Risk Management – Knowsia

PM – Nov 2024 – L2 – Q5 – Risk Management

Financial evaluation and credit terms review for a new customer order in Vena Plc.

Question

Vena Plc. manufactures engineering equipment. The company has received an order from a new customer for 5 machines at N5,000,000 each. Vena Plc.’s terms of sale are 10 percent of the sales value payable with order. The deposit has been received from the new customer. The balance is payable 12 months after acceptance of the order by Vena Plc.

Vena Plc.’s past experience has been that only 60 percent of similar customers pay within 12 months. Customers who do not pay within 12 months are referred to a debt collection agency to pursue the debt. The agency has in the past had a 50 percent success rate of obtaining immediate payment once they became involved. When they are unsuccessful, the debt is written off by Vena Plc. The agency’s fee is N500,000 per order, payable by Vena Plc. with the request for service. This fee is not refundable if the debt is not recovered.

You are an accountant in Vena Plc.’s credit control department, and based on the company’s past experience and discussions with the sales and credit managers, you do not expect the pattern of payment and collection to change.

Incremental costs associated with the new customer’s order are expected to be N3,600,000 per machine; 70 percent of these costs are for materials and are incurred shortly after the order has been accepted. The remaining 30 percent is for all other costs, which you can assume are paid shortly before delivery in 12 months’ time. The company is not presently operating at full production capacity.

A credit bureau has offered to provide an error-free credit information about the new customer if the price is right.

Vena Plc.’s opportunity cost of capital is 16 percent. Ignore taxation.

Required:

a. Write a report to the Credit Control Manager evaluating, from a purely financial point of view, whether Vena Plc. should accept the order from the new customer based on the information provided. (12 Marks)

b. Comment on what other factors should be considered before a decision to grant credit is taken. (3 marks)

Answer

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Tags: Credit Evaluation, Credit terms, Opportunity Cost, Payment Collection, Risk Assessment
Level: Level 2

Topic: Risk Management

CSME – Nov 2019 – L2 – Q5a – Risk Management and Corporate Strategy

Outlines a presentation on the functions and determinants of the efficiency of a risk manager.

Question

(a) You are preparing for a job interview as a risk manager. This requires you to make a ten-minute presentation on the functions and determinants of the efficiency of a risk manager.

Required:
Present an outline of your 10-minute presentation. (10 Marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Corporate Strategy, Risk Management, Risk Manager Efficiency
Level: Level 2

Topic: Risk Management, Risk Management and Corporate Strategy
Series: NOV 2019

PM – Nov 2016 – L2 – Q7 – Risk Management

This question involves advising a company on how to protect its data from hackers and viruses, addressing cybersecurity threats and preventive measures.

Question

Adak Nigeria Limited sells its products through the internet. Many people around the world have access to its website to transact various businesses. Recently, the company has been experiencing security issues with its business processes. The management has raised concerns about the following:

a. How to protect its data from hackers.
b. How to prevent its files from being destroyed by viruses.

As a Performance Management Expert, you have been consulted to provide advice on the following:
(i) How to protect the company’s data from hackers.
(ii) The types of viruses that can affect the company’s files.

Required:
Prepare a paper that addresses the concerns above.

Answer

Find Related Questions by Tags, levels, etc.

Tags: Business Process Security, Cybersecurity, Data protection, Hackers, Virus Types
Level: Level 2

Topic: Risk Management
Series: NOV 2016

PM – Nov 2018 – L2 – Q6a – Risk Management

Analyze threats due to patent expiration and recommend strategies to maintain profitability for DDD Ltd.

Question

DDD Limited is a relatively small, specialist manufacturer of chemicals used in the pharmaceutical industry. It does not manufacture pharmaceutical products itself but modifies raw materials sourced from large chemical companies using patented processes before selling them to pharmaceutical companies. Several patents are due to expire in the next three years.

The following are some key points regarding the company:

DDD’s customers are large pharmaceutical companies under pressure from governments to reduce drug prices.
DDD has experienced high profit margins due to the protection provided by its patents.
The expiration of these patents poses a threat to DDD’s business, with customers pressuring for lower prices.

Required:
a. Advise the Board of Directors on the possible threats related to the expiration of patents.
(7 Marks)

b. Appraise suitable courses of action DDD might take to maintain its profits in light of the threats identified in part (a).
(8 Marks)

Answer

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Tags: Competitive Strategy, Patent Expiry, Profit Maintenance, Threats
Level: Level 2

Topic: Risk Management
Series: NOV 2018

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.

Question

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)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Credit risk, Market Risk, Risk Management, Stakeholder Impact
Level: Level 2

Topic: Risk Management, Stakeholder Management
Series: MAR/JULY 2020

PM – Nov 2024 – L2 – Q5 – Risk Management

Financial evaluation and credit terms review for a new customer order in Vena Plc.

Question

A credit bureau has offered to provide an error-free credit information about the new customer if the price is right.

Vena Plc.’s opportunity cost of capital is 16 percent. Ignore taxation.

Required:

b. Comment on what other factors should be considered before a decision to grant credit is taken. (3 marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Credit Evaluation, Credit terms, Opportunity Cost, Payment Collection, Risk Assessment
Level: Level 2

Topic: Risk Management

CSME – Nov 2019 – L2 – Q5a – Risk Management and Corporate Strategy

Outlines a presentation on the functions and determinants of the efficiency of a risk manager.

Question

(a) You are preparing for a job interview as a risk manager. This requires you to make a ten-minute presentation on the functions and determinants of the efficiency of a risk manager.

