GUJ A small but rapidly expanding company has recently opened several branches in locations far away from the Head Office. All of the branches are relatively small with no one branch accounting for more than 5% of turnover. Management has decided that the company is not yet large enough to install an Internal Audit function but is, nonetheless, concerned about maintaining adequate control and monitoring at the branches whilst allowing Branch Managers the opportunity to react to local circumstances as appropriate.
Which of the following measures would assist Head Office management in maintaining appropriate monitoring and control at the branches?

• A. Restricting the autonomy of individual Branch Managers to purely routine matters and instructing them to refer everything else to Head Office.
• B. Dealing with all Human Resource, recruitment, and similar issues directly from Head Office.
• C. Arranging visits by senior management to each branch periodically.
• D. Establishing an open communication policy for employees at branches to allow them to contact Head Office on any matter that concerns them.
• E. Instituting the use of a formalised budgetary control system at head office for all branches.

TDC is a company which runs gas-fired power stations in western Europe. The Risk Committee has just received a report that a power station built to the same design and specification in a developing country has recently collapsed. The causes of the collapse are unclear but the consequences for TDC would be catastrophic if something similar were to happen in Europe Which of the following actions being considered by the Risk Committee are ethical?
Select ALL that apply

• A. Send experts employed by TDC to the site of the collapse so that they can gather information first hand on what happened
• B. Decide that the information available to date is too uncertain to take any action for now
• C. Issue a press release confirming that all TDC's power stations are "entirely safe'.
• D. Commission a reputable firm of structural engineers to carry out a review of all power stations owned by TDC
• E. Draw up contingency plans in case some of TDC's power stations need to be shut down
• F. Attempt to increase the level of insurance cover against this type of eventuality

A project has an NPV of £1,200,000. The present value of material costs which are included in the NPV calculation are £8,000,000.
What is the sensitivity of the project to changes in material costs?
Give your answer to the nearest whole percentage.

P Ltd, a manufacturing company, is considering a new capital investment project to set up a new production line. The initial appraisal shows a healthy net present value of $6,465 million at a discount rate of 10% as shown in the table below:
However, management is unsure about the demand for the product which will be produced and has insisted that the future revenues should be reduced to certainity equivalents by taking 70%, 65% and 60% of the years 1,2, and 3 cash inflows respectively.
What should P do?

• A. Stop the project, it has considerable risk.
• B. Proceed with the project, it has a healthy net present value.
• C. Re-appraise the project using other capital appraisal techniques to get a more balanced view.
• D. Put pressure on sales and marketing to re-verify their forecasts.

Which TWO of the following are NOT methods used for risk identification?

• A. Designing a process to deal with complaints
• B. Accounting for waste in a manufacturing process
• C. Carrying out interviews on key members of staff
• D. Employing external advisors with specialist knowledge
• E. Brainstorming ideas with colleagues from different disciplines within the business