Question Tag: Risk Management

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  • 20 Marks

BO – APRIL 2023 – L3 – Q1 – Functions of Asset-Liability Committee (ALCO)

Identify and explain five functions of the bank's Asset-Liability Committee (ALCO) for ensuring short-term and long-term viability.

a) Your bank’s Asset Liability Committee (ALCO) is a very important committee that ensures the sustainability and viability of the bank both in the short-term and long term. Identify and explain five functions performed by this committee in your bank. [15 marks]

b) Gap analysis is used in Asset and Liability management to measure interest rate risk in a bank’s balance sheet. Explain the phrase ‘Positive Gap’. How is a positive gap affected by rising interest rates? [7.5 marks]

c) Interest rate swaps are often used to manage interest rate risk of an organization. Briefly explain interest rate swaps and the expectation of a buyer of this risk hedging instrument. [7.5 marks]

[Total: 30 marks]

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  • 20 Marks

MFS – APR 2024 – L2 – Q3 – Financial Intermediation and Profitability Enhancement

Describe financial intermediation as a business activity and consider ways to enhance profitability of a financial intermediary with reference to revenue streams and cost components, while maintaining caution.

(a.) How would you describe Financial Intermediation as a form of business activity?                                                                                     (b.) With reference to its revenue streams and cost components, consider how Profitability of a Financial Intermediary could be enhanced within the ambit of caution.

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  • 30 Marks

CML – APR 2024 – L3 – Q4 – Relevance of ESG in Bank Credit Strategy

Discuss the importance of incorporating Environmental, Social, and Governance (ESG) factors into a bank's credit strategy.

Discuss the relevance of ESG considerations in Bank Credit Strategy.

[20 Marks]

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  • 20 Marks

CG – APR 2024 – L4 – Q6 – Role Expansion of Chief Governance Officer in Capital Planning

Discuss whether the evolving role of the Company Secretary to Chief Governance Officer should include capital planning in situations of stressed bank balance sheets.

The changing role of the Company Secretary to become the Chief Governance Officer (CGO) means that in situations of stressed Balance Sheet or Statement of Position of banks, the role of the CGO should be expanded to include Capital Planning. Discuss.

(20 marks)

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  • 20 Marks

SCS – Mar 2025 – L3 – Q2 – Change Management

Explain leadership's role in change management and three of Kanter's skills for AML's diversification strategy.

a) Akosa Minerals Limited (AML) has undergone significant transformations in its operations, particularly with the integration of lithium extraction into its core business. This shift has presented both opportunities and challenges, including regulatory compliance, technological advancements and stakeholder management. Successfully navigating these changes requires effective leadership and change management.

Rosabeth Moss Kanter suggests that managers in change-adept organisations must possess key skills to drive transformation effectively. As AML continues its diversification efforts, the company’s leadership must demonstrate these skills to sustain growth and maintain a competitive edge.

Required:

Identify and explain the critical role of leadership in managing change and THREE out of five key change management skills suggested by Kanter that AML’s leadership should exhibit to effectively manage its diversification and growth strategies.

b) Akosa Minerals Limited (AML) recently engaged a risk consultant from Isodek Consultants to conduct a comprehensive risk assessment and provide recommendations on managing the transformational changes the company is undergoing. The consultant’s report highlights key risks and challenges related to AML’s diversification strategy, operational restructuring, stakeholder engagement and compliance with global sustainability standards.

To navigate these challenges effectively, AML’s leadership needs to apply the Gemini Consultants’ 4Rs model which provides a structured framework for managing large-scale organisational change.

Required:

Using the Gemini Consultants’ 4Rs model, discuss how each component can be applied to address the operational and environmental risks identified in the consultant’s report.

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  • 20 Marks

FM – Mar 2025 – L2 – Q3 – Foreign exchange risk and currency risk management

Determine outcomes of forward contract and money market hedge for GPL's USD payment and recommend the best technique.

a) Gyenyame Pharmaceuticals LTD (GPL), a Ghanaian company, imports raw materials from the United States of America to produce generic drugs for the local market. Due to recent fluctuations in the foreign exchange market, the company’s management is concerned about the impact of exchange rate movements on its costs and profitability.
The company is expected to pay USD750,000 in three months for a shipment of Active Pharmaceutical Ingredients (APIs). GPL also exports locally produced herbal medicine called ‘Koo-pile’ to the Ghanaian community in Oklahoma, USA on credit basis. The company is expecting a receipt of USD250,000 in three months for a consignment exported a month ago.
GPL is considering two hedging strategies to manage the foreign exchange risk: a forward contract and a money market hedge.
The following financial information is available:

