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P3 Risk Management Questions and Answers

Questions 4

SC is a professional football club which is currently listed on a recognised stock exchange. There is a proposal that it builds a new stadium at a location a considerable distance from its current stadium.

There is strong support within the club for the move as the current ground is now over 40 years old and has not been extensively modernised in that time.

However, there is a lot of opposition to the move in the area where it is proposed to locate the new stadium. Objectors claim that the new stadium will increase traffic and pollution in the area and will adversely affect the value of their properties.

Which of the following statements about the responsibility of the board of SC is correct?

Options:

A.

SC is now a listed company and so the board should prioritise the interests of shareholders to the exclusion of other stakeholders.

B.

A football club needs to be part of the community in which it exists and so the board should consider the other stakeholders.

C.

The board should conclude that objectors to the new stadium have a legal course of action open to them and if they do not take legal action they should ignore them.

D.

If the board of directors is seen as acknowledging its responsibility to stakeholders other than shareholders this will enhance the reputation of the club and it will be more likely that a compromise can be reached with objectors.

E.

The board should share information about the new development with the local community only to the extent that it is legally obliged to do so.

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Questions 5

HJK is a publishing company that employs several hundred staff A member of the company's IT Security Department contacted 30 members of HJK's staff selected at random, and told each one that his or her computer appeared to be infected with a virus The staff members were asked to provide their login details and corporate passwords so that IT Security could remove the virus remotely A total of six members of staff provided this information.

Which TWO of the following statements are correct?

Options:

A.

HJK's entire staff should be informed of the investigation and of the disappointing fact that six members of staff handed over their logins and passwords

B.

The investigation should be repeated in the future on a different sample of staff, using other reasons for asking for logins and passwords

C.

HJK's response should be limited to briefing the six staff members on their error and ensuring that they change their passwords.

D.

It was acceptable for the staff to surrender their details because the request had actually been made by members of HJK's IT Security Department.

E.

It was unethical for HJK's IT Security Department to contact staff in this manner, lying about the suspected presence of a virus in order to provoke a response.

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Questions 6

RFD, a listed company, is considering making an investment in a risky new venture. RFD has a substantial cash surplus that will be used to acquire the necessary resources. It is unlikely that RFD would have been able to raise finance for this investment because the company is already highly geared.

Which of the following statements about stakeholders' conflicting interests are true?

Options:

A.

RFD's shareholders are exposed to the systematic risk from this project and the directors are exposed to total risk.

B.

RFD's lenders are likely to suffer a greater risk than RFD's equity investors.

C.

Neither RFD's shareholders or lenders are likely to have the means to prevent the directors from making this investment.

D.

RFD's existing employees are likely to enjoy a significant upside risk from this project.

E.

The diversification of RFD's interests will reduce the risks for all stakeholders.

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Questions 7

AB is a manufacturing company which relies heavily on its computerised systems for customer management

Which of the following is the most important factor which will enable AB to continue to operate after an incident which destroys its central computer*?

Options:

A.

A duplicate copy of its computer hardware at a remote location

B.

The ability to replicate its data and applications elsewhere

C.

A good insurance policy.

D.

Paper hardcopies of all original documents

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Questions 8

DFG's call centre budgets four minutes for its operators to deal with a customer's enquiry and conclude the call. Team leaders are evaluated on the basis of the average call length.

Simone is a team leader. Her team's average call length is five minutes and 30 seconds. Simone accepts full responsibility. She encourages her team members to check that the customer is satisfied before concluding the call.

On investigation, it was discovered that 2% of the customers who dealt with Simone's team had to call DFG again within seven days. Other teams had an average of 25% of customers call back within seven days because their first call had not fully resolved their problem.

Which of the following statements are true?

Options:

A.

The use of average call length may be leading to dysfunctional behaviour.

B.

Simone is in breach of call centre policy.

C.

It would be better to evaluate team leaders on the basis of multiple criteria.

D.

Team leaders should be responsible for setting policy on performance measurement within the call centre.

E.

Average call length should be replaced with the average rate of return calls as the primary performance measure for team leaders.

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Questions 9

R is a manufacturer of biscuits. The market for biscuits is extremely competitive with many companies competing for contracts with large supermarkets. The intensity of the competition means that prices are kept low; and the buyers can demand higher levels of quality, and greater flexibility in supply arrangements.

