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Risk Management Question Paper

Risk Management

Course:Bachelor Of Commerce

Institution: Kenyatta University question papers

Exam Year:2010

BMS 202
RISK MANAGEMENT
9TH JUNE 2010
INSTRUCTIONS: Answer question one and two others

QUESTION ONE

A) A major security firm in Kenya has had cases of lost cash in transit by its staff. The management is considering installing a transport management and security system that can warn its head office in cases where staff collude and veer off their designated routes. The transport and security system will cost 28 million to boost its cash transit security. The installations will have the following additional features;

The installations will save the company 3 million per year in the cash in transit theft and 2 million per year in armed security labor costs in the next 10 years.

The annual depreciation for the installation will be 1.6 million

The risk less rate is 12%

Expected market return is 10%

Discount rate is 15%

Tax rate is 30%

Required,

a) Determine whether the transport management and security system should be installed. (8marks)

b) Determine the risk inherent in the project returns. (4marks)

B) Risk management is a strategic level decision to the organization and should be handled by the senior management team. Do you agree with this statement? Give reasons for your answer. (10marks)

C) In some sense, a risk manager must be a "jack of all trades," because of the breadth of his/her activities. Identify at least eight areas , in which a risk manager should be knowledgeable. (8marks)

QUESTION TWO

A) Maridadi limited manufacturers and sells building materials that are used by construction firms. These products are sold to more than 300 retailers in East Africa. The management of the firm is concerned that the company may be sued if one of its products is defective and someone is injured. Since the cost of product liability insurance has increased sharply in recent years, the firm is looking for ways to control its loss exposures.

a) Describe the steps in the risk management process that the firm will use to manage its risks and control its loss exposures. (8marks)

b) Discuss six techniques that the firm can use to identify the pure loss exposures in its operations (12marks)

QUESTION THREE

a) Explain the expectation gap in risk pooling arrangement. (2marks)

b) In analyzing risks it is always desired that risks be prioritized. Explain three categories under which risks could be prioritized. (6marks)

c) Discuss six risk management problems facing technologically driven companies in Kenya today. (12marks)

QUESTION FOUR

a) Define what a hazard is. List and explain any four kinds of hazards that may affect a business. (10marks)

b) What is risk reduction? Discuss the measures that a risk manager may employ to reduce risks facing organizations today. (12marks)

QUESTION FIVE

a) What is pure loss exposure? Explain the economic burden created by pure loss in the society. (10marks)

b) Briefly discuss five techniques of managing the international risks. (10marks)

Risk Management Question Paper

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