Page 7 - CIMA May 18 - MCS Day 2 Suggested Solutions

CIMA MAY 2018 – MANAGEMENT CASE STUDY

CHAPTER NINE

TASK 1 – RISK

Suggested solution:
To: CFO
From: Financial Manager
Date: Today
Subject: Risk Management

How Menta could improve its risk management process

The key steps for such a process are outlined below.

 Identify risk – public transportation has become high on the agenda of local and national
governments. There are many interested parties and diverse risks to consider e.g.
customers, suppliers, trade unions, trade associations and regulatory bodies such as Health
and Safety UK. This will require a comprehensive approach.
 Analyse the risk by considering the potential impact and likelihood both internally to
MENTA and any identifiable external risk e.g. storage of flammable fuel, disposal of oil and
tyres from workshops, safety of maintenance workers in the bus depots, etc.
 Impact – attempt to quantify the magnitude of the impact if the risk occurs e.g.
inappropriate installation, lack of safety equipment on buses or trams resulting in personal
injury or insurance claim
 Likelihood of this happening – attempt to assess the probability of the risk materialising
 Prioritise / rank risks
 Select and implement strategy to deal with risks identified, depending on the likelihood and
impact.
 Monitor and review – we can hopefully learn a great deal in this context from the processes
currently adopted when considering risks in the workplace
 Maintain record of risks and actions taken to deal with them via a risk register
 For a listed company, a Risk Committee should be in place to review and monitor the
process. For a non‐listed company such as MENTA this may not be practical. The board
composition however should reflect the complexity of the company’s activities so we may
need to consider board appointments to reflect HR and IT for example. This will ensure that
all key activities within MENTA are represented from a risk perspective.

Suggested approaches to mitigate/manage risks:

Accept (low likelihood/low impact). Risks which fall into this category can be accepted as a
normal part of business. It is anticipated that the risk is unlikely to occur and even if it does the
consequences can be coped with e.g. breakdown of buses in transit, failure of equipment in the
maintenance process. It remains essential however that the risk continues to be monitored to
ensure the impact of the risk has not changed e.g. as a result of changes in driving technology for
which we were unprepared.

94 KAPLAN PUBLISHING