Which of the following represent ways that the use of an Information System could help R to win and retain supermarket contracts in such a competitive market?

Options:

A.

It could facilitate product ordering and selection by the use of Electronic Data Interchange.

B.

If R's system is integrated with that of a particular supermarket, then this will make it more expensive for the supermarket to change to a different supplier.

C.

It would mean that R's products would be more prominently displayed on the supermarket shelves.

D.

It could be used to facilitate more timely and accurate delivery which would minimising waste.

E.

If R's system is integrated to that of a particular supermarket then other supplier's systems cannot also be integrated to that supermarket system.

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Questions 10

DFR is an online retailer that sells picture frames The software running on DFR's website enables customers to log in and make purchases by inputting an email address as a user name and a password that must contain at least eight characters, including upper and lower case letters, numbers and punctuation marks (e.g. £, $ or!) Once logged in, customers can check previous orders that they have placed.

Customers can also use DFR's website to change personal details, including credit card numbers and delivery addresses Whenever they wish to use those facilities, the software sends a text message containing a six-digit number to their mobile phones They must input that number before the system will accept changes to their personal details

Which TWO of the following statements are correct?

Options:

A.

It is illogical to have different security measures in place for orders and for access to personal details.

B.

The software treats customers' personal details as being more sensitive than their ordering histories

C.

The arrangement with the text message will have no effect on the security associated with changing personal details

D.

Customers should be able to update the mobile phone numbers in their DFR accounts using only their email addresses and passwords for access

E.

The software should never show the whole of a customer's credit card number on screen, even if the customer has logged in and input the six-digit number.

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Questions 11

Amber selects appropriate suppliers and places purchase orders.

Brian passes invoices for payment and submits payment instructions to the bank.

Chris checks incoming inventory and unpacks goods from their containers.

Dirwan posts purchase invoices and files invoices and supporting documents.

Which member of staff could most easily commit fraud?

Options:

A.

Amber

B.

Brian

C.

Chris

D.

Dirwan

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Questions 12

M, a manufacturing company, has had some problems with defects in one of the main products it produces. This product has been made by the company for many years and is very profitable. Last month it had over 300 defects reported by customers which is more than 15% of products sold. This is a reputation risk for M and is also affecting profitability.

Which of the following controls could M introduce to reduce defects and also increase profitability?

Options:

A.

M could increase the number of quality control staff.

B.

M could introduce a procedure where quality control staff sign a form at the end of each day to say they have examined 1 in 10 products for defects and they are satisfied with the quality.

C.

The production director could examine one in every 10 products and sign a form to say they are satisfactory.

D.

M could service machinery at least once a month as recommended by the machinery supplier.

E.

M could check all employees qualifications to ensure they are qualified for their jobs.

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Questions 13

A UK manufacturing company has simultaneously:

   • purchased a put option to sell USD 1million at an exercise price of GBP1.00 = USD1.65

   • sold a call option that grants the option holder the right to buy USD 1million at a price of GBP1.00 = USD1.61 (this option has the same maturity date as the put).

Which of the following is a valid explanation for entering into these option positions?

Options:

A.

The company expects to receive USD 1million from a customer and wishes to offset the cost of the put option by the premium on the call option.

B.

The company expects to pay USD 1million to a supplier and wishes to offset the premium from the call option against the cost of the put option.

C.

The company expects to receive USD 1million from a customer and wishes to obtain an additional benefit if the USD strengthens beyond GBP 1.00 = USD 1.61.

D.

The company expects to pay USD 1million to a supplier and wishes to obtain additional protection against the USD strengthening beyond GBP 1.00 = USD 1.65.

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Questions 14

T has its computer facilities in a building adjacent to its headquarters Severe structural problems have been discovered with this building and T has been advised that the only option is demolition and rebuild This leaves T with strategic decisions to make about its IT provision and it has decided to investigate the outsourcing of its services.

Which TWO of the following factors should T consider as most important at this stage?

Options:

A.

A supplier who can act as a partner in considering all its business needs

B.

A supplier who can act as its agent in choosing the cheapest options

C.

A supplier who provides a wide range of services

D.

A supplier with a long history of providing outsourcing services

E.

