Interviewer view · keep this screen to yourself
Which risks should a food factory in Johor pay to reduce?
You run the case. Read the prompt, answer questions from the notes below, and share data only when the candidate asks for it or gets stuck. Score at the end.
Case timer
00:00
1. Read the prompt aloud
Read it slowly, then pause. Let the candidate ask questions before they structure.
A biscuit factory in Johor, Malaysia makes about MYR 15 million of profit a year. Its risk register is in the table with this case. Three actions are proposed. First, a second flour supplier (MYR 0.4 million a year extra). It would cut the impact of the main supplier failing from MYR 8 million to 2 million. Second, a spare parts kit for the oven (MYR 0.15 million a year). It would halve the impact of a breakdown. Third, flood insurance (MYR 1.2 million a year). It would pay MYR 40 million of the MYR 50 million flood loss. Which should it take? (Fictional company, illustrative figures.)
The prompt refers to Exhibit 1. After reading it, say: "Open Exhibit 1 now."
2. Answers to clarifying questions
This case has no scripted clarifying answers. Answer from the prompt, and say "assume what you think is reasonable" if the prompt does not cover it.
3. A model structure
Compare the candidate's structure with this one. A different split can be just as good if it is clean and fits the problem.
- For each action: expected loss saved compared with what the action costs
- Expected loss = chance x impact, for every risk
- Action pays on average if the expected loss it removes is more than its cost
- Key: Survival test: could one event sink the company?
Exhibit 1
The prompt uses this exhibit, so the candidate opens it right after you read the prompt ("Show exhibit 1" on their screen).
| Risk | Chance a year (percent) | Impact if it happens (MYR millions) | Expected loss a year (MYR millions) | Owner |
|---|---|---|---|---|
| Main flour supplier fails | 10 | 8 | 0.8 | Head of purchasing |
| Flood shuts the plant for months | 2 | 50 | 1 | Plant manager |
| Oven breakdown (the bottleneck) | 30 | 2 | 0.6 | Head of maintenance |
| Cyberattack stops ordering | 5 | 6 | 0.3 | Head of IT |
| Product recall | 3 | 20 | 0.6 | Head of quality |
So-what
The flood has the largest expected loss even though it is the least likely risk, because its impact is so large.
4. The working, step by step
Each step shows how a strong candidate works it out. Share a new fact from it only when the candidate asks or is stuck, and let them do the math: the result in the dark box is what they should reach.
Step 1: Total expected loss
What a strong candidate does: Add the five expected losses.
Expected loss a year (MYR millions): 0.1 × 8 + 0.02 × 50 + 0.3 × 2 + 0.05 × 6 + 0.03 × 20 = 3.3
Step 2: Second supplier: loss removed
What a strong candidate does: Expected loss falls from 10 percent x 8 to 10 percent x 2.
Expected loss removed (MYR millions): 0.1 × 8 - 0.1 × 2 = 0.6
Step 3: Second supplier: net
What a strong candidate does: Minus its MYR 0.4 million a year.
Net gain a year, second supplier (MYR millions): 0.1 × 8 - 0.1 × 2 - 0.4 = 0.2
Step 4: Spare parts kit: net
What a strong candidate does: Impact halves from 2 to 1, so the expected loss falls by 30 percent x 1; minus the kit's cost.
Net gain a year, spare parts (MYR millions): 0.3 × 2 - 0.3 × 1 - 0.15 = 0.15
Step 5: Insurance: expected payout
What a strong candidate does: 2 percent chance of a MYR 40 million payout.
Expected payout a year (MYR millions): 0.02 × 40 = 0.8
Step 6: Insurance: net
What a strong candidate does: Expected payout minus the premium.
Net a year, insurance (MYR millions): 0.02 × 40 - 1.2 = -0.4
Step 7: Survival test
What a strong candidate does: How many years of profit would a flood wipe out?
Flood loss in years of profit: 50 ÷ 15 = 3.33
The recommendation to listen for
At the end, say: "The CEO walks in. What is your recommendation?"
Take all three, for different reasons. The second supplier and the spare parts kit pay for themselves on average. They gain about MYR 0.2 million and 0.15 million a year. The spare parts also protect the oven, which is the bottleneck. Flood insurance loses about MYR 0.4 million a year on average, as insurance almost always does. Insurers charge more than the expected payout to cover their costs and profit. Buy it anyway: a flood would wipe out more than three years of profit and could close the company. Expected value is the right guide for frequent, survivable risks; for rare, ruinous ones, protect survival first. Next, check whether flood barriers would cost less than the premium over time.
Score the candidate
Score each criterion from 1 to 5. A 2 or a 4 sits between the descriptions.
Total
0 out of 25
Score all five criteria to see the band and the feedback template.
Next: another case in Partner mode
Swap roles and run the next case, so you both practise answering and scoring.