Risk Analysis

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 Hypothetically speaking if Saia were to increase their driver fleet and demand for trucking services increased as well Saia could potentially see profits increase $1.5 million USD. The risk analysis diagram below shows the potential profits and losses based on the decision to expand the driver fleet or not. 


There is a 50% chance that their will be an increase in demand for trucking services, a 30% chance that demand stays at current levels, and a 20% chance that trucking demands will decrease. The EMV, or expected monetary value of Saia's options are listed below.

EMV of increasing the driver fleet

    Demand goes up: (.50)(1500000) = $750,000

    Demand is steady: (.30)(900000) = $270,000

    Demand goes down: (.20)(-500000) = -$100,000

EMV= 750,000 + 270,000 + -100,000  = $920,000

EMV of maintaining current fleet

    Demand goes up: (.50)(-500000) = -$250,000

    Demand is steady: (.30)(500000) = $150,000

    Demand goes down: (.20)(-250000) = -$50,000

EMV= -250,000 + 150,000 + -50,000 = -$150,000

Based on these calculations it is an acceptable risk to increase the driver fleet, as the expected monetary value of doing so has a potential profit of $920,000.


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