Chapters 30, 31, and 34 presented three mini-case studies on ERM and risk. Each one presented a slightly different risk scenario. Suppose General Motors wants to replace one of their traditional lines of vehicles with all electric models. How could GM use game theory to identify and assess the major risks to this decision? Identify two major risks that would result from GM converting an existing line to an all-electric line. Provide a brief discussion of each risk, and your assessment of the levels of inherent, current, and residual risk, using GM’s five point scale. To complete this assignment, you must do the following: Suppose General Motors wants to replace one of their traditional lines of vehicles with all electric models. How could GM use game theory to identify and assess the major risks to this decision? Identify two major risks that would result from GM converting an existing line to an all-electric line. Provide a brief discussion of each risk, and your assessment of the levels of inherent, current, and residual risk, using GM’s five point scale.

General Motors (GM) is contemplating replacing one of their traditional lines of vehicles with all-electric models. In order to identify and assess the major risks associated with this decision, game theory can be employed. Game theory is a mathematical tool used to analyze decision-making in situations involving multiple stakeholders with conflicting interests. By applying game theory, GM can gain insights into the potential risks and uncertainties it may face during this transition.

One major risk that GM may encounter is the uncertainty surrounding consumer adoption of all-electric vehicles. The success of the transition largely depends on the demand for and acceptance of these vehicles by potential customers. Game theory can be used to model the behaviors and preferences of consumers, competing automakers, and other relevant stakeholders. Through this analysis, GM can assess the potential reactions and strategies of competitors, such as offering their own all-electric vehicles or aggressively pricing their traditional vehicles to maintain market share. By understanding the different strategies and potential outcomes, GM can evaluate the inherent risk associated with consumer adoption as well as the likelihood of success for its own all-electric line.

Another major risk that GM may face is the uncertainty surrounding advancements in battery technology. As all-electric vehicles heavily rely on efficient and reliable battery systems, any shortcomings or delays in battery technology advancements could significantly impact the success of GM’s all-electric line. Game theory can assist GM in evaluating the strategies of competing battery manufacturers and potential rivals in the electric vehicle market. By considering different scenarios and outcomes, GM can assess the inherent risk associated with battery technology advancements and the potential competitive landscape. Additionally, GM can analyze the actions it can take to mitigate this risk, such as forming strategic partnerships with leading battery manufacturers or investing in battery research and development.

Using GM’s five-point scale for assessing risk (ranging from low to extreme), we can assess the levels of inherent, current, and residual risk for the identified risks.

For the risk associated with consumer adoption of all-electric vehicles, the inherent risk may be assessed as medium, as it is moderately challenging to predict and influence consumer behavior. The current risk may also be evaluated as medium, as market research and consumer trends can provide some insights into potential demand. The residual risk could vary depending on the strategies implemented by GM, but it may be assessed as low to medium if GM successfully navigates the market and secures a significant share of the all-electric vehicle market.

For the risk associated with advancements in battery technology, the inherent risk may be assessed as high, as it is highly dependent on external factors and technological advancements. The current risk can be evaluated as medium to high, as GM can monitor and evaluate the progress in battery technology. The residual risk may also be assessed as medium to high, depending on the extent to which GM is able to adapt to the advancements and maintain its competitive edge.

In conclusion, game theory can be a valuable tool for GM in identifying and assessing the major risks associated with replacing one of their traditional vehicle lines with all-electric models. By considering the uncertainty surrounding consumer adoption and battery technology advancements, GM can better understand the inherent, current, and residual risks associated with this strategic decision.