Page 12 - CIMA SCS Workbook August 2018 - Day 1 Suggested Solutions

CIMA AUGUST 2018 – STRATEGIC CASE STUDY

Overall

If they were to list, the biggest concern – based on the limited information we have – would be
around the number of NEDs and the existence/makeup of the compulsory committees. Also of
concern would be a potential lack of skills/experience in IT and Legal.

These should be looked at regardless of flotation as they could jeopardise company performance
in a very challenging market.

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 Register

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 FNG have 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. If FNG were listed the Board would be expected to comment on FNG’s
risks at the AGM, so it is good governance that FNG have a risk register.

A risk register shows that FNG is committed to preventing issues and complying with regulations.
Should there be any incident, FNG could point to the risk management process it has in its
defence. In particular the risk register would show any regulator or authority that FNG were
taking such matters seriously. This may lower fines or limit legal action. Given that injuries may
occur while a journalist is investigating a story or through an accident at the print sites, 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 FNG’s risk register are probably those which the Board of FNG believes are
currently the most significant to the success of their business model. These are clearly the risks
that FNG has prioritised as being either the most likely or would have the most serious impact.

The FNG risk register has lots of key sections recommended in a risk register, title, explanation
and rating, although there is no indication given about the likelihood or impact, it would be
expected that these two aspects have been considered in the overall rating that is present. Often

50 KAPLAN PUBLISHING