Required:
Present an outline of your 10-minute presentation. (10 Marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Corporate Strategy, Risk Management, Risk Manager Efficiency
Level: Level 2

Topic: Risk Management, Risk Management and Corporate Strategy
Series: NOV 2019

PM – Nov 2016 – L2 – Q7 – Risk Management

This question involves advising a company on how to protect its data from hackers and viruses, addressing cybersecurity threats and preventive measures.

Question

a. How to protect its data from hackers.
b. How to prevent its files from being destroyed by viruses.

Required:
Prepare a paper that addresses the concerns above.

Answer

Find Related Questions by Tags, levels, etc.

Tags: Business Process Security, Cybersecurity, Data protection, Hackers, Virus Types
Level: Level 2

Topic: Risk Management
Series: NOV 2016

PM – Nov 2018 – L2 – Q6a – Risk Management

Analyze threats due to patent expiration and recommend strategies to maintain profitability for DDD Ltd.

Question

The following are some key points regarding the company:

DDD’s customers are large pharmaceutical companies under pressure from governments to reduce drug prices.
DDD has experienced high profit margins due to the protection provided by its patents.
The expiration of these patents poses a threat to DDD’s business, with customers pressuring for lower prices.

Required:
a. Advise the Board of Directors on the possible threats related to the expiration of patents.
(7 Marks)

b. Appraise suitable courses of action DDD might take to maintain its profits in light of the threats identified in part (a).
(8 Marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Competitive Strategy, Patent Expiry, Profit Maintenance, Threats
Level: Level 2

Topic: Risk Management
Series: NOV 2018

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.

Question

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

Answer

Find Related Questions by Tags, levels, etc.

Tags: Credit risk, Market Risk, Risk Management, Stakeholder Impact
Level: Level 2

Topic: Risk Management, Stakeholder Management
Series: MAR/JULY 2020

Topic: Risk Management

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PM – Nov 2024 – L2 – Q5 – Risk Management

Financial evaluation and credit terms review for a new customer order in Vena Plc.

CSME – Nov 2019 – L2 – Q5a – Risk Management and Corporate Strategy

Outlines a presentation on the functions and determinants of the efficiency of a risk manager.

PM – Nov 2016 – L2 – Q7 – Risk Management

This question involves advising a company on how to protect its data from hackers and viruses, addressing cybersecurity threats and preventive measures.

PM – Nov 2018 – L2 – Q6a – Risk Management

Analyze threats due to patent expiration and recommend strategies to maintain profitability for DDD Ltd.

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.

PM – Nov 2024 – L2 – Q5 – Risk Management

Financial evaluation and credit terms review for a new customer order in Vena Plc.

CSME – Nov 2019 – L2 – Q5a – Risk Management and Corporate Strategy

Outlines a presentation on the functions and determinants of the efficiency of a risk manager.

PM – Nov 2016 – L2 – Q7 – Risk Management

This question involves advising a company on how to protect its data from hackers and viruses, addressing cybersecurity threats and preventive measures.

PM – Nov 2018 – L2 – Q6a – Risk Management

Analyze threats due to patent expiration and recommend strategies to maintain profitability for DDD Ltd.

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.

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PM – Nov 2024 – L2 – Q5 – Risk Management

Financial evaluation and credit terms review for a new customer order in Vena Plc.

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CSME – Nov 2019 – L2 – Q5a – Risk Management and Corporate Strategy

Outlines a presentation on the functions and determinants of the efficiency of a risk manager.

You're reporting an error for "CSME – Nov 2019 – L2 – Q5a – Risk Management and Corporate Strategy"

PM – Nov 2016 – L2 – Q7 – Risk Management

This question involves advising a company on how to protect its data from hackers and viruses, addressing cybersecurity threats and preventive measures.

You're reporting an error for "PM – Nov 2016 – L2 – Q7 – Risk Management"

PM – Nov 2018 – L2 – Q6a – Risk Management

Analyze threats due to patent expiration and recommend strategies to maintain profitability for DDD Ltd.

You're reporting an error for "PM – Nov 2018 – L2 – Q6a – Risk Management"

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.

You're reporting an error for "CSME – Mar/Jul 2020 – L2 – Q5 – Oasis Bakeries Risk and Stakeholder Impact Analysis"

PM – Nov 2024 – L2 – Q5 – Risk Management

Financial evaluation and credit terms review for a new customer order in Vena Plc.

You're reporting an error for "PM – Nov 2024 – L2 – Q5 – Risk Management"

CSME – Nov 2019 – L2 – Q5a – Risk Management and Corporate Strategy

Outlines a presentation on the functions and determinants of the efficiency of a risk manager.

You're reporting an error for "CSME – Nov 2019 – L2 – Q5a – Risk Management and Corporate Strategy"

PM – Nov 2016 – L2 – Q7 – Risk Management

This question involves advising a company on how to protect its data from hackers and viruses, addressing cybersecurity threats and preventive measures.

You're reporting an error for "PM – Nov 2016 – L2 – Q7 – Risk Management"

PM – Nov 2018 – L2 – Q6a – Risk Management

Analyze threats due to patent expiration and recommend strategies to maintain profitability for DDD Ltd.

You're reporting an error for "PM – Nov 2018 – L2 – Q6a – Risk Management"

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.

You're reporting an error for "CSME – Mar/Jul 2020 – L2 – Q5 – Oasis Bakeries Risk and Stakeholder Impact Analysis"

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