Page 12 - SCS May 2018 - Day 1 Suggested Solutions

CIMA MAY 2018 – STRATEGIC CASE STUDY

EXERCISE 3 – 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.

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. The Board would be expected to comment on Couchweb’s risks at the
AGM and we can see from the extract they include a section on risks in the annual report. The risk
register would most likely form the basis of this information.

A risk register would act as proof that Couchweb is committed to preventing accidents and
complying with regulations. Should there be any incident, Couchweb could point to the risk
management process it has in its defence. In particular the risk register would show any regulator
or authority that Couchweb were taking such matters seriously. This may lower fines or limit legal
action. Given that injuries may occur on set during filming, the legal action in particular may be
significant.

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 first five are from Couchweb’s risk report are probably those which the Board of Couchweb
believes are currently the most significant to the success of their business model. These are
clearly the risks that Couchweb has prioritised as being either the most likely or would have the
most serious impact. A risk register would include mitigations, the following may be appropriate
mitigations for Couchweb:

Competition
Mitigation
The key mitigations for the risk posed by competition is to keep producing and acquiring quality
content that cannot be viewed elsewhere, innovations in how it can be viewed and the low price
for subscriptions. While the price is considered small, it will be low on the list of removal from
non-essential spends should a member be reviewing personal outgoings.

Investment in new innovations
Mitigation
It is always a risk for companies to develop/produce anything new, and this is exactly the same for
Couchweb whether it is new content or new ways to deliver the content, but to maintain their
position they must continue to do this, if they don’t then another company will do it. Applying the
TARA model it may be viewed by some that this risk has to be accepted. The only other mitigation
they can have here is reduction by attracting and retaining quality staff to make sure the
investments are more likely to be worthwhile.

48 KAPLAN PUBLISHING