CIMA P3 - Risk Management exam in just 24 HOURS!

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CIMA P3 - Risk Management

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Question No 1:
D has decided to invest in a new factory at a cost of $6,000,000. The discount rate of the
project is 22% and the PV of tax shield is $80,000.
What is the IRR?
Give your answer to two decimal places.

Answer: 21.71%
Question No 2:
S Doc is an out-of-hours service provided by a country's government. The service allows
members of the public to call and speak to a nurse who can advise on medical situations
which are not obviously emergencies. Depending on the situation the caller can be referred
to the full emergency services, or be advised to go to Accident and Emergency at the nearest
hospital. Alternatively, a callout from a general practitioner (GP) can be organised; the caller
can be advised of where GP services are available; advice can be given over the phone; or a
decision can be taken that no further action is required at least until normal services resume
on the next working day. There has been a suggestion that the nurses who take these calls
could be replaced by suitably trained operatives who have available to them a specially
designed expert system. Which of the following are advantages of using an expert system
instead of nurses?
A. The operatives would be too careful and therefore would recommend unnecessary
treatments or interventions.
B. Some callers may present with complicated scenarios that a non-medically trained
operative or expert system would be unable to recognise (for example, psychological
issues).
C. Using an expert system would make operatives less inclined to feel sorry for the caller
and ensure that only relevant facts were considered in coming to a decision.
D. The use of an expert system would ensure that only relevant questions were asked of
the caller and that operatives did not miss something vital due to distraction or fatigue.
E. The expert system will always follow the same path whereas the nurses may have more
knowledge about some health issues and very little about others.

Answer: C, D, E

Question No 3:
YUI owns 18 factories, which are spread around the country. Each factory employs 500-700
production staff and has its own administrative and accounts departments. It has recently
been discovered that the manager in charge of YUI's Hightown factory has been overstating
his personal expenses claims for the past five years. The total amount stolen in this manner
has been estimated at $10,000. Why would it have been relatively difficult to have prevented
this fraud?
A. Senior members of management can often override controls.
B. It is impossible for anybody to check expenses claims submitted by a senior manager.
C. Managers are generally highly intelligent and are generally capable of designing ways to
defeat control systems.
D. Internal controls cannot address fraud, only error.

Answer: A
Question No 4:
The government health service in country H employs well over 100,000 staff in various
locations throughout the country. Traditionally, local management has had high levels of
autonomy in relation to personnel issues and there are several different human resources
(HR) managers located across various regions.
The government has decided to introduce a completely new HR/payroll information system
to have just one database containing all relevant information about every staff member on
the payroll (start date, job title, salary and all other details) and to use this information to
begin streamlining recruitment and HR policies.
The government has outsourced the system's development to a reputable company.
Which of the following are disadvantages associated with this IT project?
A. There is a risk that the system will not capture all of the existing terms and conditions of
staff, thus leading to industrial relations problems later.
B. There is a risk that significant anomalies in the current system will be highlighted.
C. Any initial problems in running the system could have serious repercussions as it could
lead to, for example, staff not being paid, payroll tax not being properly collected, and
similar difficulties.
D. The system could make it more difficult to employ specialist medical staff on terms and
conditions which are different from the normal terms and conditions available.
E. The amount of data storage space required to run the system may not be available.
F. The government is very heavily dependent on the contractor to whom this assignment is
outsourced and if they do not to perform as required this could have serious
consequences.

Answer: A, C, F
Question No 5:
S Doc is an out-of-hours service provided by a country's government. The service allows
members of the public to call and speak to a nurse who can advise on medical situations
which are not obviously emergencies. Depending on the situation the caller can be referred
to the full emergency services, or be advised to go to Accident and Emergency at the nearest
hospital. Alternatively, a callout from a general practitioner (GP) can be organised; the caller
can be advised of where GP services are available; advice can be given over the phone; or a
decision can be taken that no further action is required at least until normal services resume
on the next working day.
There has been a suggestion that the nurses who take these calls could be replaced by
suitably trained operatives who have available to them a specially designed expert system.
Which of the following are advantages of using an expert system instead of nurses?
A. The operatives would be too careful and therefore would recommend unnecessary
treatments or interventions.
B. Some callers may present with complicated scenarios that a non-medically trained
operative or expert system would be unable to recognise (for example, psychological
issues).
C. Using an expert system would make operatives less inclined to feel sorry for the caller
and ensure that only relevant facts were considered in coming to a decision.
D. The use of an expert system would ensure that only relevant questions were asked of
the caller and that operatives did not miss something vital due to distraction or fatigue.
E. The expert system will always follow the same path whereas the nurses may have more
knowledge about some health issues and very little about others.

Answer: C, D, E
Question No 6:
Which of the following are objectives of the audit planning procedure?
A.
B.
C.
D.
E.

To work out the time and resources required for the audit.
To perform substantive tests.
To work out how audit evidence will be obtained.
To perform analytical review to identify possible areas for investigation.
To set out how audit objectives will be achieved.

Answer: A, C, E

Question No 7:
You are in process of compiling a risk register for P, a company which maintains railway
tracks. This helps prevent accidents and ensures the trains are not disrupted due to problems
with the track.
Which of the following statements are valid?
A. A properly compiled risk register will identify all the risks to which P could possibly be
exposed.
B. A risk register should profile each risk in terms of probability and consequence.
C. A risk register should concern itself with only the direct consequences of each risk such
as injury to passengers and ignore indirect risks, such as re-routing trains due to an
accident.
D. The risk register for P should be updated frequently: for example, every two weeks.
E. The risk register should specify the individual, or group of individuals, responsible for
the management of each risk.

Answer: B, E
Question No 8:
A project has an NPV of 1,200,000. The present value of material costs which are included in
the NPV calculation are 8,000,000.
What is the sensitivity of the project to changes in material costs?
Give your answer to the nearest whole percentage.

Answer: 15%
Question No 9:
Will owns $400,000 of shares in Company X.
Company X has a daily volatility of 1% of its share price.
Calculate the 28 day value at risk that shows the most Will can expect to lose during a 28 day
period.
(Will wishes to be 90% certain that the actual loss in any month will be less than your
predicted figure).
Give your answer to the nearest $000.

Answer: $27

Question No 10:
Physical access controls can greatly enhance the security of company assets.
Select THREE methods by which physical access security can be significantly enhanced.
A. Use of CCTV cameras monitoring all access points, with security guards monitoring
images and a secured system making a recording.
B. Use of one way mirrors, so people can be observed undetected.
C. Use of USB sticks and removable media should be prohibited.
D. Use of access control pads with numerical keys on every door, which is otherwise
locked.
E. Personal individual ID card access, logging individual person movement through every
door, which is otherwise locked.
F. Visitors to be logged in by security staff and to be accompanied by a member of staff at
all times until they leave.

Answer: A, E, F
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