EXAMINATION
Big Assignment (Official)
Program: VNU - IB Lecturer’s Signature & full name
Le Quy Duong
Course Code: INS3028
Course Title: Risk Management and Insurance
Level: Undergraduate
Date: 15/04/24
Time allowed: No specific time given. Your team is to turn
the case report no later than the due date given by the Department’s Signature & full
Academic Affairs Department name
Due Date:
Date: ………………………………
Instructions to students:
1. Closed/Opened book examination: Opened book
2. Submit your assignment as a PDF file
3. Late submission will result in a 30% deduction of your total point
4. The file name is as follows: Student name_Student number_Course code
(Example: Nguyễn Văn A_19071122_INE1050.01)
Group name_Course code
(Example: GroupA_19071122_INE1050.01)
This is an open and team-based exam.
This exam paper contains 5 pages, including the cover page.
Part A: Risk Management
Question 1: Financial analysis to assess Financial Risk (3.5p)
- Choose a set the targeted and benchmarked companies from the list below, then
collect their financial statements between 2018 and 2023:
No. The targeted company The benchmarked company
1 DHG Pharmaceutical Joint Stock Cuu Long Pharmaceutical Joint Stock
Company Company
2 The Southern Rubber Industry Joint Sao Vang Rubber Joint Stock
Stock Company Company
3 Vicem Ha Tien Cement Joint Stock Bim Son Cement Joint Stock
Company Company
- Calculate indicators measuring the liquidity risk of the targeted company, then assess
its liquidity risk during 2019-2023. Compare results to the benchmarked company.
- Calculate indicators measuring the solvency risk of the targeted company, then assess
its solvency risk during 2019-2023. Compare results to the benchmarked company
- Calculate indicators measuring the profitability of the targeted company, then assess
its profitability during 2019-2023. Compare results to the benchmarked company
Student must submit the calculation excel file in a nice, presentable format via Teams.
Financial data must be clear, transparent, and visualize
Ex 2: Investment risk (1.5 p)
The candidate chooses one of the following questions (Question 2.1 or Question 2.2)
Question 2.1. Debate: Whether cryptocurrencies may serve as a safe-haven asset
against stock risk?
a) While stock markets provide investors with significant returns over the long run, rare
but unanticipated disasters cause severe short-term losses. One common practice used
to manage risk is portfolio diversification. The literature employs the magnitude and
sign of the cross-asset correlation to classify assets into three levels: (1) diversifiers, (2)
hedges, and (3) safe havens. First, review the literature to define each asset. Next,
propose four safe-haven assets against stock risk and explain why their correlation to
stock markets is negative. (0.5p)
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b) In addition to traditional safe-haven assets, recent studies endorse cryptocurrencies
such as Bitcoin as a safe-haven asset against stock risk. However, some researchers
disagree. Review the literature and consider either Affirmative or Negative position on
the topic. First, summarise the literature on this topic, including both Affirmative and
Negative positions. Next, address your point on this topic and provide reasons to support
your point (using realised data is encouraged). (1p)
Question 2.2. Mini Case
Consider the following information about the returns of three stocks:
State Probability Stock A Stock B Stock C
Boom 0.3 25% 10% -2.5%
Good 0.4 15% 5% 5%
Level 0.2 10% 2% 10%
Slump 0.1 -5% -10% 15%
Next, we build up the following two portfolios:
Portfolio 1: 50% on Stock A and 50% on Stock B
Portfolio 2: 40% on Stock A and 60% on Stock C
a) What are the expected return and standard deviation of the two portfolios? (1p)
b) Use (a) results to explain the relationship between the risk deduction effect of
diversification and the correlation, i.e., explain how/why the correlation affects the risk
deduction effect of diversification? (0.5p)
Question 3. Discounted Cash Flows + CAPM (1.5p)
Leon Joint Stock company is considering to invest in a new equipment. If Leon
continues to use its current machine, the net cash inflow is $100,000 per year. The net
cash flow is expected to increase at 4% per year. The lifespan of the current machine is
about 20 years.
If Leon purchases a new equipment, the net cash inflow is $120,000 per year. The cash
inflow will increase by 3% per year. At the moment, if Leon sells its current machine,
then purchases the new equipment, the net cash outflow would be $10,000. The current
weighted average cost of capital (WACC) is 4.5%. The cash inflows will occur from
year 1. The cash outflow will arise in year 0.
a) Use 4.5% as the discount rate to calculate the NPV of the two projects: the current
machine and the new equipment. Should Leon purchase the new equipment? (0.5 p)
b) What are the consequences of using WACC as a discount rate for all projects without
considering their risk levels? Should Leon use his current WACC (4.5%) to calculate
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the NPV of his new equipment? Why? What are the conditions for Leon to use its current
WACC as a discount rate for the new equipment? (0.5 p)
c) Re-answer (a) if using a 5.5% discount rate for the new equipment. (0.5 p)
Question 4. Operational Risk + Risk Matrix (1.5p)
Assume the Payroll process at a company is as follows:
- Staff is required to check attendance at 9am and 6pm or when they get out of
office (before 12am) by tapping their card
- Data of staff’s timesheet at the office is extracted to excel file to review by
payroll staff on 25th of each month
- Payroll staff input timesheet and salary base of all employees into excel file to
calculate total salary for each staff for that month
- After that, Head of HR will review and check for calculation in the excel files
sent from payroll staff
- After review and revision if any, list of total salary will be signed by head of
HR and sent to the bank to make payment
a/ Identify any operational risks in the process and suggest related control accordingly
(0.5p)
b/ Choose 1 of the key risks identified above, assess them applying Risk Matrix (you
can use any assumption given by yourself). Use the KRI and threshold you set, apply
Risk Profile to explain when the risk is considered Red/Amber/Green. Present your
Risk Matrix, Risk Profile and analysis in a nice format (1p)
Question 5. Strategic risk (1p)
Energizer Holdings, Inc., headquartered in St. Louis, Missouri, USA, is one of the
world’s largest manufacturers of primary batteries and portable lighting products and is
anchored by its globally recognized brands Energizer, EVEREADY, Rayovac, and
VARTA.
In 2024, Energizer plans to expand its visibility in the Vietnamese market and boost the
sale of EVEREADY, one of its business lines.
Use an appropriate framework to analyze and identify Strategic Risks related to this plan
to consult for the management.
Part B - Insurance (1p)
Company X is engaged in the energy sector, including oil and gas. Its main operations
include gas exploration and production. At the moment, X has five oil platforms in the
Southeast Ocean and an oil refinery in the coastal land. The total number of employees
is about 3000 with 500 employees working in these oil platforms. To deliver oil products
to customers, X also owns ten vessels. In the last year, X purchased the following
insurance products:
- Drilling equipment and rigs insurance
- Offsore construction & erection insurance
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- Fire insurance for oil refinery
- Fire insurance for buildings
- Hull insurance
- Cargo Insurance
- Public liability insurance
- Health care insurance for all employees
- Occupational accident insurance for employees working in oil platforms
- Endowment life insurance for all employees
- Life insurance retirement plan for managers
- Auto insurance
However, the economic recession has significantly reduced operating profits. Due to
financial constraints, the board of directors must consider purchasing only necessary
insurance products in the next year. Discuss which insurance products are necessary for
X and which insurance products are not?