A supplier who has facilities conveniently located close to its headquarters

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Questions 15

The Board of Directors of VCX, a state-owned electricity company, includes four executive directors the Chief Executive Officer, the Finance Director the Operation Director and the Technical Director

All of the shares in the company vest in the Office of the Minister for Energy, who is entitled to appoint two non-executive directors to the Board It has been alleged that the Minister appoints political "insiders" who have no particular knowledge of. or interest in. the electricity industry

There are three further non-executive directors

• L, who spent seven years as Chief Executive of VCX, but retired from that role two years ago,

• M, who spent several years on the Board of a state electricity company in a different country to VCX but who resigned from it before accepting the position with VCX: and

• N, who is a qualified and experienced professional accountant

In relation to best practice in respect of Corporate Governance, which of the following statements are valid? Select ALL that apply

Options:

A.

None of the executive directors should be allowed to sit on the Remuneration Committee

B.

M is unsuitable to be part of the Board because his previous involvement with a similar company in another country is a conflict of interest.

C.

L can now be considered to be an independent non-executive director

D.

M and N are both suitable appointees to the Audit Committee

E.

The Finance Director should be part of the Audit Committee because of her expertise

F.

Non-executive directors should be responsible for monitoring the performance of executive management especially with regard to company strategy and objectives

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Questions 16

The technology used by 3D printers is developing rapidly These machines can now use a data file to print a solid object Depending on the printer the object can be plastic, metal or ceramic The increasing capability of those printers is being matched by the falling prices of the printers themselves and of the materials that they use to create the finished product

Which THREE of the following suggest that 3D printing is a potentially disruptive technology?

Options:

A.

Parts created by 3D printers can be distorted during the print process

B.

The printers use expensive materials

C.

Many of the spare parts used to repair cars are made out of plastic or metal.

D.

There is a limit to the size of objects that can be 3D printed.

E.

Design engineers typically design and draw plans for new products on their computers.

F.

Some courier companies have purchased 3D printers for their depots

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Questions 17

B, a construction company, has a policy of carrying out a post completion audit on every construction project undertaken where the value exceeds $1 million.

What is the role of the post completion audit?

Options:

A.

To reward staff and celebrate success.

B.

To signify the end of the project.

C.

To highlight what can be done to improve similar future projects.

D.

To apportion blame for things not done well.

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Questions 18

Which of the following best describes the relevance of value at risk (VaR) as a decision tool?

Options:

A.

VaR quantifies past volatility

B.

VaR quantifies future volatility

C.

VaR quantifies the maximum loss that could ever be incurred

D.

VaR can only measure downside risk

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Questions 19

A project has been evaluated on the basis that it will cost $22 million and will have a net present value of $4.3 million The project has commenced and $5 million of the $22 million has been invested. A problem has been discovered that will cost an additional $4.5 million to rectify. The $4.5 million will be payable immediately. What is the NPV of continuing with this project?

Options:

A.

-$5million

B.

-$0.2million

C.

$1million

D.

$4.8million

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Questions 20

P Ltd, a manufacturing company, is considering a new capital investment project to set up a new production line. The initial appraisal shows a healthy net present value of $6,465 million at a discount rate of 10% as shown in the table below:

However, management is unsure about the demand for the product which will be produced and has insisted that the future revenues should be reduced to certainity equivalents by taking 70%, 65% and 60% of the years 1,2, and 3 cash inflows respectively.

What should P do?

Options:

A.

Proceed with the project, it has a healthy net present value.

B.

Stop the project, it has considerable risk.

C.

Put pressure on sales and marketing to re-verify their forecasts.

D.

Re-appraise the project using other capital appraisal techniques to get a more balanced view.

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Questions 21

When a new computer system is being implemented there are several possible methods for managing the changeover from the old system to the new system.

Which THREE of the following are true?

Options:

A.

Phased changeover is the safest and slowest method of changeover.

B.

Phased changeover moves individual portions of the business to the new system one at a time.

C.

Pilot changeover moves the simplest part of the business to the new system first.

D.

Parallel running involves keeping the old system running, normally until certain data retention criteria are met or confidence is gained, while the new system deals with the new workload. Data input is usually carried out on both systems.

E.

