Page 11 - CIMA SCS Workbook February 2019 - Day 1 Suggested Solutions

SUGGESTED SOLUTIONS

We must also be prepared for additional information in the unseen to present other potential
problems, such as lack of financial experience within the NEDs, or a key Board member wishing to
leave.

EXERCISE 2 – RISK MITIGATION

Risk management should be seen as an essential role of any Board under any organisational
structure. It shows a commitment to minimising risks and maintaining a sound set of internal
controls so that the business remains a going concern, so it is a good sign that Vita has a risk
register.

From a governance perspective, a risk register is essential. It allows the Board to see any new risks
and identify changes to existing risks. Companies can use it to prioritise risks by looking at the
likelihood of the risk occurring and the impact it may have. Often a risk register will turn this into a
numeric value to rank risks and highlight the key ones. Then an appropriate risk management
strategy can be determined to mitigate the risk. It can also ensure that the best is made of any
opportunities that arise.

A risk register shows that Vita is committed to preventing issues and complying with regulations.
Should there be any incident, Vita could point to the risk management process it has in its
defence. In particular the risk register would show any regulator or authority that Vita was taking
such matters seriously. This may lower fines or limit legal action. Given that Vita supplies devices
designed to encourage the wearers to be more active, this is important.

Controls can reduce risks, but are not the only way to deal with risks. Diversification, hedging and/
or joint ventures could be used to help reduce risks. Risks can also be mitigated through risk
transfer such as insurance and/or outsourcing. Certain risks are considered to be so severe the
activity may be avoided.

The risks identified in Vita’s risk register are probably those which the Board of Vita believes are
currently the most significant to the success of their business model. These are clearly the risks
that Vita has prioritised as being either the most likely or would have the most serious impact.
The Vita risk register has lots of key sections recommended in a risk register, title, explanation and
ratings on the likelihood and impact, these ratings then link into an overall rating. Often the date a
risk was identified would be in a risk register, and this is not present in Vita’s, another
consideration is when the risk last changed as this shows whether a risk has been recently
reviewed. This is particularly important in a dynamic industry such as the one Vita is in.

Finally, Vita has the very important mitigation column, so it is clear what controls they have in
place or they are intending to put in place.

Other suggestions to improve the risk register would be a residual risk rating – after the
mitigations have been considered – but perhaps more importantly a risk owner. A risk owner
would mean that someone had responsibility for making sure actions were taken and that people
would also know who to contact about any issues related to that risk.

In terms of additional risks and mitigations for these risks, below are some other factors that
could pose issues for Vita and how they could be mitigated:

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