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CIMA CIMAPRA19-P03-1 Exam Questions
P3 Risk Management (Online) (Page 7 )

Updated On: 15-Feb-2026
Page 7 of 56
PDF with 275 Questions

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?

  1. M's shareholders would only be exposed to the systematic risk from the investment in the new venture.
  2. M's credit rating is likely to fall as a result of this new venture.
  3. The directors would only be exposed to the systematic risk from the investment in the new venture.
  4. M's diversification will mean less risk for the shareholders.

Answer(s): A,B



You are a consultant to an international charity which provides aid to people displaced by war, civil unrest, and natural disaster. The charity has requested you to carry out a post implementation review on their new procurement and logistics system.
Which TWO of the following should you be most concerned about when conducting this review?

  1. An assessment of how the aid is used once it has arrived at its destination.
  2. The identification of the reason for any cost overruns so as to be able to assign responsibility to particular individuals so that the management can deal with them as they see fit.
  3. An assessment of the extent to which the new system has led to more efficient delivery of aid to those in need.
  4. To create a record of good and bad experiences in relation to the implementation of the project so that the charity is able to learn from them should they decide to implement a similar project in the future.

Answer(s): C,D



Which of the following represents the greatest risk associated with introducing a system of post- completion audit for investment projects?

  1. Decision makers may be deterred from taking responsible risks.
  2. The entity will realise that its approach to project appraisal is flawed.
  3. The audit itself will waste time.
  4. The entity may withdraw from a project without good cause.

Answer(s): A



A project has been evaluated on the basis that it will cost $22 million and will have a net present value of $4.3 million The project has commenced and $5 million of the $22 million has been invested. A problem has been discovered that will cost an additional $4.5 million to rectify. The $4.5 million will be payable immediately.
What is the NPV of continuing with this project?

  1. -$5million
  2. -$0.2million
  3. $1million
  4. $4.8million

Answer(s): D



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?

  1. There is no acceptable level of risk for a major nuclear accident and so the probability has little information value in itself.
  2. The probability is so low as to be ignored.
  3. The directors will be able to argue that they were not negligent in the event of a major disaster within the 20 year period.
  4. The calculation of a precise probability demonstrates that the engineers who conducted the inspection are experts in their field.

Answer(s): A






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