You are the Risk Manager for BCD plc, an international company who specialises in manufacturing
construction plant and mechanical excavators.
BCD plc operates a fleet of cars for staff use and a fleet of commercial vehicles to transport its products.
There is an upwards trend in the number of motor accidents in some driver age groups.
Prior to the renewal of BCD plc’s motor fleet insurance policy, the company’s insurance broker advises that
the insurer will impose a significant premium rate increase.
The insurance broker suggests that you conduct a probability assessment with a view to limiting drivers
within specified age groups from using fleet vehicles which, if adopted, might lead to the insurer offering
improved renewal terms.
The following table provides information relating to BCD plc’s motor fleet:
Grouping of drivers by age Number of drivers Average number of motor fleet
accidents per year
Under 25 275 210
25-30 425 120
31-40 520 160
Over 40 760 160
(a) Calculate, showing all your workings, the annual probability of an accident occurring for each of
the four groups of drivers. (4)
(b) Explain, with justification, one additional relevant data field that would improve the understanding
of the overall financial impact of the motor fleet accidents. (6)
Question 2 – Learning Outcome 2 (20 marks)
You are the Risk Manager for SKL plc, a financial organisation. SKL plc has a modest growth strategy for the
next five years.
Following a recent acquisition by SKL plc of another financial organisation of a similar size, the senior
management has asked you to review the ‘technology and cyber risks’ faced by SKL plc. There has also
been a recent malicious information technology (IT) security incident within SKL plc.
Your review highlighted the following key issues:
• Financial products are offered to customers through a wide range of platforms.
• The main central computer system operates with a common communication platform for both internal and
customer-facing staff.
• Data is backed up daily to an IT server located in the same building as the central computer system.
• A large amount of processing data is manually input by staff.
• Certain functions of the computer systems of SKL plc and its new acquisition still operate independently.
You must now prepare a risk management report on these key issues.
(a) Identify, with justification, four significant ‘technology and cyber risks’ faced by SKL plc. (8)
(b) Explain briefly, one action you could take to manage each of the four risks you have identified in
(a) above. (12)
M67/2021 M67: Fundamentals of risk management 2
Copyright © 2021 The Chartered Insurance Institute. All rights reserved.
Question 3 – Learning Outcome 3 (30 marks)
You are the Marketing Manager for HC plc, a large general insurer.
HC plc has decided to adopt a strategy of significant growth. HC plc’s strategy is to expand its business by
offering a wider range of products to gain new customers, as well as entering additional international
markets.
To support this growth strategy, you have been asked by HC plc’s Chief Risk Officer to review how HC plc is
perceived by its current and potential competitors and customers, as well as other relevant external
organisations.
To conduct your review, you require external information to determine how HC plc is perceived.
(a) Explain, with justification, three significant sources of external information you require. (12)
(b) Explain one method of collecting each of the sources of external information you have explained
in (a) above. (6)
(c) Explain one challenge for collecting each of the sources of external information you have
explained in (a) above. (6)
(d) Identify, with justification, one limitation for each of the three sources of information you have
explained in (a) above. (6)
Question 4 – Learning Outcome 4 (10 marks)
You are the recently appointed Group Head of Risk for LND Group, a newly formed insurer.
LND Group was formed by the merger of two similar sized insurers, both of which operated within the UK.
The insurers had different approaches to risk categorisation.
Your first task is to establish a common approach to risk categorisation across the LND Group.
Explain, with justification, one significant benefit and one significant challenge for the LND Group in
adopting a common approach to risk categorisation. (10)
Question 5 – Learning Outcome 5 (20 marks)
You are the Risk Manager for JNL plc, a UK-based chemical manufacturer. JNL plc has a single
manufacturing site near the coast.
Some businesses and residents, near JNL plc’s manufacturing site, have raised issues regarding health and
damage to the environment. These issues have been reported locally on the television and radio. There
have also been comments made on social media. JNL plc has been implicated in the health and
environmental issues.
Following an internal investigation, it is discovered that there has been a leak of chemicals from JNL plc’s
manufacturing site.
The investigation has identified the following:
• Damage to vegetation and pollution of watercourses.
• Increased incidents of mortality to local wildlife.
• Increased incidents of sickness reported in respect of farm animals.
• Reports of skin conditions and sickness affecting members of the public.
The Board has determined this to be a major incident and has asked you for advice relating to the risks and
to measure the impact on JNL plc.
Discuss the individual and collective impact on JNL plc of five significant risks arising from this incident. (20)
Sample Solution
