1.

Explain the difference in attitude to risk between European and US Companies

In late 90’s, a study commissioned by an internationally-known accounting firm
found that while in continental Europe strategies focus on avoiding and hedging risk,
Anglo-American companies view risk as an opportunity and accept risk management as
necessary to achieving their goals. In 2017, this relative attitude to risk among European
and US companies remains broadly the same, the result of long-standing cultural
experiences and history as well as recent events.

2. What is the advantage of defining the categories into which risk fall?
Identification of significant risks both within and outside the organization is
crucial and allows to make informed decisions. This make it easier to avoid unnecessary
surprises. This is also to allows for a more structured analysis and reduces the chances of
a risk being overlooked.

3. Explain how the following types of risk catalyst might trigger risk
a. Technology – New hardware, software or system configurations can trigger risk,
as can new demands on existing information systems and technology.
b. Organizational charge – Risks are triggered by, for example, new management
structures or reporting lines, new strategies and commercial agreements
(including mergers, agency or distribution agreements).
c. Processes – New products, markets and acquisitions all cause change and can
trigger risks.
d. People – Hiring new employees, losing key people, poor succession planning, or
weak people management can all create dislocation, but the main danger is
behavior: everything from laziness to fraud, exhaustion and simple human error
can trigger this risk.
e. External factors – Changes to regulation and political, economic or social
developments can all affect strategic decisions by bringing to the surface risks that
may have lain hidden. The economic disruption caused by the sudden spread of
the SARS epidemic from China to the rest of Asia in 2003 highlights this risk.
4. The typical areas of financial risk include the following except
a. Poor brand management
b. Treasury risks
c. Accounting decisions and practices
d. Fraud

5. What are the stages in managing the enterprise wide risk?

The stages of managing the enterprise-wide risk inherent in decisions are simple.
First, assess and analyze the risks resulting from a decision by systematically identifying
and quantifying them. Second, consider how best to avoid or mitigate them. Lastly, in
parallel with the second stage, take action to manage control and monitor the risks.

6. What factors should be considered when setting and reviewing financial strategy?
Profitability, cash flow, long-term shareholder value and risk all need to be
consider when setting and reviewing financial strategy

7. What are some of the financial tools that can be applied in making strategic
financial decision affecting profitability?
 Improving profitability
 Avoid pitfalls in making financial decisions
 Reduce financial risk

8. Enumerate and explain at least (7) practical technique to improve profitability.

 Focus decision-making on the most areas. Concentrating on products and services
with the best margin will protect or enhance profitability. This might involve
redirecting sales and advertising
 Decide how to treat the least products. These often drift, with dwindling
profitability. Turn around a poor performer (by reducing costs, raising prices,
altering discounts or changing the product) or abandon it to prevent drain on
 resources and reputation. The shelf-life and appeal of product must be considered
when deciding to continue or discontinue it.
 Make sure new products enhance overall profitability. New product development
often focuses on market need or the production process, with insufficient regard
to cost, price, sales volume and overall profitability, which are inextricably
linked.
 Manage development and production decisions. The amount spent on research, as
well as the priorities and methods used, affect profitability. Too little expenditure
may increase costs in the long term.
 Set the buying policy. For example, should there be a small number of preferred
suppliers or a bidding system among a wider number of potential suppliers? Also,
consider techniques for controlling delivery charges, monitoring exchange rates,
improving quality control, reducing inventory and improving production lead
times.
 Consider how to create greater value from existing customers and products to
enhance profitability, Ask:
o How can customer loyalty (and repeat purchasing) be enhanced?
o How can the sales proposition be made more competitive relative to the
opposition?
o How can existing markets, sales channels, products, brand reputation and
other resources be adapted to exploit new markets and new opportunities?
o How can sales expenses be reduced?
o How can effectiveness of marketing activities be increased?
 Consider how to increase profitability by managing people. Successful leadership
is prerequisite for profitability. People need to be motivated and supported, and
this implies rewarding them fairly for their work, training and developing them,
providing clear sense of direction, and focusing on the needs of the team, the task
and the individual.