Summary Questions – Part A

VETO plc is struggling to grow its revenue and so has decided to make its’ credit terms significantly more generous, this will mean a substantial increase in the level of borrowings.

Which THREE of the following risks will be affected by this decision?

The low-lying country of Columbus has faced a series of problem as a consequence of increasingly erratic weather patterns, including flooding and in some cases extended periods of dry weather. MOD plc is one of the largest insurance companies in Columbus and has itself faced problems arising from their recent rapid expansion funded by debt into neighbouring countries.

Which THREE of the following risks is MOD plc most likely to be exposed?

JKL plc is a large utility company that operates exclusively in the country of Mercury. In recent years JKL has invested heavily in new technology which means that their plant equipment and infrastructure is recognised as amongst the best in the world.

Mercury is currently going through a general election in which one of its’ two main parties has vowed to nationalise all the utility companies in the country. The other party, while not planning to nationalise companies has announced that should it win, it will introduce great swathes of legislation that will significantly curtail utility companies ability to increase their prices.

Which TWO of the following risks are JKL plc exposed to as a consequence of the above?

Following a recent election campaign in the country of Malawi, a swathe of new laws have been introduced in the telecommunications industry. BCC Inc, a listed company is finding many of these new laws very difficult to implement

Which ONE of the following is BCC Inc particularly exposed to?

MIC ltd is operating in the country of Cocomelon for the first time and has experienced a number of issues.

Firstly, ZILLE, the production manager seconded to run the new operations in Cocomelon has repeatedly disagreed with the local workforce, often about what to ZILLE seem to be relatively minor issues.

Secondly, despite having invested heavily in the latest technology, and keeping up with the latest developments in the industry, they have found themselves to be unable to satisfy customer needs due to items being delivered late or in some cases, not at all.

Which TWO of the following risks associated with international trade have MIC ltd been exposed to?

DOG plc has been trying to reduce costs in the last year due to a fall in turnover having a negative impact on profitability. In order to save money, the internal audit department was disbanded and all the staff were made redundant. As a consequence of this, there has been an increase in the incidences of fraud.

Which ONE of the following is LEAST likely to lead to the increase in fraud caused by the disbanding of the internal audit department?

KED plc produces cans of beans. The production line manager has correctly identified that the 99% Value at Risk of the daily manufacturing process is 36g. That is they are 99% certain that KED plc will not waste more than 36g of ingredients in a day.

What is the standard deviation in the manufacturing process?

The z-value for the 99% level of confidence is 2.33

The newly appointed risk manager of POS plc, a manufacturing company that makes a wide variety of products, is reviewing the risk profile of the company. She has identified that their fireworks division has experienced a high number of minor explosions in its factories in the past, and so has separated its production lines – each of them produces only a small proportion of the total output. So far, none of the explosions has caused injuries to staff, but the risk manager thinks that this is something that should be addressed.

Which ONE of the following would be the most appropriate method of managing the risk of explosions in POS plc?

It is early on Monday morning, and the finance manager of a firm that trades commodities is considering how to deal with the pressing matter of an upcoming tax bill, which the finance manager has to pay at the end of the day’s trading on Friday. Historically, the firm has generated cash flows of $10,000 per day with a daily standard deviation of $200. Rather than take money off deposit, the finance manager would ideally like to pay the bill out of the firms trading profits and so is assessing how much money she can confidently predict as being available to pay the tax bill. Being a risk averse manager, she wants to be 99% confident of the amount available.

For a 99% confidence level, the Z score is 2.33.

What amount should the finance manager assume will be available to pay the tax bill at the end of the week?

A company is concerned about the high level of bad debts that have arisen in the last 12 months, and they have decided that they will first implement procedures that reduce the likelihood of bad debts occurring.

Which TWO of the following procedures will reduce the LIKELIHOOD of bad debts arising?

The COSO double helix has recently been added to the risk management framework.

Which of the following elements are in the double helix model? Select ALL that apply

The following is an extract from the board minutes of a company.

“While it is true that business has been profitable, it has not come without a number of complaints from major institutional shareholders who are concerned that the volatility of earnings has been growing in the past year, and is now greater than they wished for when they originally invested in the company. They feel that even with the controls set in place by management, the risk exposure is too great.”

Which TWO of the following issues are being referred to?