  • Current Spot Rate (GHS/USD): 12.00
  • 3-Month Forward Rate (GHS/USD): 12.20
  • 3-Month USD Interest Rate: 3% per annum
  • 3-Month GHS Interest Rate: 14% per annum
  • Expected Future Spot Rate in 3 Months (GHS/USD): 12.50

Required:
i) Determine the outcome of the two hedging techniques and recommend the appropriate technique to GPL based on your computations.
(9 marks)

ii) Explain THREE internal hedging techniques that GPL could use to manage its foreign exchange risk.

b) Technological advancements have significantly transformed financial markets, enhancing the way transactions are conducted, information is accessed and risks are managed. As financial institutions and individual investors increasingly depend on digital tools and innovative technologies, financial markets have become more efficient, accessible and transparent.

Required:
Explain FIVE positive impacts of technological development on financial markets.
(5 marks)

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  • 20 Marks

AA – Mar 2025 – L2 – Q3 – Audit Strategy

Discuss the content and relevance of an audit strategy memorandum in guiding the audit process.

a) The overall audit strategy sets the scope, timing and direction of the audit and guides the development of a more detailed plan. Audit plan converts the audit strategy into a more detailed plan and includes the nature, timing and extent of audit procedures to be performed by the engagement team members in order to obtain sufficient and appropriate audit evidence to reduce audit risk to an acceptable level. Required: Discuss the content of an audit strategy memorandum and its relevance to an audit.

b) Kalomo & Partners, an audit firm, has decided to enhance its audit procedures by integrating Artificial Intelligence (AI) technologies. The firm aims to leverage on AI to audit financial data and transactions more efficiently and effectively. As part of this initiative, the audit team is exploring how AI can be used to analyse large datasets, identify anomalies, and improve the accuracy of their audit findings. The management of Kalomo & Partners is seeking to understand the best practices for using AI in auditing and the potential challenges they may encounter. The firm wants to ensure that the integration of AI aligns with auditing standards and enhances the overall quality of their audit processes.

Required:

i) Explain how AI can be utilised in auditing financial data and transactions.

ii) State TWO potential benefits of using AI in the audit process of Kalomo & Partners.

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  • 10 Marks

AAA – Nov 2024 – L3 – Q5a – Roles of an Audit Committee in Corporate Governance

Explain four roles of an audit committee in compliance with good corporate governance practices.

An Audit Committee is a sub-group of a company’s Board of Directors responsible for the oversight of the financial reporting and disclosure process. The duties and responsibilities of the Audit Committee greatly contribute to good corporate governance practices of a company.

Required:
Explain FOUR roles of an Audit Committee in compliance with good corporate governance practices.

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  • 15 Marks

AA – Nov 2024 – L2 – Q3a – Management’s Expert and Audit Evidence

Explain the term "management’s expert" and four factors to consider before relying on their work as audit evidence.

Question:
ISA 500: Audit Evidence provides guidance for auditors intending to rely on the work of a management’s expert. If the information to be used as audit evidence has been prepared using the work of a management’s expert, the auditor must evaluate the management’s expert.

Required:
i) Explain the term “management’s expert.” 
ii) Explain FOUR factors to consider before relying on the work of a management’s expert as audit evidence.

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  • 5 Marks

AA – Nov 2024 – L2 – Q2b – Advantages of Outsourcing Internal Audit

Explain the advantages and disadvantages of outsourcing the internal audit function.

As organisations look for ways to cut costs, the idea of outsourcing internal audit work goes on the agenda. While outsourcing may be appealing in theory, there are good reasons to keep internal audit in-house.

Required:
i) State TWO advantages of outsourcing the internal audit function. 
ii) State THREE disadvantages of outsourcing the internal audit function.

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Has Case Study
  • 6 Marks

SCS – July 2023 – L3 – Q1a – Controlling Risk

Explain the SAM four-step approach to measuring product sustainability over its entire life cycle.

Sustainability assessment and test for Full-Cost Accounting (FCA) of HVSC is to measure the impact over the full product life cycle. The Management team is concerned about the great deal of judgment that would be exercised. Conceptually, FCA appears straightforward, but it is also not an easy technique to develop and use in practice if adopted by SavvyTech plc.

The Sustainability Assessment Model (SAM) measures the impacts on sustainability of a product such as HVSC over its full life cycle from raw material extraction through the production process to final usage and disposal.