Direct changeover, or Big Bang is only used when the systems are significantly different such that comparing the outputs of the two systems is largely irrelevant.

F.

All methods of changeover carry high risk and it is the preparation, consideration of data compatibility and data cleansing before the changeover which has the biggest impact on the smoothness of the transition.

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Questions 22

B uses a balanced scorecard to monitor the performance of its divisions.

Classify each of the following decisions taken by a division's management team as either commercially sound or dysfunctional.

Options:

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Questions 23

An oil company has entered into a joint venture with a competing oil company to develop a new oil field. The joint venture arrangement is intended to mitigate the risks associated with developing the oil field.

The following disclosure appears in the oil company's risk report:

"Many of our large projects and operations are conducted through joint ventures. These arrangements involve complex risk allocation and indemnification arrangements and we have less control over these activities than we would have if we had full ownership and control. Our partners may have economic or business interests that are opposed to ours, and may exercise the right to block key decisions or actions. We believe the joint arrangement is in our best interest."

Which of the following statements are correct?

Options:

A.

The risk report means that the shareholders know exactly how bad the risk is.

B.

The risk report says nothing useful about the risk.

C.

Now the shareholders know the directors are aware of the risk.

D.

If the risk report had not reported the risk the shareholders might not have been aware of the risk.

E.

The shareholders now have more useful information.

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Questions 24

SDF has a variable rate loan of $100 million on which it is paying interest of LIBOR + 2%.

SDF entered into a swap with CV bank to convert this to a fixed rate 7% loan. CV bank charges an annual commission of 0.3% for making this arrangement.

Calculate the net payment from SDF to CV bank at the end of the first year if LIBOR was 3% throughout the year.

Give your answer in $ million, to one decimal place.

Options:

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Questions 25

A US company enters into a five year borrowing with bank A at a floating rate of USD Libor plus 2%.

It simultaneously enters into an interest rate swap with bank B at 3.5% fixed against USD Libor plus 1%.

What is the hedged borrowing rate, taking the borrowing and swap into account?

Give your answer to 1 decimal place

Options:

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Questions 26

GHY is a listed company. Tom is GHY's CEO and Peter is its non-executive Chair of the Board. Tom and Peter both have substantial relevant business and industrial experience and both are believed to have considerable integrity. Tom and Peter quickly developed a good working relationship after Peter's appointment. They have become close friends.

Tom briefs Peter on every aspect of the business. Tom and Peter jointly agree the agenda for every board meeting and both agree on the manner in which matters will be presented to the board.

Taking account of the principles of good corporate governance, which of the following statements is correct?

Options:

A.

It is entirely appropriate that Tom and Peter have this kind of relationship and both are acting in the best interests of the company.

B.

Non-contentious board meetings show how well Tom and Peter are running the company and shows that the management is cohesive.

C.

The relationship between Peter and Tom may have a detrimental effect on company decision making as the Board is not always being informed about matters in an unbiased manner.

D.

Since the non-executive chair clearly has a significant role within this company there is little danger that any individual will become excessively dominant.

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Questions 27

Which categories on a risk map best describe the loss of sales floor staff in a fast fashion chain?

Options:

A.

Low likelihood; low consequence

B.

High likelihood; high consequence

C.

Low likelihood; high consequence

D.

High likelihood, low consequence

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Questions 28

A government department is conducting a value for money audit on a school.

The school's pupils sit leaving exams. Classify each of the audit tests as either economy and efficiency or effectiveness.

Options:

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Questions 29

Match the descriptions shown in the boxes below with the method of quantifying risk exposure it best describes.

Options:

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Questions 30

You are the Management Accountant for P, a food manufacturing company with an annual sales revenue of $5 million.

You discover that the Production Manager's records are inconsistent. Raw materials purchased do not agree to the total recorded for transfers to production plus wastage. There is an average shortfall of 2% of purchases.

You investigated and discovered that there are often mistakes made during manufacturing that results in food that is safe to eat, but cannot be sold because of visual flaws. The Production Manager is supposed to scrap all such damaged product and write all such losses off as waste, but you discovered that he has been giving the damaged food to a charity that assists homeless people. No records are made of such gifts in order to conceal the losses due to manufacturing errors.

What should you do?

Options:

A.

Do nothing, this is a good cause and the amount is insignificant.

B.

