Topic: Risk Management and Corporate Strategy

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CSME – Nov 2023 – L2 – Q7 – Risk Management and Corporate Strategy

This question discusses the application of risk management frameworks in an IT start-up, focusing on Enterprise Risk Management (ERM), ISO31000, and the ALARP strategy.

Question

An Information Technology start-up located in Lagos is planning to establish a robust risk management system that covers all its activities. You have been engaged as a consultant to advise it on how an effective risk management framework can be incorporated into the company’s processes to ensure that all risks that could impair the achievement of organisational goals are effectively managed.

Required:
a. Suggest to your client a risk management framework that the management can adopt using the following:
i. Enterprise Risk Management (ERM) (6 Marks)
ii. ISO31000 frameworks (3 Marks)

b. Draft an enterprise risk management strategy for the firm, using ALARP. (5 Marks)

Answer

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Tags: ALARP, Enterprise Risk Management, ISO31000, IT Start-Up, Risk Strategy
Level: Level 2

Topic: Risk Management and Corporate Strategy

CSME – Nov 2023 – L2 – Q6 – Risk Management and Corporate Strategy

This question identifies types of risk in a volatile business environment, using the Turnbull Report.

Question

Today’s business environment is often described by many experts as Volatile, Uncertain, Complex, and Ambiguous (VUCA). Some of the driving forces of the VUCA environment include COVID-19 pandemic, the war in Europe, global warming, and a rapidly changing technological environment.

The impact of the VUCA environment on the global economy includes inflation, dwindling consumers’ purchasing power, rising energy costs, among others, leading to an increase in a sense of turbulence, danger, and unpredictability. With the volatility in the business environment also comes frequent changes in laws and regulations affecting businesses, a factor that adds instability to an already unstable business environment.

You have been asked by a start-up company in the consumer goods retailing business to provide advice on risk management as it concerns the global economy. The company is planning to launch an online retail store with a focus on the global consumer goods market.

Required:
Using the Turnbull Report and drawing from the given scenario, identify and explain to your client the types of risk that are inherent in the VUCA business environment. (15 Marks)

Answer

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Tags: Global Economy, Risk Management, Strategic Risks, Turnbull Report, VUCA
Level: Level 2

Topic: Risk Management and Corporate Strategy

CSME – Nov 2023 – L2 – Q3 – Risk Management and Corporate Strategy

Clarify key concepts in risk management for an investor considering a new business venture.

Question

Professor Akinlabi has been teaching physics at a frontline public university in Nigeria for 30 years. He made quite some money from research grants and has over the years saved about 75 million naira, which he has been keeping in a fixed deposit facility. He complained to his friend, Dr. Albert, who is a professional accountant and expert in risk management, about the low interest rate on fixed deposits and how the high inflation rate in the country is fast eroding the real value of his savings. He is thinking of investing his savings in a poultry farm, but he is quite averse to risks.

Having tried to get some information on the diverse dimensions and dynamics of risks involved in business, he asked Dr. Albert to offer some clarifications. As Dr. Albert, you are required to offer clarifications on the following:

a. Exposure to risk and the nature of qualitative risks. (5 Marks)

b. Residual risk. (3 Marks)

c. The dynamic nature of risk assessment. (7 Marks)

d. Risk-based approach to business. (5 Marks)

Answer

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Tags: Dynamic risk assessment, Qualitative risks, Residual Risk, Risk Exposure, Risk-Based Approach
Level: Level 2

Topic: Risk Management and Corporate Strategy

MGE – Nov 2014 – L2 – Q7 – Risk Management and Corporate Strategy

Assessing risk in importing machinery and comparing finance vs. operating lease strategies for construction equipment.

Question

EXPEE CONSTRUCTION PLC.

Expee Construction Plc. has been awarded a contract to construct a 50-kilometer feeder road from Abekoko to Idi Magoro by Adatan State. Unfortunately, the company’s earth-moving machine (bulldozer) suffered a major mechanical fault, making it impossible to mobilize to the site for execution of the contract.

