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MANAGING EXCHANGE RATE RISK case study solution (Code: c63)

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The Bronson Insurance Group was originally founded in 1900 in Auxvasse, Missouri, by James Bronson.
The Bronson Group owns a variety of companies that underwrite personal and commercial insurance
policies. Annual sales of the Bronson Group are $100 million. In recent years, the company has suffered
operating losses. In 1990, the company was heavily invested in computer hardware and software. One of
the problems the Bronson Group faced (as well as many insurance companies) was a conflict between
established manual procedures and the relatively recent (within the past 20 years) introduction of
computer equipment. This conflict was illustrated by the fact that much information was captured on
computer but paper files were still kept for practical and legal reasons.
The file department employed 20 file clerks who pulled files from stacks, refilled used files, and delivered
files to various departments including commercial lines, personal lines, and claims. Once a file clerk
received the file. Clerks delivered files to underwriters on an hourly basis throughout the day. The
average file clerk was paid $8,300 per year. One special file clerk was used full time to search for
requested files that another file clerk had not been able to find in the expected place. It was estimated that
40 percent of the requested files were these “no hit” files requiring a search. Often these “no hit” files
were eventually found stacked in the requester’s office. The primary “customers” of the file clerks were
underwriters and claims attorneys.
Company management and operations analysts were consistently told that the greatest problem in the
company was the inability of file clerks to supply files in a speedy fashion. The entire company from top
to bottom viewed the productivity and effectiveness of the department as unacceptable. An underwriter
used 20-50 files per day. Because of their distrust of the files department, underwriters tended to hoard
often used files. A count by operations analysts found that each underwriter kept from 100-200 files in his
or her office at any one time. An underwriter would request a file by computer and work on other
business until the file was received. Benson employed 25 underwriters.
Upper management was deeply concerned about this problem. The MIS department had suggested using
video disks as a possible solution. A video disk system was found that would be sufficient for the
Semester II Examination Papers
IIBM Institute of Business Management
companies needs at a cost of about $12 million. It was estimated that the system would take two years to
install and make compatible with existing information systems. Another, less attractive was using
microfilm. A microfilm system would require underwriters to go to a single keyboard to request paper
copies of files. The cost of a microfilm system was $5 million.
1. What do you recommend? Should the company implement one of the new technologies? Why or
why not?
2. An operations analyst suggested that company employees shared a “dump on the clerks”
mentality. Explain.

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