Instigate disciplinary action, this is both theft and poor management.

C.

Instigate a confidential, but documented, review with the Production Manager and tell him to stop.

D.

Instigate a review of the production process to potentially reduce the amount of wastage.

E.

Instigate a process whereby edible but unsellable items can be given to the charity officially.

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Questions 31

A US company has to pay £500,000 for a new machine.

You have the following information on currencies.

EUR 1 = £1.2300

EUR 1 = USD 1.6200

What is the cost of the machine in USD?

Give your answer to the nearest $.

Options:

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Questions 32

Laura is an accounts clerk. She is supposed to sign each invoice as evidence that she has conducted checks against supporting documents. Sometimes Laura signs invoices without making these checks.

Terry is a member of the internal audit team. Terry has been told to conduct compliance tests on whether Laura is checking the invoices properly.

Which of the following would give Terry a false sense of assurance that Laura's checks have been operating?

Options:

A.

Terry examined a sample of invoices to make sure that they had been signed by Laura. All had been signed.

B.

Terry worked at a spare desk in the accounts department and quietly watched Laura without telling her. She checked every invoice carefully while Terry was present.

C.

Terry selected a sample of purchase invoices and compared each to the supporting documents that Laura is supposed to review. Every one of Terry's invoices was supported by the related documents.

D.

Terry asked Laura a series of open-ended questions about the operation of the purchases system. She did not mention anything about detailed checks of invoices against documents.

E.

Terry reviewed a sample of invoices for purchases of plant and equipment and found that Laura had not signed them. Laura explained that she believed that those were authorised by someone else, although the accounts manual indicates that it was her responsibility.

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Questions 33

GHJ is a manufacturing company that insures against the financial costs associated with industrial injuries involving staff. The Health and Safety Office is part of GHJ's Operations Department. GHJ's insurers will automatically increase the insurance premium by 10% in the event of a claim against the policy.

Which TWO of the following are correct?

Options:

A.

The risk of an increase in the cost of injury insurance cover should be made the responsibility of the company's finance function

B.

The automatic increase in the insurance premium is part of the financial risk associated with industrial injuries.

C.

Linking the risks associated with industrial injuries will overcomplicate the management of those risks.

D.

The risk that a serious accident could impair the morale of uninjured staff is related to the financial risk associated with accidents.

E.

The insurance cover means that management need only be concerned with the possibility of a 10% increase in the premium m the event of a serious accident.

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Questions 34

BCD has recently experienced a cyber security breach which fortunately was carried out by someone more interested in demonstrating the weakness in its defence than by someone malicious

This has made BCD realise that its cyber defence is inadequate BCD has engaged a cyber security consultant who has advised BCD to set up a Computer Incident Response Team (GIRT)

What THREE of the following activities would this CIRT have responsibility for?

Recruit specialist security staff to avoid an incident

Options:

A.

Carry out or assist with any investigations of an incident

B.

Ensure all security policies are carried out to avoid an incident.

C.

Restore normal operations as soon as possible after an incident.

D.

Manage or assist with any communications throughout an incident

E.

Advise on best products against malware attacks to prevent an incident.

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Questions 35

The safety guard on a piece of equipment was broken. The factory manager suspended an operator who refused to operate the equipment until it was repaired. The factory manager paid another operator a bonus for operating the damaged equipment until the safety guard could be repaired.

What does this incident say about the control environment within that factory?

Options:

A.

Management is not particularly concerned with managing risks.

B.

Employees will perceive that management does not care about health and safety risks.

C.

This factory's safety record is likely to be poor.

D.

Employees are motivated to maintain productivity.

E.

Management has a proportionate and considered attitude towards risk.

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Questions 36

GHJ makes large export sales to customers in Country A, whose currency fluctuates significantly against GHJ's home currency. GHJ also makes large purchases from suppliers in Country A. All of these transactions are in Country A's currency.

GHJ's Treasurer does not actively hedge currency risks because there is a natural hedge in place due to the company making both sales and purchases in the same currency.

GHJ's Board has instructed the Treasurer to put active hedging measures in place because the Risk Report would otherwise have to disclose the fact that GHJ has a currency risk which is not actively hedged.

Which of the following statements are correct?

Options:

A.

The Board may be concerned it will be criticised if it does not hedge.