Required:
Explain the SAM four-step approach to measuring product HVSC over its entire life cycle.

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  • 6 Marks

SCS – Nov 2023 – L3 – Q4a – Controlling Risk

Identifying and explaining the role of three stakeholders in corporate risk management.

Risk management is critical for the success of every organization, including NSL. Responsibilities for effective risk oversight and management within NSL do not depend on only one stakeholder group.

Required:
Identify and explain the role of THREE (3) stakeholders as identified by the International Corporate Governance Network (ICGN) guidelines on responsibilities for the oversight and management of corporate risk (2010).
(6 marks)

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  • 1 Marks

BMF – Nov 2021 – L1 – SA – Q16 – Basics of Business Finance and Financial Markets

Question on separating risk and return characteristics from individual investment decisions.

Separating the risk and return characteristics of market investments from the individual investment decisions is known as:

A. Risk transformation
B. Separation theorem
C. Financial intermediation
D. Maturity transformation
E. Amortisation

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  • 1 Marks

BMF – Nov 2021 – L1 – SA – Q4 – The Role of Professional Accountants in Business and Society

Question about identifying which scenario is not an agency conflict.

Which of the following is NOT an example of agency conflicts?

A. Moral hazard
B. Risk aversion
C. Earnings retention
D. Maturity transformation
E. Effort level

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  • 20 Marks

CSME – Mar/Jul 2020 – L2 – Q5 – Oasis Bakeries Risk and Stakeholder Impact Analysis

Analyze the risks inherent in Oasis Bakeries' growth strategy and the impacts on stakeholders.

Oasis Bakeries is a producer of all kinds of bread, servicing only the Lagos market. In response to the anticipated increase in the demand for bread, the company decided to increase its installed production capacity from 1,000 loaves to 5,000 loaves per day, having secured regulatory approval from the federal authority.

However, the market for bread in Lagos is largely dominated by bigger producers, and there is some stability in the price of bread across all brands in the market. Thus, the risk of a price war is low. However, owing to the short shelf life of loaves of bread, most are sold to retailers on credit, and due to a combination of reasons, the credit default rate is increasing. The company by experience has also discovered that ovens, mixers, and other equipment for the production of bread rarely break down within the first 5 years of usage. However, procurement of raw materials such as flour and butter has become more challenging due to the activities of bigger bakeries and the recent increase in import duty on all processed food.
Required:
a. Advise Oasis Bakeries on the level of exposure to any FIVE categories of risk inherent in its growth strategy. (10 Marks)

b. Analyze the impacts of risk on any FIVE of the stakeholder groups of Oasis Bakeries. (10 Marks)
(Total: 20 Marks)

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  • 1 Marks

BL – Nov 2023 – L1 – SA – Q6 – Business Ethics and Corporate Governance

This question asks about a company's method to hedge against business risks.

A means by which a company may hedge against business risk is called
A. Limitation of Liability
B. Limitless Liability
C. Moderated Liability
D. Arbitraging
E. Modulating

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  • 1 Marks

BL – MarJul 2020 – L1 – SA – Q16 – Introduction to Law

Question on identifying the principle that a person must have a financial interest in the subject matter of insurance.

Under insurance contract, which principle states that a person must stand to gain from the preservation of the subject matter or suffer loss from its destruction?
A. Insurable interest
B. Insurance credit rule
C. Cover note policy
D. Indemnity principle
E. Insurance payment policy

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  • 2 Marks

BL – May 2016 – L1 – SB – Q3d – Law Relating to Banking

Explain the concept of insurable interest in insurance law.

Insurance is to mitigate the effect of losses when they occur.

Required:

Explain briefly the term “Insurable Interest”.

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  • 10 Marks

MI – Mar-Jul 2020 – L1 – SB – Q5b – Information Systems

Explain the main approaches to managing the risk of computer fraud and measures to provide protection against fraud and theft.

“Computer systems are often at risk of fraud or theft.”

i. List and explain briefly the TWO main approaches to managing the risk. (5 Marks)

ii. State FOUR measures that can provide protection against fraud and theft. (5 Marks)

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  • 1 Marks

MI – May 2016 – L1 – SA – Q20 – Information System Development and Security

Identify non-standard risk management measure.

The following are measures for the management of risks EXCEPT

A. Identifying risks to system security
B. Evaluating and prioritising the identified risks
C. Developing controls to avoid the identified risks or control the risk within acceptable limits
D. Implementing the controls and monitoring their effectiveness
E. Allowing the risks to manifest and monitor control

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