TUESDAY: 5 April 2022. Afternoon paper. Time Allowed: 3 hours.
Answer any FIVE questions. ALL questions carry equal marks. Do NOT write anything on this paper.
QUESTION ONE
1. In the context of credit management, explain the following types of risks:
Potential risks. (2 marks)
Economic risks. (2 marks)
Currency risks. (2 marks)
Enforcement risks. (2 marks)
2. State four principles of an efficient credit governance system. (4 marks)
3. Analyse four areas that could be covered by a credit controller’s risk mitigation plan. (8 marks)
(Total: 20 marks)
QUESTION TWO
1. Outline six risk financing options. (6 marks)
2. Describe four assumptions that management might consider when carrying out strategic analysis of the organisation. (8 marks)
3. Explain three functions of a risk management department in an organisation. (6 marks)
(Total: 20 marks)
QUESTION THREE
1. Explain the meaning of the term “recovery rate” as used in the management of credit risks. (2 marks)
Outline three elements that could influence the amount of recovery. (6 marks)
2. Assess four advantages of informing customers of their credit limits. (8 marks)
3. Summarise four steps of cybersecurity risk analysis and prioritisation process. (4 marks)
(Total: 20 marks)
QUESTION FOUR
1. Analyse five parameters which a lender could use to judge the repayment capacity of a borrower. (5 marks)
2. Describe five factors that could influence a firm’s profitability level. (10 marks)
3. Outline five benefits of understanding the impact of migration risk by a lender. (5 marks)
(Total: 20 marks)
QUESTION FIVE
1. Explain the term “risk register”. (3 marks)
List three reasons of developing a risk register. (3 marks)
2. Outline three objectives of a credit risk management process in a bank. (6 marks)
3. Describe four drivers of credit risk. (8 marks)
(Total: 20 marks)
QUESTION SIX
1. Explain the acronym PESTEL as used in risk classification. (6 marks)
Outline four disadvantages of using PESTEL as a means of identifying risk. (4 marks)
2. Summarise four steps used to calculate probability of default (PD). (4 marks)
3. Explain three classes of suppliers of credit in your country. (6 marks)
(Total: 20 marks)
QUESTION SEVEN
1. Explain three essential principles that govern setting of a customer’s credit limit. (6 marks)
2. Analyse three types of industry risk. (6 marks)
3. Describe four steps used to mitigate risk where a collateral is used as a security for a loan product in microfinance institutions (MFIs). (8 marks)
(Total: 20 marks)