B.

Risk reports can change behaviour.

C.

The Board does not want to be blamed for ignoring a risk.

D.

Risk reporting is a bad thing.

E.

Risk reporting drives the whole risk management process.

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Questions 37

Which of the following statements are correct?

Options:

A.

It is always possible to remove all risks when undertaking large projects.

B.

If a project has high risks it should always be accepted as the rewards will always be high.

C.

If a project has low risks it will usually have relatively low returns.

D.

Risk can always be transferred to someone else.

E.

Risk should be carefully considered when evaluating possible future projects.

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Questions 38

P has decided to invest in a new warehouse at a cost of $2,000,000. The discount rate of the project is 18% and the present value of the tax shield is £26,000.

What is the minimum acceptable Internal Rate of Return of the project?

Options:

A.

18%

B.

17.77%

C.

18.23%

D.

16.50%

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Questions 39

HWG is a large company which grows and processes coffee The coffee is sold to supermarkets, branded with their names for sale as "own brand" products HWG brands and packages the coffee using the supermarkets' own designs

HWG's directors are considering a strategic proposal to develop a range of coffees to be sold under a brand that HWG will develop

Which TWO of the following should the directors consider as part of their strategic analysis?

Options:

A.

The design of packaging for the new brand

B.

The reaction of the supermarkets who currently buy coffee from HWG

C.

The sales volume forecast for the new coffee

D.

The choice of name for the new brand

E.

Recruiting a marketing firm to advertise the new coffee

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Questions 40

CW is a large company in the food production industry. It has grown over the years by the acquisition of several smaller rivals CW has ten branches located in its home country and has just opened a foreign branch for the first time It has recently made some changes to the structure and implementation of its control system.

Which TWO of the following changes would be most likely to improve the overall control system?

Options:

A.

CW has just opened a bank account in the currency in which the newly opened branch is now operating

B.

Establishing an internal audit department

C.

Excess funds are now invested, by the finance director, in short-term securities The finance director initiates buy and sell transactions and she also receives and retains all correspondence relating to the investments

D.

Purchase invoices are now approved for payment at branches and a list of approved invoices are sent to head office for payment The invoices, supporting documentation and suppliers' statements are retained at the branches

E.

A policy has been initiated to complete a physical inventory of all non-current assets at least annually This is then reconciled with the non-current asset register

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Questions 41

Identify, from the list provided, which category of business risk most accurately describes the events detailed below.

Options:

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Questions 42

Z plc has recently undertaken a SWOT analysis. The SWOT analysis identified two main threats to Z plc:

   • The threat that the currency of Z plc's main overseas competitor weakens compared to Z plc's home currency.

   • The threat that there will be a military coup which will overthrow the government in the country that Z plc purchases most of its raw materials from.

Which TWO of the following categories of risk correspond most closely to the above threats?

Options:

A.

Financial risk

B.

Political risk

C.

Business risk

D.

Economic risk

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Questions 43

C is an accounts clerKwho is supposed to sign each invoice as evidence that she has conducted checks against supporting documents Sometimes C signs invoices without making these checks

D is a member of the internal audit team He has been told to conduct compliance tests on whether C is checking the invoices property

Which of the following would grve D a false sense of assurance that C's checks have been in operation?

Select ALL that appry

Options:

A.

D reviewed a sample of invoices for purchases of plant and equipment and found that C had not signed them C explained that she believed that those were authonsed by someone else although the accounts manual indicates that it was her responsibility

B.

asked C a series of open-ended questions about the operation of the purchases system She did not mention anything about detailed checks of invoices against documents

C.

D examined a sample of invoices to make sure that they had been signed by C AH had been signed

selected a sample of purchase invoices and compared each to the supporting documents that C is supposed to review Every one of D's invoices was supported by the related documents

D.

D worked at a spare desk in the accounts department and quietly watched C without telling her She checked every invoice carefully while D was present

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Questions 44

Which of the following is an ethical dilemma?

Options:

A.

A company is considering giving poorly-paid staff a generous pay rise.

B.

A company is deciding whether to issue debt or equity.

C.

A company is deciding whether to make a substantial bonus payment to its directors by means of cash or shares.

D.

