Exam 2017, questions PDF

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Matric No: _________________EDINBURGH NAPIER UNIVERSITYSCHOOL OF ACCOUNTING, FINANCIAL SERVICES & LAWCORPORATE RISK MANAGEMENTFINAcademic session: Diet: Exam duration: 2 hours Reading time: NoneTotal exam time: 2 hoursPlease read full instructions before commencing writingExam paper info...

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Matric No: _________________ EDINBURGH NAPIER UNIVERSITY

SCHOOL OF ACCOUNTING, FINANCIAL SERVICES & LAW CORPORATE RISK MANAGEMENT

FIN09104 Academic session: Exam duration:

Diet: 2 hours

Reading time:

None

Total exam time:

2 hours

Please read full instructions before commencing writing

Exam paper information   

Total number of pages: Number of questions: Attempt any THREE questions

4 6

Special instructions Special items

Examiner(s):

1

Attempt any THREE Questions Question 1 (a)

Define peril, hazard, physical hazard, and moral hazard. (40 marks)

(b)

Discuss two definitions to explain the meanings of risk. (60 marks) (Total: 100 marks)

Question 2

(a)

Discuss the utility function on wealth for a risk-averse person. (40 marks)

(b)

Attitudes towards risk between an individual and a group of individuals may be extremely different.

Apply the concepts of risky shift and group

polarisation to discuss why risk managers need to take into account group attitudes towards risk when making risk management decisions. (60 marks) (Total: 100 marks) Question 3 (a)

Charting risk can be used to identify risk. Discuss the meanings of resources, threats, consequences, and modifying factors. (60 marks)

(b)

Discuss how to use organisational charts to identify areas of risk. (40 marks) (Total: 100 marks)

2

Question 4 An organisation is considering two alternative risk reduction projects. Both involve a three year contract. Project A is for provision of a burglar alarm at a cost of £20,000. Project B is for the provision of security guards at a cost of £2 3,000. Projected savings for each for the period of the contract are: Project A

Project B

PV factor

Year 1

£8,000

£10,500

0.9259

Year 2

£8,500

£10,500

0.8573

Year 3

£9,000

£10,500

0.7938

Additional information: Assume full payment made at the commencement of the contract and savings realised at the end of each year. Discount rate is 8%. The PV factor is used to calculate the present value of a series of values. Required: (a)

Evaluate the projects using payback, accounting rate of return (based on initial capital), and net present value methods. (60 marks)

(b)

Discuss four investment appraisal criteria. (40 marks) (Total: 100 marks)

Question 5 Organisations may decide to accept the uncertainty associated with a particular risk exposure. (a)

Discuss three managerial benefits of risk retention. (40 marks)

(b)

Discuss five financial indicators that can be used to assess the decision for optimal risk retention. (60 marks) (Total: 100 marks)

3

Question 6 Establishing a captive insurance company can be regarded as a more effective form of risk transfer. Explain the reasons why many large corporations set up captive insurers. (Total: 100 marks)

END OF QUESTION PAPER

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