Boeing is the world's leading aerospace company and the largest manufacturer of commercial jetliners and military aircraft combined. Additionally, Boeing designs and manufactures rotorcraft, electronic and defense systems, missiles, satellites, launch vehicles and advanced information and communication systems
For Boeing, managing risks is extremely important as their losses could be substantial due to the nature of the business the company is in and the fact that their products are very expensive (airplanes as high as 300 million and military contracts and systems worth billions of dollars). Also, Boeingʼs products touch many people (passengers, crew, airport personnel, equipment operators, etc.) at any point in time.
There are several factors and types of risks Boeing needs to manage, of which all have associated costs. Some of these include: risk of an airplane crash, risk of military or commercial system malfunction, risk of oil prices, risk of outside factors such as terrorist attacks, and risk of loss of government funding which can cause a program on the brinks of completion to come to a complete halt. To touch on the cost of risk for Boeing we look at the example of the realization of the risk of an airplane crash where Boeing would endure costs associated with the damage to the aircraft, loss of life, investigation of crash costs, liability claims, and defense costs for injured people. Other indirect costs associated with the crash could include: the grounding of all similar aircraft models pending investigation, and/or the impact on future passengers flying with the same aircraft or same company.
Risk management efforts for Boeing will potentially reduce any expected losses caused by some of the companyʼs pure risk and will increase the companyʼs value and sustain or even boost profits. As in the example of the airplane crash, risk