A company must decide whether to settle a claim from an employee who appears to have fabricated a workplace injury. The company want to avoid the cost of defending the claim.

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Questions 45

UIO sells mobile phones through a cham of 100 shops spread across the country Shop managers have considerable discretion over pncmg and the incentives offered to sales staff Shop managers are evaluated on the monthly contribution from completed sales. Those who exceed targets by more than 10% for three successive months are promoted Those who fail to achieve monthly targets in two successive months lose their jobs

Which of the following statements are true of the performance management of UIO's shop managers?

Select ALL that apply.

Options:

A.

UIO's shop managers have an incentive to offer excellent customer service

B.

UIO's shop managers are encouraged to take risks that may harm UIO

C.

UIO's shop managers have an incentive to develop attractive sates promotions for their shops

D.

UIO's shop managers are encouraged to sell phones at a loss

E.

UIO's shop managers may have very little sense of loyalty to the company

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Questions 46

A patient has been prescribed a new medicine by their physician. The medicine is accompanied by a leaflet describing potential adverse effects associated with taking it. Most of these potentially adverse effects are trivial, but the leaflet states that three patients in every 10,000 who take the medicine suffer a severe reaction requiring urgent medical attention.

Which of the following statements is true?

Options:

A.

Statistical probabilities mean very little in themselves when dealing with decisions that could have serious consequences, such as whether to take this medicine.

B.

The patient should ignore the risk because there is only a 0.03% risk of a severe adverse reaction.

C.

Statistically, the medicine is safe.

D.

The patient should not be concerned because only those few patients who are susceptible to this reaction are at risk.

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Questions 47

S, a qualified and experienced professional accountant, has been appointed as a non-executive member of the Audit Committee of X X has recently obtained a listing on the second tier of a reputable Stock Exchange

B, the Finance Director, is only worried about the maintenance of proper financial controls and is less concerned with operational controls

S has asked A. the Production Director, to produce regular reports for the Audit Committee on production specification compliance and related issues A is concerned that this means S does not think he is doing his job properly and doubts his integrity

In relation to this scenario, which of the following statements are valid?

Select ALL that apply.

Options:

A.

The appointment of an independent professionally qualified and experienced accountant will help strengthen the Audit Committee.

B.

A is correct in believing that being asked to report to the Audit Committee in the manner described above suggests a lack of trust in his ability or integrity

C.

The Audit Committee should plan for the receipt of regular reports on production specification compliance and related issues

D.

B is correct to be more concerned about the maintenance of financial controls because they are inevitably more important than operational controls.

E.

If X is not seen to have an effective Audit Committee it will be exposed to increased market risk

F.

There is no benefit for X of A producing reports for the Audit Committee unless there are some members on the Audit Committee who have expertise in the production area

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Questions 48

ABC has recently appointed a Chief Information Officer who has announced that he wants to start a major clean up starting with all desktop and laptop equipment.

Which THREE of the following measures should be adopted to help enhance security'?

Options:

A.

Make an employee of the month award for whoever spots the most bogus emails.

B.

Issue a corporate policy on email use

C.

Make security training available to anyone who wants it.

D.

Set up a hot line in the service desk for any security queries.

E.

Automate anti-virus update processes so they cannot be avoided

F.

instruct all staff not to click on any links in emails from anyone outside the company

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Questions 49

Multinational companies have a variety of methods by which to manage currency risk.

Select ALL internal hedging methods from the following list.

Options:

A.

Leading and lagging

B.

Invoice in home currency

C.

Matching

D.

Pooling

E.

Money market hedge

F.

Forward contracts

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Questions 50

An electricity company owns and operates a nuclear power station located ten miles from a large city. A recent and very extensive engineering examination of the power station concludes with the estimate that the probability of a major nuclear disaster within the next 20 years is 0.2%.

Which of the following best explains the relevance of quantifying the risk in that way?

Options:

A.

There is no acceptable level of risk for a major nuclear accident and so the probability has little information value in itself.

B.

The probability is so low as to be ignored.

C.

The directors will be able to argue that they were not negligent in the event of a major disaster within the 20 year period.

D.

The calculation of a precise probability demonstrates that the engineers who conducted the inspection are experts in their field.

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Exam Code: P3
Exam Name: Risk Management
Last Update: Nov 23, 2024
Questions: 339

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