Question 1

Which THREE of the following are true with regard to managing the changeover from an old to a new computer system?

APilot changeover moves the simplest part of the business to the new system first

BParallel running involves keeping the old system running normally until certain data retention criteria are met or confidence is gained, while the new system deals with the new workload Data input is usually earned out on both systems

CAll methods of changeover carry high risk and it is the preparation consideration of data compatibility and data cleansing before the changeover which has the biggest impact on the smoothness of the transition

DPhased changeover moves individual portions of the business to the new system one at a time

EDirect changeover, or big bang, is only used when the systems are significantly different such that comparing the outputs of the two systems is largely irrelevant

FPhased changeover is the safest and slowest method of changeover

Answer : D, E, F

Question 2

COM is a well established company in the construction industry The company was founded by the Mac family 30 years ago and several family members still serve on the Board The company obtained a listing five years ago The Board has an appropriate balance between executive and non-executive members It also has audit remuneration and nomination committees The average age of board members is 68

COM is profitable but profit margins have been falling steadily and this year's revenues are lower than it was achieved last year The Board recognis thai it does not have a long term strategy in place and has been losing business to newer, more aggressive competitors

Which THREE of the following statements are correct?

AThe remuneration committee should consider incentives such as share options to encourage the Board to focus on COM's long term strategy

BThe nomination committee should have had a succession plan in place for directors.

CThe nomination committee should be operating for the benefit of the directors.

DThe audit committee should have alerted the Board to the impact of falling profit margins

EThe non-executive directors should have challenged the lack of long term strategic planning

Answer : A, B, E

Question 3

The Board of Directors of VCX, a state-owned electricity company, includes four executive directors the Chief Executive Officer, the Finance Director the Operation Director and the Technical Director

All of the shares in the company vest in the Office of the Minister for Energy, who is entitled to appoint two non-executive directors to the Board It has been alleged that the Minister appoints political "insiders" who have no particular knowledge of. or interest in. the electricity industry

There are three further non-executive directors

* L, who spent seven years as Chief Executive of VCX, but retired from that role two years ago,

* M, who spent several years on the Board of a state electricity company in a different country to VCX but who resigned from it before accepting the position with VCX: and

* N, who is a qualified and experienced professional accountant

In relation to best practice in respect of Corporate Governance, which of the following statements are valid? Select ALL that apply

ANone of the executive directors should be allowed to sit on the Remuneration Committee

BM is unsuitable to be part of the Board because his previous involvement with a similar company in another country is a conflict of interest.

CL can now be considered to be an independent non-executive director

DM and N are both suitable appointees to the Audit Committee

EThe Finance Director should be part of the Audit Committee because of her expertise

FNon-executive directors should be responsible for monitoring the performance of executive management especially with regard to company strategy and objectives

Answer : A, D, F

Question 4

JC is a car manufacturing company in country C and manufactures diesel cars It is facing a number of serious risks Which TWO of the following nsk factors are external?

AJC's marketing director is considering an attractive job offer from one of J's main competitors

BCountry F, JC's main market, is threatening to impose tariffs on car imports

CJC is facing court action arising from injuries to customers caused by an alleged brake failure in one of its cars

DDiesel cars are being criticised by experts because it is believed they cause more harmful pollution than petrol

EJC's production staff are complaining that their wages are too low compared to wages paid to other employees.

Answer : B, D

Question 5

HWG is a large company which grows and processes coffee The coffee is sold to supermarkets, branded with their names for sale as "own brand" products HWG brands and packages the coffee using the supermarkets' own designs

HWG's directors are considering a strategic proposal to develop a range of coffees to be sold under a brand that HWG will develop

Which TWO of the following should the directors consider as part of their strategic analysis?

AThe design of packaging for the new brand

BThe reaction of the supermarkets who currently buy coffee from HWG

CThe sales volume forecast for the new coffee

DThe choice of name for the new brand

ERecruiting a marketing firm to advertise the new coffee

Answer : B, C

Free CIMA P3 Risk Management (Online) (CIMAPRA19-P03-1) Practice Questions

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