 ,000 with a cost of 100 , 000 , the company is risking 750 ,000 and also with the current cost of 250 , 000 the company still risks 750 ,000

REFERENCES

KIT , SANDGROVE , The complete guide to business risk managemen . [Online] Available...