Assessment 

Identify risk and apply risk management processes 
BSBRSK401A and 

Undertake Risk Identification FNSRSK501A and 
Assess Risks FNSRSK502A 
All elements of these units are covered by this assessment 
Name: 
The above units are UNGRADED and will be recorded as Competent/Not yet competent on your official transcript 
To be assessed as competent in this section of the units you must achieve 80% overall competency 
ALL questions to be attempted. 
I accept by uploading this assessment that I am certifying that this is entirely my own work, except where I have given fully documented references to the work of others, and that the content of this assessment has not previously been submitted for assessment in any formal course of study. 
Scenario 
You are the owner/office manager of Careful Financial Services ("CFF") - a mortgage broking business in Fedtown. 
The business has been successfully operating for 5 years and a recent increase in loan applications has you considering whether to employ a new loan writer. 
One of the reasons for the increase in applications is the approval by local council of a development application for a site that will contain 500 new houses. Off the plan sales have been popular for the first release with an average sale price of $350,000. 
The economy is reasonably stable with interest rates at 5.7%, they have not changed in the past 6 months and are not predicted to change in the next quarter. 
No risk management planning has ever been completed and you feel it is needed so that both opportunities and risks are effectively identified and treated. 
Relevant information: 
? There is one other mortgage broking business in Fedtown. 
? Your business has 6 employees who have all been with the business for 3 years or more. 1 Business Development Manager, 3 loan writers, 1 support officer, 1 administration assistant. 
? Premises are owned. 
? Spare office space is limited in the current premises. 
? Business borrowings: 
? Term loan $200,000 
? Overdraft $20,000 
? Procedure manuals completed when business first opened (never reviewed). 
? Monthly workplace inspections are conducted. 
? The business operates a company car that is leased. 
? All computers are networked and basic virus protection is installed. 
? Training of new staff and ongoing training is not well structured and is a bit "hit and miss". 
? Business insurance is current - including personal injury and property damage, fire, storm, malicious damage and other defined events, business vehicle insurance, business interruption, personal accident or illness. 
? Audits have not been completed as regularly as needed due to Office Manager being too busy. 
? A recent customer satisfaction survey showed excellent results, which has been very positive for the business with a high level of referrals being received. 
? Business sponsors the local Under 10's soccer team and has participated in Clean up Australia day for the last 5 years. 
? Aged debtors and creditors listing shows some long overdue accounts. 
Answer the following questions using the above scenario: 
Please note: The answers provided should relate directly to the scenario and be in your own words to demonstrate your understanding (do not copy directly from the notes). The case study in the learners guide is there to assist in your completion of the assessment. 

Question 1 - Establish the Context 

a) Identify at least 5 external and 2 internal stakeholders: 

External Stakeholders Internal Stakeholders 

b) Identify at least 4 external and 3 internal influences: 
External Internal 

c) List 5 key business drivers: 

1. 
2. 
3. 
4. 
5. 

d) Complete a SWOT analysis (provide at least 4 points under each heading) 
Strengths Weaknesses 

• 
• 
• • 
• 
• • • 
Opportunities Threats 

• 
• 
• • 
• 
• • • 

e) To establish the risk management context provide information for the following steps: 

i) Step 1- 
Define the 
a) organisation, 
b) process of activity 
c) and establish its goals and objectives (use the table below to establish objectives). 

Criteria Objectives 
Financial 

Operational 

Health and safety 

Compliance/Legal 

Technological 

Reputation 

ii) Step 2 - Specify the nature of the decisions that have to be made. 

iii) Step 3 - Define the extent of the project activity or function in terms of time and location. 

Question 2 - Identify risks 

a) List 7 risk identification tools that could be used in the formulation of the risk management plan and discuss reasons for selecting each tool. 
Tool Reasons 
1 
2 
3 
4 
5 
6 
7 

b) Complete the following table identifying within each risk category: 

• Financial/economic and Operational at least four risks/opportunities 
• All other risk categories at least two risks/opportunities 

Example of what is required 
A financial risk in the scenario could be that the increase in loans (due to the new development) does not continue because the other mortgage broker in the town attracts more clients. 

