Borrowed Funds

Question 1

• You are the Risk Manager for FY plc, an electronics company that has grown rapidly. FY plc specialises in the production of mobile phones for the highly competitive mobile phone market. FY plc is focussed on profitability and delivering shareholder value in the short-term.

FY plc is about to launch a new mobile phone that they expect will give them a competitive advantage. FY plc has made a significant investment in the development of this new product with borrowed funds. The production of this new mobile phone is heavily dependent on one specialist component supplier.
(a) Identify two potential catastrophic failures that FY plc could experience following the launch of the new mobile phone. (2)
(b) Explain how risk management could contribute to the prevention of each of the two catastrophic failures you have identified in (a) above. (8)

Question 2– Across more than one Learning Outcome (30 marks)
You are the newly appointed Group Risk Manager for MC plc, a successful UK-based pharmaceutical company. MC plc has decided to expand its pharmaceutical production capability by building a new factory in an overseas country – a country that has an emerging economy.
You have been asked by the Board to recommend how an effective risk management process could manage the risks associated with the expansion into the overseas location.
(a) Identify three internal and two external key stakeholders you would engage with, in order to establish an effective risk management process. (5)
(b) Explain, for each of the three internal and two external stakeholders you have identified in (a) above, how these stakeholders could contribute to the risk management process of the risks involving the overseas location.  (25)