CIMA P3 Risk Management Exam Dumps

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P3 shows how to identify, evaluate and manage various risks that could adversely affect the implementation of the organisation’s strategy. It provides the competencies required to analyse, evaluate and apply the techniques, processes and internal control systems required to manage risk. This insight is then used to manage the risks associated with both cash flows and capital investment decisions – two important areas of organisational life for which the finance function is responsible.

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Questions No 1: An electricity company owns and operates a nuclear power station located ten miles from a large city. A recent and very extensive engineering examination of the power station concludes with the estimate that the probability of a major nuclear disaster within the next 20 years is 0.2%.

Which of the following best explains the relevance of quantifying the risk in that way?

A. There is no acceptable level of risk for a major nuclear accident and so the probability has little information value in itself.

B. The probability is so low as to be ignored.

C. The directors will be able to argue that they were not negligent in the event of a major disaster within the 20 year period.

D. The calculation of a precise probability demonstrates that the engineers who conducted the inspection are experts in their field.

Answer: A https://www.certs4you.com/cima/p3-dumps.html

Question No 2: M is a listed company. It is hoping to invest in a risky new venture. M has a substantial amount of cash to invest in the venture. M would have found it difficult to raise new finance as it has a high level of gearing. Which of the following statements about stakeholders' conflicting interests are true?

A. M's shareholders would only be exposed to the systematic risk from the investment in the new venture.

B. M's credit rating is likely to fall as a result of this new venture.

C. The directors would only be exposed to the systematic risk from the investment in the new venture.

D. M's diversification will mean less risk for the shareholders.

Answer: A B

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Questions No 3: C Ltd is a private, family-owned company which is hoping to become listed on a recognised Stock Exchange within the next two years. At the moment, the Board of Directors comprises five directors; four of whom are from the founding family and all of whom are involved in the day-to-day running of the business. The remaining director obtained a seat on the Board three years ago as a condition of an investment by a venture capital fund.

The Board meets in half-day sessions once a fortnight and the Board meetings are reasonably well run. All decisions are taken by the Board as a whole. There are no sub-committees.

Which of the following steps would it be appropriate for C Ltd to take in the light of the proposed listing?

A. Appoint enough independent non-executive directors (NEDs) that they make up at least 50% of the Board.

B. Appoint one of the NEDs as Chair of the Board.

C. Insist that the venture capital company director be removed as he is not necessarily motivated to act in the best interests of C Ltd. D. Set up at least three sub-committees namely remuneration, nomination, and audit committees.

E. Ensure that the current executive directors are given 10 year contracts starting on the day the company is floated, to ensure consistency and continuity in the management of the company.

F. Set up an "agenda setting" sub-committee consisting of the current executive directors to decide the agenda for each Board meeting.

Answer: A B D https://www.certs4you.com/cima/p3-dumps.html

Questions No 4: GHY is a listed company. Tom is GHY's CEO and Peter is its non-executive Chair of the Board. Tom and Peter both have substantial relevant business and industrial experience and both are believed to have considerable integrity. Tom and Peter quickly developed a good working relationship after Peter's appointment. They have become close friends.

Tom briefs Peter on every aspect of the business. Tom and Peter jointly agree the agenda for every board meeting and both agree on the manner in which matters will be presented to the board.

Taking account of the principles of good corporate governance, which of the following statements is correct?

A. It is entirely appropriate that Tom and Peter have this kind of relationship and both are acting in the best interests of the company.

B. Non-contentious board meetings show how well Tom and Peter are running the company and shows that the management is cohesive.

C. The relationship between Peter and Tom may have a detrimental effect on company decision making as the Board is not always being informed about matters in an unbiased manner.

D. Since the non-executive chair clearly has a significant role within this company there is little danger that any individual will become excessively dominant.

Answer: C https://www.certs4you.com/cima/p3-dumps.html

Questions No 5: H has a floating rate loan that it wishes to replace with a fixed rate. The cost of the existing loan is LIBOR + 4%. H would have to pay a fixed rate of 8% on a fixed rate loan. H's bank has found a potential counterparty for a swap arrangement.

The counterparty wishes to raise a variable rate loan. It would pay LIBOR + 1% on a variable rate loan and 9% on a fixed rate.

The bank will require 10% of the savings from the swap and H and the counterparty will share the remaining saving equally.

Calculate H's effective rate of interest from this swap arrangement.

A. H would pay 6.2% B. H would pay 6% C. H would pay Libor + 1% D. H would pay 6.4% Answer: A https://www.certs4you.com/cima/p3-dumps.html

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