QUESTION 1
(i) Give explanation that how Risk Management protect and adds value to the organization and its stakeholders through supporting the organization's objectives?
(ii) Demonstrate with the use of a drawing the risk management process and explain the different steps involved in the said process.
(iii) Every business countenances the risk that could present threats to its success. Risk usually comes in all size and shape and professionals usually be acquainted with four main types of risk. Clarify it using exemplars, the four main kinds of risks which companies have to face when operating their business activities.
QUESTION 2
Many staffs, whether junior or senior, may not be familiar with risk management and chiefly with the quantitative form of risk analysis. Workforce need to be educated so as to identify and calculate risk in a way that is relatively easy to understand.
State the six risk concepts which are important in understanding the nature of risk in any organization and which forms the basis for assessing risk.
QUESTION 3
(i) Supply chain risk can officially be distinct as the potential loss resulting from a variation in an expected supply chain outcome. It is the mismatch which is sandwiched between supply and demand. Supply chain risks can be classified into different types depending on their origin. These comprise supply risk, demand risk, internal risk, and external environment risk.
Identify and exemplify using real life cases from the industry, each of the above mentioned type of supply chain risk.
(ii) Evading risk is made more complicated by the increasing pressure to source globally, to exploit lower mechanized costs and import products. The involvedness of products and processes also adds to the probability of disruptions.
In this environment, which method and technique can an organization adopt to design its supply chains to assure uninterrupted material availability?
QUESTION 4
(i) There are a number of key themes which might be used to assess contractor performance which can be used as a yardstick for determining whether good practice is being achieved in specific situations. Itemise and make clear the ways in which supplier performance may be appraised?
(ii) What are the advantages and drawbacks of assessing/monitoring supplier performance?
QUESTION 5
(i) A Mauritian Company (ABC) imports products from another Company (XYZ) in the United Kingdom. ABC is then invoiced in GBP.
ABC has put an order for an amount of GBP 450,000 from XYZ and the payment for the goods is due on the 2nd of September 2010 which is in 3 months time.
Suppose that ABC wishes to hedge against the currency risk for this payment which will take place in the future and noted that a call option on GBP with a Strike price of Rs 45/GBP and an expiration date of 2nd September 2010 is selling at a premium of Rs 0.025/GBP. Moreover each call option gives the holder the right to buy GBP 50,000.
Required
(1). (a).How many call option must be purchased in order to hedge against the currency risk of this payment of GBP 450,000.
(b).How much will be paid to purchase the contracts?
(2). Expect that on the 2nd of September 2010 the spot rate is Rs 40/GBP.
(a). Will the call option be exercised? Provide a reason for your answer
(b). How much will the merchandise cost the Company?
(3). Presume that on the 2nd of September 2010 the spot rate equals to Rs50/GBP.
(a). Will the call option be exercised? Give a reason for your answer
(b). How much will the merchandise cost the concern?
(4). "The use of call options can set a maximum cost for the products to purchase from XYZ"
Do you agree with the above statement? Please provide an explanation for your answer.
(ii) Describe any three of the following terms:
1) Currency option
2) Forward Contract
3) Hedging
4) Order Expediting