Question 1 [10 marks]
Identify and evaluate the operational risks for SPEND Ltd and plot the risks on an Operational Risk Profile. Use the Risk Evaluation Matrix as provided.
Solution 1
The table 1.1 below represent the operational risk profiling; by identifying them and evaluating them.
The risks where R = Risk

Identified operational risks Other types of operational risks R Evaluation and measurement Description (quotes from the case study)
Credit Risks Process Risk R1 < 10M and Likely Trade receivables consist of an average trading exposure of R4.3m per store at year-end. Process Risk R2 < 25M and Unlikely Overdue receivables balances, representing 4.9 % of the total trade receivables and loans balances, amounted to R28.5m. Process …show more content…
Systems Risk R9 >100M and Unlikely The sprinkler system was not able to contain the fire as it started outside the warehouse in abandoned packaging material. Process Risk R10 >100M and Highly unlikely The Fire Brigade was only notified after the fire spread into the warehouse and by then it was out of control. Business risk R11 < 10M and Highly Unlikely Theft from trucks includes hijackings and theft by staff. Business risk R12 < 10M and Unlikely The cost for the year included damage to 5 trucks during hijackings of R6.5m, of which R5m was recovered from the current insurance policies. People Risk R13 < 10M and Unlikely Drivers were involved in 12 fatal accidents with liability claims totaling R2m. External Environmental Risk R14 < 25M and Certainly The insurer gave notice of the intention to increase premiums as the drivers were found to be negligent in the majority of the cases.
Market risks External Environmental …show more content…
The risk mitigation strategy comprises of establishing or creating the context or setting of the risk. It allows SPEND Ltd to identify, then evaluate it and treat the risk, and then tracking and reporting the risk plans (Exp, 2015). I would have asked for control owners as these are the employees that are responsible for managing the mitigation of the Port Elizabeth distribution centre risk through the operation of internal controls (Blunden& Thirlwell,