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BCG Medium Strategic Decision Risk Management Financial Analysis

Contagion Containment

#Non-profit #Media & Entertainment
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This case tests the candidate's ability to balance quantitative financial analysis with qualitative risk assessment under uncertainty. It requires calculating expected values of IOC revenues under proceed vs. cancel scenarios, determining a breakeven probability threshold (66%), and identifying both financial and non-financial risks including reputational, relationship, and human impact considerations.

Estimated Time 26 minutes
Difficulty Medium
Source Darden
59 / 100
Your client is the International Olympic Committee (IOC), and the Summer Olympics are a couple months away. A viral outbreak has occurred in a country across the globe and has begun to spread. There is a real threat that the outbreak reaches pandemic levels and arrives in the host country within a few weeks or months. Should the outbreak reach the host country, there is an 80% probability of a low-severity outbreak and a 20% chance of a high-severity outbreak. The modern Olympics, which date to 1896, have been cancelled previously only during wartime. Recently, the Rio Games in Brazil went on as scheduled in 2016 despite the outbreak of the Zika virus. Because countries bear a large cost to host the Olympics, the IOC has decided to be particularly cautious about the host country bearing significant unexpected costs. However, the IOC is unsure whether to cancel or move forward with the Olympics and would like your firm’s insight on how they should proceed.

Clarifying Information

  1. Objective: Make a decision on whether to proceed or not by considering minimizing unexpected economic costs to host country while maximizing IOC revenue.
  2. Timeline: The IOC must make a decision today regarding the event.
  3. The IOC: The International Olympic Committee (IOC) is a not-for-profit independent international organization that is committed to building a better world through sport. While the IOC may consider input from the host country, the IOC is the decision-maker.
  4. The Virus: Like the seasonal flu, this virus is an infectious respiratory illness. It can spread from person to person through droplets in the air from an infected person coughing, sneezing or talking. However, unlike the flu, no vaccine currently available. Research is being conducted but the timeline is uncertain.
  5. Host Country: The host country is a developed nation. GDP is 3 trillion.
Mock Interview
Interviewer

Your client is the International Olympic Committee (IOC), and the Summer Olympics are a couple months away. A viral outbreak has occurred in a country across the globe and has begun to spread. There is a real threat that the outbreak reaches pandemic levels and arrives in the host country within a few weeks or months. Should the outbreak reach the host country, there is an 80% probability of a low-severity outbreak and a 20% chance of a high-severity outbreak. The modern Olympics, which date to 1896, have been cancelled previously only during wartime. Recently, the Rio Games in Brazil went on as scheduled in 2016 despite the outbreak of the Zika virus. Because countries bear a large cost to host the Olympics, the IOC has decided to be particularly cautious about the host country bearing significant unexpected costs. However, the IOC is unsure whether to cancel or move forward with the Olympics and would like your firm's insight on how they should proceed.

You

Thanks. Before analyzing, I'd like to clarify a few key questions...

Interviewer

Good question. Let me provide some background information...

You

Based on this, I suggest analyzing from these dimensions...

AI Score
Structure Analysis Communication Business Sense Quantitative
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The IOC must decide whether to proceed with the Summer Olympics despite a viral outbreak threat. The case requires analyzing revenue implications (approximately $8B if proceeding vs. $4B if cancelled), determining the probability threshold at which cancellation becomes rational (66%), and evaluating financial and non-financial risks including lives lost, athlete impact, and relationship damage with host countries.

Key Insights:

  1. Expected value analysis: At 66% probability of virus arrival, the IOC is indifferent between the $4B loss from cancellation vs. $8B gain from proceeding
  2. Revenue recovery varies significantly by source: TV rights retain only 40% if cancelled, while licensing and non-refundable tickets provide higher recovery
  3. Non-financial risks are material: reputational damage, relationship risks with future host countries, and impact on human lives should influence the decision beyond pure financial metrics
  4. Sunk costs (construction, promotion) are irrelevant to the decision; only marginal financial impacts and incremental risks matter
  5. Economic impact on host country: 0.05% GDP loss ($1.5B) for low-severity vs. 0.2% ($6B) for high-severity outbreak creates significant leverage in recommendation