Similar machines are not available for sale in the open market. Management is therefore considering the option of either importing a new machine from Japan or leasing one from Odogunyan Machines Limited located in Eko-Akete. The lease may be a finance or operating lease; either option would release the machine to the lessee for immediate use. Management’s decision on this choice is dependent on its willingness to either retain or transfer the risks involved in the usage of the machine.

Required:

a. Evaluate the risk exposure of the company in adopting the import option.
(5 Marks)

b. Identify and formulate strategies that might be used by the company in managing:

i. The finance lease option
(5 Marks)

ii. The operating lease option
(5 Marks)

Answer

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Tags: Equipment Acquisition, Finance lease, Import Options, Operating Lease, Risk Exposure
Level: Level 2

Topic: Risk Management and Corporate Strategy

CSME – May 2021 – L2 – Q5c – Risk Management and Corporate Strategy

Relating 'Impact and Likelihood' to 'Objective and Subjective' risk perception using a table.

Question

Risk Assessment is a very important activity in an organisation. With the use of a table, relate ‘Impact and Likelihood’ to ‘Objective and Subjective’ risk perception.

Answer

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Tags: Impact, Likelihood, Risk Management, Risk Perception
Level: Level 2

Topic: Risk Management and Corporate Strategy
Series: MAY 2021

CSME – May 2021 – L2 – Q5b – Risk Management and Corporate Strategy

Explanation of the ALARP principle with the aid of a diagram.

Question

With the aid of a diagram, explain the concept of “As Low as Reasonably Practicable” (ALARP) principle. (5 Marks)

Answer

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Tags: ALARP Principle, Risk Evaluation, Risk Management, Safety Standards
Level: Level 2

Topic: Risk Management and Corporate Strategy
Series: MAY 2021

CSME – May 2021 – L2 – Q2 – Risk Management and Corporate Strategy

Examination of a risk manager’s role, specific risks managed, and purposes of risk monitoring.

Question

“A risk manager is not a line manager and is not directly responsible for risk management but might help with the management of specific risks.”

Required:

a.
i. Review the statement above within the context of the role of a risk manager. (7 Marks)
ii. Evaluate THREE specific risks that can be managed. (3 Marks)

b. Discuss the purposes of risk monitoring. (10 Marks)

Answer

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Tags: Evaluation, Risk Management, Risk Monitoring, Role of Risk Manager, Specific Risks
Level: Level 2

Topic: Risk Management and Corporate Strategy
Series: MAY 2021

CSME – May 2017 – L2 – SC – Q5 – Risk Management and Corporate Strategy

Show how organizations can address risk management challenges using ISO 31000.

Question

a. Using the ISO 31000 framework, show what an organization might do to address risk management challenges. (9 Marks)

b. Explain THREE main elements of risk management contained in the ISO 31000 framework. (6 Marks)

Answer

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Tags: ISO 31000, Organizational Risk, Risk Control, Risk Management, Risk Management Framework
Level: Level 2

Topic: Risk Management and Corporate Strategy
Series: MAY 2017

CSME – May 2017 – L2 – SB – Q3 – Risk Management and Corporate Strategy

Explain business risk to a conservative investor and discuss strategies for risk control and monitoring.

Question

Mallam Danladi is a civil servant who has won a sum of one hundred million Naira in a lottery. Being a very conservative person who is averse to risks, Mallam Danladi is contemplating putting the money in a fixed deposit account at an interest rate of 14% per annum or into treasury bills at an interest rate of 18.5% per annum. These two options are considered to be virtually risk-free. Mr. Madoff, a risk consultant, advised him to invest in the production of shea butter, coconut oil, and black soap, with a promise of 52% profit per annum. In an attempt to convince Mallam Danladi to invest in the production of these items, Mr. Madoff tried to educate him on the nature of risks and how to effectively monitor and control them in ways that will ensure that business remains highly profitable.

