CIMA P3 Risk Management

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Sample Questions
Question No 1:
K is a large mining company. In its risk report it states that there
is a risk of accidents and injury because of the nature of the
industry. It states that it has staff training in place and complies
with all Health and Safety regulations but in spite of this there will
still be a residual risk that accidents and injuries may
occur.
Which of the following statements are correct?

A. Most companies in this industry will say something similar in

their risk report.
B. Accepting a residual risk does not imply the company is
reckless.
C. The directors are avoiding their responsibilities by saying there
is a residual risk.
D. Some risks cannot be eliminated.

E. The shareholders should not invest because there is still a

residual risk.

Answer: A, B, D

Question No 2:
Which of the following statements are correct?

A. Risk should be carefully considered when evaluating possible

future projects.
B. If a project has low risks it will usually have relatively low
returns.
C. It is always possible to remove all risks when undertaking
large projects.
D. If a project has high risks it should always be accepted as the
rewards will always be high.
E. Risk can always be transferred to someone else.

Answer: A, BQuestion No 3:
VBN's home currency is the V$. On 1 January, VBN must make a
payment of C$2 million on 31 March of that same year. On 1
January the spot exchange rate was V$1 = C$0.4. On 1 January
VBN paid $180,000 for a call option to buy C$2 million for V$5.5
million on 31 March. VBN's cost of borrowing was 8% per year. On
31 March the spot rate was V$1 = C$0.45. What was the total
cost, including the cost of the option, of settling the payable?

A. V$4.444 million
B. V$5.684 million
C. V$4.628 million
D. V$5.5 million

Answer: C

Question No 4:

What is Risks Definition?

Answer:
Risk is when the actual outcome differs to the expected outcome
Risks can be "pure" -risks that will only have a chance of a bad or
harmful outcome. They do not have any chance of having a good
or beneficial outcome, for example this risk of flooding or a
natural disaster. Speculative risks -have the possibility of a gain
as well as possibility of a loss

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