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Assessment name Risk Management Assessment
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Checklist of attachments:
? Task 1 – Written activities
? Task 2 – Project
? Task 3 – Case study 1
? Task 4 – Report
? Task 5 – Case Study 2
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RISK MANAGEMENT ASSESSMENT
CREDIT TRANSFER
You may be able to claim credit transfer for a unit/s of competency that you have previously completed with AAMC Training or another RTO. If you have been awarded a record of result or statement of attainment for any of the units detailed below then please go to the Credit Transfer tab in your Learning Centre and follow the prompts.
This assessment relates to the following units of competency:
• BSBRSK401 Identify risk and apply risk management processes
• FNSRSK502 Assess risk
Please refer to AAMC Training’s full Recognition Policy for further details.
IMPORTANT INSTRUCTIONS
• Your answers to each of the tasks are to be typed into this document or supplied electronically and uploaded.
• No assessment word count has been specified although you are expected to provide good quality answers to each of the questions.
• Although some general discussion between students covering the assessment is allowed your responses to each of the questions must be an individual effort.
• PLEASE NOTE: AAMC Training only wants to see your own work. Please do not upload parts of the learning guide or instructions on how to complete. When this extra information is uploaded it presents unnecessary work for the assessors and in turn delays our assessment responses.
Task 1 – Written activities
1. Name the two categories of risk.
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2
2. Pure risk or speculative risk—which one can usually be mitigated by transferring the risk to another party i.e. insurance company?
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3. What are the four steps in the risk management process?
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2.
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4. In assessing credit risk from a single borrower, a lender must consider what three issues?
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2.
3.
5. The seven Cs analysis frame work is the most common of all expert systems. It involves examining the borrower using the seven key principles in lending; list them.
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6. What are the more common types of security?
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7. What does the PARSER analysis method consider?
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Task 2 – Project
This task requires you to identify and explain two risks under each category in the table below. These risks must directly impact your business as a finance broker and those stakeholders involved both internally and externally to your business. Please note: explaining a risk means that you must explain your answer. For example; just stating ‘’workplace injury’’ does not explain the actual risk you have identified. We would expect to see for example: power cords lying across a workspace that people could trip over, as the identified risk.
a. Using the table below, make a list (minimum of two in each category) of what you perceive to be risks for each of the key risk areas for Finance/Mortgage Industry representatives AND list who would be the internal and external stakeholders in the risk identification process.
Financial &
Economic Stakeholder/s Manage Safety
& Health Stakeholder/s
Internal External Internal External

Regulatory/Legal Stakeholder/s Professionalism and Reputation Stakeholder/s
Internal External Internal External

Marketing documentation Stakeholder/s
Internal External

b. Once completed; provide a brief commentary on your understanding of the Australian Standard AS/NZS ISO 31000:2009 Risk management — Principles and guidelines, i.e. definition and how it affects you as a Finance/Mortgage Industry representative.
Task 3 – Case study 1
You have an existing finance broking business which has grown over time. The business has several key staff members including:
• 1 Responsible manager
• 1 Loan processor
• 3 Finance brokers
• 1 Personal assistant/office manager
• 1 Receptionist
You have been approached by a new client who is expanding his business operations into a franchise opportunity and while he has not had his financials prepared by his accountant for the last two years, he wants to use the family home as security and obtain a loan. The client also informs you that he has a fair amount of cash available to assist in meeting the repayments if required.
You are just about to meet him for the first time. Use the risk register below to identify and describe three potential risks to your business, and three potential risks to the client arising from this proposal. Remember, when identifying risk, you need to consider both what can go wrong and how it can go wrong.
Risk L C Risk rating
(LxC) Comments
Your organisation’s risks
Client risks

Task 4 – Report
Using the activity in Task 3 – Case Study 1, complete the following template. Select one of the risks from the risk register and develop an action plan for dealing with this risk. Consider all of the members in your business and how they may play a role in the various areas listed in the plan. Remember a preventative action is one that should stop the risk from occurring and corrective actions need to be considered after the risk has occurred to stop it from happening again. Monitoring and review actions are important to ensure that the business is regularly checking their processes to prevent reoccurrences of the risk.
Risk Item no Describe risk item
Responsible area
Initial assessment Likelihood Consequence Rating

PREVENTATIVE ACTIONS
Training
Operational
Managerial
Resource requirements
Responsibilities
CORRECTIVE ACTIONS
Training
Operational
Managerial
Resource requirements
Responsibilities
MONITORING & REVIEW ACTIONS
Task 5 – Case study 2
In this Case Study you are the credit assessor for ABank. In your role as the credit assessor you are required to determine the risks associated with the scenario below. The following information is from a loan application submitted to ABank by an authorised credit representative:
Applicant Single male applicant (29 years of age).
Loan Details and Purpose Applicant wants to buy an investment property for $450,000 and borrow $405,000 plus LMI. A loan term of 15 years is requested with an Interest Only product.
The Loan to Value Ratio (LVR is 90.00%);
Credit History Applicant has 3 Consumer Payments Defaults listed in his Credit Report
Residence Is currently living at home with parents and is paying no rent. He does not have his own home.
Employment/
Income Applicant is a sub-contractor working in the mining industry for 2 years. The applicant's income is $100,000 per annum.
The likely rental return for the property is in the vicinity of $420.00 per week.
Credit Card Limit of $8,000 with a current balance of $5,000.
Other Loan Debts $30,000 car loan with repayments of $609.00 per month.
Assets Savings with a bank $50,000
Small assets with a total value of $60,000
Household Living Expenses $1,200.00 per month
Costs Stamp duty and purchase costs to be paid from savings.
Recommendation The Loan Application is recommended for pre-approval by the authorised credit representative.
1. Complete a Risk Assessment using the Risk Register template below, noting all points listed:
• List and highlight 3 Risks you consider to be important and which you have identified from the above Loan Application scenario and list the risks you have identified in the relevant column.
• Rate each of the 3 Risks according to their Likelihood (L) and Consequence (C) of a negative event occurring and insert the ratings in the relevant columns.
• Calculate the Risk Rating (LxC) value for each of the 3 Risks and insert the Risk Rating values in the relevant column.
• Refer to the Ranking Key table below and record the required action
• Add your own comments on how the risk will be treated.
RISK REGISTER
CLIENT RISK L C Risk Rating (LxC) Ranking
Key
Action Comments

RISK ANALYSIS MATRIX
Likelihood Consequence
Insignificant
1 Minor
2 Moderate
3 Major
4
5 - Almost Certain 5 10 15 20
4 - Likely 4 8 12 16
3 - Possible 3 6 9 12
2 - Unlikely 2 4 6 8
1 - Rare 1 2 3 4
RANKING KEY
Ranking Risk Required Action
20-25 Extreme risk Licensee/stakeholder
Action required
13-19 High risk Senior management
Attention required
6-12 Moderate risk Management responsibility must be specified
1-5 Low risk Manage by routine procedures
2. In ABank if the loan presents some high risks (risk rating 15-20), it can often fall outside of your approval limits or delegated lending authority (DLA). You have a senior credit assessor that you refer loans for approval that present higher risks. Based on your risk ratings determine if the Loan Application is outside your Delegated Lending Authority (DLA). Briefly explain why you may need to escalate the loan application to a higher DLA holder, for approval sign-off.

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