Required:

a. Explain briefly the nature of risk in business to Mallam Danladi. (2½ Marks)

b. Discuss FOUR distinct means of controlling business risk. (10 Marks)

c. Explain briefly the purpose of monitoring risks in business. (3 Marks)

d. Discuss THREE ways of monitoring risks in business. (4½ Marks)

Answer

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Tags: Business risk, Financial Decision-Making, Fixed Deposit, Risk Control, Risk Monitoring, Treasury bills
Level: Level 2

Topic: Risk Management and Corporate Strategy
Series: MAY 2017

CSME – May 2023 – L1 – SB – Q7 – Risk Management and Corporate Strategy

Analysis of enterprise and operational risks for Gbam Telecoms in launching 5G services.

Question

Gbam Telecoms Plc, a leading mobile phone and internet communications company, is planning to roll out its 5th Generation (5G) spectrum. As a new product, the 5G spectrum promises customers high-speed internet with immense possibilities in computing, big data management, robotics, and other numerous benefits. While a section of the populace believes that the roll-out is a welcome development, others express reservations about the 5G technology. Within Gbam Telecoms Plc, some employees believe that the erratic nature of the country’s power supply could damage the 5G transponders. Also, the high cost of diesel would increase the company’s operating costs, thus making the product largely unaffordable to prospective consumers. There are also security threats to the company’s facilities due to heightened insecurity in the country. The umbrella trade union for the company’s employees is also agitating for a pay rise and hazard allowance should the company go ahead with the 5G roll-out. Some experts believe that the market for 5G spectrum in the country today is negligible because most telecommunication and internet devices used by consumers in the market are not 5G-compliant. There are also reports that the competitors of Gbam Telecoms Plc are studying how the market will respond to Gbam Telecoms’ 5G spectrum before deciding to enter the market. In addition, a study carried out in Europe concluded that 5G spectrum may be hazardous to the health of people living close to 5G transponders. There is also news about the development of new and better technologies called 6G and 7G, which may make 5G obsolete within a short period of time.

Required:

(a) Advise the management of Gbam Telecoms Plc on the enterprise and operational risks that could be associated with the roll-out of 5G spectrum using information contained in the given scenario. (11 Marks)
(b) Suggest to Gbam Telecoms Plc the key elements that should be contained in the company’s Risk Management System. (4 Marks)

Answer

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Tags: 5G Technology, Enterprise Risks, Operational Risks, Risk Management, Strategic Risks
Level: Level 2

Topic: Risk Management and Corporate Strategy
Series: MAY 2023

CSME – Nov 2016 – L2 – Q4a – Risk Management and Corporate Strategy

Present on ISO 31000 framework and the role of the board in risk management for a newly listed company on the Nigerian Stock Exchange.

Question

The board of directors of a company, recently listed on the Nigerian Stock
Exchange, has just resolved to put in place a robust enterprise-wide risk
management framework to ensure consistency in the approach to risk
management across the firm. This will include introducing the ISO 31000
framework for risk management to ensure international best practices in risk
management.

Required:
Draft a presentation to the board of directors on:

i) Key elements of ISO 31000 framework (6 Marks)
ii) The role of the board of directors and management in risk management (9 Marks)

Answer

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Tags: Board of Directors, Corporate Governance, ISO 31000, Risk Management
Level: Level 2

Topic: Risk Management and Corporate Strategy
Series: NOV 2016

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

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

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

CSME – Nov 2020 – L2 – Q5a – Risk Management and Corporate Strategy

Explain the concept of risk and differentiate between the two broad categories of risk, with examples.

Question

In an effort to increase shareholders’ value, companies are often faced with risks.

Required:
i. Explain the term ‘risk’. (2 Marks)
ii. Differentiate between the two broad categories of risk, with examples. (8 Marks)

Answer

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Tags: Pure Risk, Risk, Speculative Risk
Level: Level 2

Topic: Risk Management and Corporate Strategy
Series: NOV 2020

CSME – Nov 2020 – L2 – Q2 – Risk Management and Corporate Strategy

Recommend a universally accepted risk management framework and discuss its elements and techniques for Global Masters Plc.

Question

Global Masters Plc. is a multinational corporation operating in numerous industries in many jurisdictions. The company had adopted different frameworks for managing risks in different jurisdictions over the years. This had made reporting on risk management difficult.

The board of Global Masters Plc. resolved to harmonise these various frameworks into a framework which has universal acceptance. The board therefore engaged your firm of risk experts to carry out the harmonisation process.

