Failures have impact on the society as well as on the entity that caused the failure. The size of impact varies with each case. Although large scale accidents will cause great impact on the society and the originator, it is not only the size of failure that determines the size of impact on the originator. When an unethical corporate misconduct is revealed, the company at times will disappear by loss of business or administrative disposition. To measure the impact of failures on the originator and to help make decisions of whether to disclose or cover the event, we defined two quantities associated with failure; “Profit of Failure” and “Loss of Failure”. The former measures monetary gain for covering up a failure, and the later the loss in case the failure is disclosed. We applied our method of calculation to 18 cases of past failures and identified different groups. Some cases, the loss exceeds the profit and business owners are encouraged to publicly disclose the event as soon as it internally becomes known to keep the damage smaller. In other cases, the loss is smaller than the profit and in which case, business owners may decide to cover up the event. Even in the later case, business owners may want to disclose the event anyway because recently changed regulations protect the whistle blowers better and for ethical reasons.
- Design Engineering Division and Computers and Information in Engineering Division
Quantifying Profit and Loss Associated With Failure Cases
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Nakao, M, Yabuta, N, & Terabe, M. "Quantifying Profit and Loss Associated With Failure Cases." Proceedings of the ASME 2004 International Design Engineering Technical Conferences and Computers and Information in Engineering Conference. Volume 1: 30th Design Automation Conference. Salt Lake City, Utah, USA. September 28–October 2, 2004. pp. 1095-1100. ASME. https://doi.org/10.1115/DETC2004-57576
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