Forty-five percent of an organization's customer payments are submitted online. Eight percent of online payments are rejected. Executive management decides to outsource its online payment services to a contractor that will assume 75 percent of the total value of rejected payments. The organization estimates $1.25 million customer payments due during the contract period.
Which of the following represents the organization's residual risk for online customer payments due?
To determine the organization's residual risk for online customer payments, we first need to calculate the total value of rejected payments and then find out what portion of these will not be covered by the contractor. The calculations are as follows: 45% of $1.25 million in payments are submitted online, which is $562,500. Out of these, 8% are rejected, totaling $45,000 in rejected payments ($562,500 x 0.08). The contractor will assume 75% of the rejected payments, which is $33,750 ($45,000 x 0.75). Therefore, the residual risk for the organization is 25% of the rejected payments, which comes out to $11,250 ($45,000 x 0.25). Thus, the correct answer is $11,250.
why not c?
probably it is 1.250.000 x0,45x0.08x0.25 (not 0,75 as it is remaining risk on the company side, not on the contractor side), am I right?