Required:

a. Recommend a universally acceptable framework which is also applicable in the various industries in which Global Masters Plc. operates. Justify your recommendation. (3 Marks)

b. Discuss the elements of the framework. (6 Marks)

c. Discuss the techniques to be adopted in implementing the framework. (11 Marks)

Answer

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Tags: ISO 31000, Risk Architecture, Risk Framework, Risk Strategy
Level: Level 2

Topic: Risk Management and Corporate Strategy
Series: NOV 2020

MGE – May 2018 – L2 – Q6 – Risk Management and Corporate Strategy

Design a risk map for Ego Oil and Gas Limited and advise on control measures for each risk category.

Question

Ego Oil and Gas Limited is a company licensed to operate in Nigeria’s downstream oil and gas sector. The company owns tank farms and filling stations across the six geo-political zones of the country. These include the North-East and South-South, where there have been increased cases of terrorist activities, especially kidnapping.

The company recently suffered losses due to a fire outbreak at one of its tank farms and fraud at the Port Harcourt office in the South-South Zone. There is also a rumoured agitation by the labour movement in the country, which will further reduce the price of petroleum products. If this happens, the company will suffer severe revenue loss. In order to control and effectively manage risk, the company has decided to assess all its risks.

Required:
Design a risk map for the management of Ego Oil and Gas Limited and advise on the control measures for each risk category. (15 Marks)

Answer

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Tags: Control measures, Oil and Gas Sector, Risk Assessment, Risk Mapping
Level: Level 2

Topic: Risk Management and Corporate Strategy
Series: MAY 2018

MGE – May 2018 – L2 – Q4c – Risk Management and Corporate Strategy

Discusses the implications of failing to understand relationships among risks.

Question

Explain briefly the implications of failure to understand relationships among risks. (2 Marks)

Answer

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Tags: Risk Implications, Risk Management, Risk Relationships
Level: Level 2

Topic: Risk Management and Corporate Strategy
Series: MAY 2018

MGE – May 2018 – L2 – Q4b – Risk Management and Corporate Strategy

Discusses the differences between objective and subjective risk perception and explains related and correlated risk factors.

Question

i. Discuss objective and subjective risk perception. (4 Marks)

ii. Explain, with examples, related and correlated risk factors. (4 Marks)

Answer

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Tags: Correlated Risks, Objective Risk, Related Risks, Risk Factors, Risk Perception, Subjective Risk
Level: Level 2

Topic: Risk Management and Corporate Strategy
Series: MAY 2018

MGE – May 2018 – L2 – Q3b – Risk Management and Corporate Strategy

Discusses the ALARP framework in risk management and its relevance for the Health Pharmaceutical Company.

Question

Risk management has been an issue with the newly constituted board of Health Pharmaceutical Company. As the chairman of the board, you are required to:

Discuss the ALARP framework in risk management with the newly constituted board. (5 Marks)

Answer

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Tags: ALARP, Board Responsibilities, Corporate Governance, Risk Management
Level: Level 2

Topic: Risk Management and Corporate Strategy
Series: MAY 2018

CSME – Nov 2021 – L2 – Q5B – Risk Management and Corporate Strategy

Evaluate the roles of the board of directors and risk committees in managing risks.

Question

Evaluate the roles of the following in risk management:
i. Board of directors. (4 Marks)
ii. Risk committees. (5 Marks)

Answer

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Tags: Board of Directors, Corporate Governance, Risk Committees, Risk Management
Level: Level 2

Topic: Risk Management and Corporate Strategy
Series: NOV 2021

CSME – Nov 2021 – L2 – Q5A – Risk Management and Corporate Strategy

Explain risk management and the process of risk mapping for a new company.

Question

A friend of yours is planning to establish a company with a board of directors and committees. He hopes the company will have a system to manage its operations and the associated risks.

Required:
Explain:
i. Risk management (2 Marks)
ii. The process and use of risk mapping (4 Marks)

Answer

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Tags: Operational Management, Risk Assessment, Risk Management, Risk Mapping
Level: Level 2