Integrated Siting Systems, Inc.

Topics: Risk, Financial risk, Finance Pages: 2 (502 words) Published: October 31, 2012

After the American military industrial expansion of the 1980’s, defense contractors such as Integrated Siting Systems, Inc. (ISSI) became increasingly cognizant of the need to outline a new strategic business direction in order to survive the retrenchment of the 1990’s. Utilizing the military’s Global Positioning System (GPS), ISSI wanted to diversify their portfolio and expand into unchartered commercial markets. Jordeen Scott, head of ISSI engineering, now must brief John Luce, president of ISSI, on the imbedded risks associated with their most current fixed-price contract.

Problem Identification

The palpable lack of communication between the sales staff and the engineering department has resulted in a seismic risk associated with the most recent fixed-price contract. Jordeen Scott previously warned the sales team of ISSI’s lack of familiarity with how their technology might respond in the dense, urban environments of the Midwest. With such a substantial financial risk inherent in the current contract, the criticality of this information should have commanded more attention. Due to unfamiliar geological factors unaccounted for in ISSI’s previous Southwestern-regional model, the contract was enacted with an inherent lack of scrutiny that has now imposed serious financial risks that could impose dire consequences upon ISSI.

Solving the Problem

The current proposal has a probability success rate of 0.9. To increase ISSI’s probability rate of success to 0.96, they must immediately invest $50,000 to conduct a new series of simulation tests. The $50,000 investment will not only increase the success rate of the current system on contract, but will generate a downstream value for future proposal and contractual assessments.

As a company exploring new ventures, ISSI would greatly benefit from improved inter-departmental communication. Jordeen Scott previously warned the sales department of the predictable environmental impacts that...
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