Risk Management Question Paper

Risk Management

Course:Bachelor Of Commerce

Institution: Kenyatta University question papers

Exam Year:2007

KENYATTA UNIVERSITY
UNIVERSITY EXAMINATIONS 2007/2008
FIRST SEMESTER EXAMINATION FOR THE DEGREE OF BACHELOR OF
COMMERCE
BMS 202: RISK MANAGEMENT
DATE: FRIDAY, 30TH NOVEMBER 2007
TIME: 8.00 A.M. - 10.00 A.M.
INSTRUCTIONS:
Attempt question ONE and any other TWO questions
QUESTION ONE
a) What is risk management policy statement 2 marks
b) Highlight the content of a risk management policy 6 marks
c) Briefly highlight any THREE types of pure risks that create great financial insecurity 6 marks
d) Discuss three factors that limit the insurability of risk 6 marks
e) Challenges faced by risk managers are often similar to those faced by other managers.
Discuss any five characteristics that distinguishes risk management problem from other
management problems. 10 marks

QUESTION TWO
a) Briefly discuss the guiding principles that are applied when establishing risk classes.
8 marks
b) Risk managers undertake several duties in the organization apart from purchasing insurance. Briefly discuss SIX of such functions that they undertake. 12 marks

QUESTION THREE
a) Briet1y discuss the contractual provisions that limit the insurability of risks 10 marks
b) Briefly discuss the classes of risk retention as a method of dealing with risks. 10 marks

QUESTION FOUR
a) Kabati Mills has had cases of break-ins into its premises by vandals and robbers who
over-powers their security personnel and steal the company property. The management is
considering installing an electric fence and Alarm systems, which will costs 4 million to
boost its security systems. The installations will have the following additional features;
i)
The installations will save the company 500,0001 p.a in theft and 300,0001 p.a in security labor costs in the next 10 years.
ii)
The annual depreciation for the installation will be 200,000.
iii)
The risk less rate is 12%
iv)
Expected market return is 20%
v)
Discount rate is 15%
vi)
Tax rate is 30%
Required
i)
Determine whether the security system should be installed.
ii)
Determine the risks inherent in the project returns 10marks

b) Discuss the various strategies that a risk manager may apply in reducing risks in the
organizations. 10 marks

QUESTION FIVE
Discuss the techniques that managers can employ to manage the international risks
20marks

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