October 23, 2025 Claire B 0 Comments

Evaluating disaster risk
Johnson Chemicals is considering two options for its
supplier portfolio. 
Option 1 uses two local suppliers. Each has a
“unique-event” risk of 5%, and the probability of a
“super-event” that would disable both at the same time is estimated
to be 1.5%. 
Option 2 uses two suppliers located in different countries. Each
has a “unique-event” risk of 13%, and the probability of a
“super-event” that would disable both at the same time is estimated
to be 0.2%.

a) What is the probability that both suppliers will be
disrupted using option 1?

b) What is the probability that both suppliers will be
disrupted using option 2?

c) Which option would provide the lowest risk of a total shutdown?

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