Risk Description Impact of risk 
Financial/economic 1. Expected increase in loans does not continue 

2. 
3. 
4. Risk - CFF could have cash flow shortages because they have put on extra staff and the work is no longer there. 
Opportunity - CFF could utilise these extra staff to implement a new marketing campaign, carry out client retention or to develop new strategies to bring in more business and increase their sales again. 
Operational 1. 
2. 
3. 
4. 
Compliance/legal 1. 
2. 
3. 
4. 
Human 1. 
2 
Health & Safety 1. 
2 
Property damage 1. 
2 
Public liability 1. 
2 
Reputation 1. 
2 
Security 1. 
2 
Technological 1. 
2 

Question 3 - Analyse and evaluate risks 

a) From the risks identified in question 2b) complete a risk register (appendix 1) for the following risk categories: 

1. Financial/economic 
2. Operational 
3. Compliance/legal 

Example of what is required 

What can happen? - again relate it to the scenario 
Look at what may or may not happen in the business 
Eg loans decrease 
How can it happen 
List how it might happen - eg the competitor may attract more loans from the new development to his business 
Identify existing controls 
What has CFF done to identify this risk? Nothing/something? 
Adequacy of existing controls? 
Assess whether it is: 
• not applicable (if there is no risk control in place) 
• effective or 
• ineffective 

Use the following matrix to analyse the risks: 

Likelihood 
Rating Expression Attributes 
A Extremely Likely The event will most probably occur under most circumstances 
B Likely The event will probably occur under most circumstances 
C Possible The event may occur under certain circumstances 
D Unlikely The event is unlikely to occur 

E Rare The event will only occur under most exceptional circumstances 

Negative Consequence 
Rating Expression Attributes 
1 Insignificant Very minor impact or cost to the business 
2 Minor Minor cost, up to $5,000 
3 Moderate Moderate Impact or cost, up to $30,000 

4 Major Significant impact on the business, over $30,000 

5 Disastrous Possibly fatal impact to the business. 
OR 
Positive Consequence 
Rating Expression Attributes 
1 Insignificant Small benefit, low financial gain 
2 Minor Minor improvement to image, some financial gain 
3 Moderate Some enhancement to reputation, high financial gain 

4 Major Enhanced reputation, major financial gain 

5 Significant Significantly enhanced reputation, high financial gain 

L: Low Risk manage by routine procedures 
M: Moderate Risk responsibility must be specified 
S: Significant Risk management attention needed 
H: High Risk immediate action needed 

OR 

L: Low Opportunity manage by routine procedures 
M: Moderate Opportunity manage by specific monitoring or response procedures 
S: Significant Opportunity management attention needed 
H: High Opportunity detailed planning required to prepare for and capture the opportunity 

The completed matrix is as follows: 

Likelihood A S S H H H 
B M S S H H 
C L M S S H 
D L L M S H 
E L L M S S 
1 2 3 4 5 
Consequence 

Question 4 - Treat risks 

Using the risk register completed in question 3 complete a Risk Treatment Plan (Risk Treatment section in appendix 2).

Note: the Monitor and Review section of appendix 2 will be completed in Q6 below. 

Question 5 - Communicate and consult 

To ensure that all stakeholders are kept informed complete a communication plan (appendix 3). 

Question 6 - Monitor and review 

Part A: 

Complete the first 3 columns of the Monitor and Review section of appendix 2 using the risks identified in Question 4 and the communication plan devised in Question 5 to ensure they are reviewed in terms of their required timing. 

Part B: 

Assume that 2 of your risk treatment plans did not achieve the Measures of Success you developed in part A above (appendix 2). 

(i) Record two hypothetical results in the Result column to reflect this unsuccessfulness. 

and 

(ii) Recommend an option for improvement for both results in the Options for Improvement column for all results recorded in (i) above 

Risk register 

Function/Activity: Compiled by: Date: 
Date of risk review: Reviewed by: Date: 

Reference The risk: 

Identify existing controls Adequacy of existing controls Consequence rating Likelihood rating Level of risk Risk Priority 
What can happen How it can happen 

Extract of Risk Treatment Plan 
Function/activity: 
Risk Treatment Plan Monitor & Review 
Risk reference Treatment strategy Resources required Responsible person Timing Monitoring requirements Review completion date Measures of success Results Options for 
improvement 

Complied by: Date: Reviewed by: Date: 

COMMUNICATION PLAN 

Purpose 

Who 
Detail the relevant audiences, include internal and external stakeholders What 
What information needs to be communicated. 
How 
Communication method/s to be used. When 
Ensure timing is accurate and specific for each step in the risk management process. Responsibility 
Who has accountability and responsibility for each task?