Question 1

FGT is evaluating the political risks associated with its operations around the world.

Which of the following would indicate that a particular subsidiary has a high level ofpolitical risk?

Options :

A : Forthcoming elections in the subsidiary-s host country.

B : The subsidiary-s host country requires the active participation of local partners before the subsidiary can operate.

C : Company law in the subsidiary host country is lax.

D : The subsidiary islocated a considerable distance from FGT-s home country.

E : Thesubsidiary employs a large number of nationals from the host country.

Answer: A,B,C

Question 2

Which TWO of the following are reasons for a company to comply with the Committee of Sponsoring Organisations of the Treadway Commission 2017 Enterprise Risk Management Framework (COSO Framework)?

Options :

A : Complying with the COSO Framework will mean all employees of a company will comply with internal controls

B : Complying with the COSO Framework will mean that a company-s internal controls will work properly

C : Complying with the COSO Framework will mean there is a good structure to a company-s risk management system

D : Complying with the COSO Framework will mean that all staff will understand a company-s risk management system

E : Complying with the COSO Framework will improve a company-s reputation

Answer: A,C

Question 3

Which method of quantifying risk exposure can be used to calculate the maximum loss on a portfolio occurring within a period of time with a given probability?

Options :

A : Value at Risk

B : Regression analysis

C : Simulation

D : Expected value

Answer: D

Question 4

A UK manufacturing company has simultaneously:

* purchased a put option to sell USD 1million at an exercise price of GBP1.00 = USD1.65

* sold a call option that grants the option holder the right to buy USD 1million at a price of GBP1.00 = USD1.61(this option has the same maturity date as the put).

Which of the following is a valid explanation for entering into these option positions?

Options :

A : The company expects to receive USD 1million from a customer and wishes to offset the cost of the put option by the premium on the call option

B : The company expects to pay USD 1million to a supplier and wishes to offset the premium from the call option against the cost of the put option.

C : The company expects to receive USD 1million from a customer and wishes to obtain an additional benefit if the USD strengthens beyond GBP 1.00 = USD 1.61

D : The company expects to pay USD 1million to a supplier and wishes to obtain additional protection against the USD strengthening beyond GBP 1.00 = USD 1.65.

Answer: A

Question 5

H Ltdis a company providing postal and courier services to small businesses. Customers pay a monthly or annual subscription fee to use the service, plusaverysmall fee for each item delivered.

A year ago, H employed a newsalesteam. Their remuneration is dependent on the number of new customers they sign up. Sales increased dramatically in the first six months, but nowdifficulties are emerging such as new customers dropping their subscription once the initial period has expired; subscriber direct debits being returned unpaid; subscribers going out of business and other similar issues.

Which of the following would be appropriate to help resolve these problems?

Options :

A : Alter the pricing structure in order to increase the price for sending each item but decrease the subscription element of the fee.

B : Ensure that a credit check is carried outbefore a subscriber is accepted.

C : Reduce the rate of commission payable to any sales person who fails to sign up at least an agreedminimum number of customers each month.

D : Alter the commission arrangements so that commission is payable only when the subscriber signs up for a second year.

E : Preparing a monthly report for sales persons detailing the performance of each new customer they have signed up over the previous year.

Answer: A,B,D