FORMATIVE ASSESSMENT $2[100$ MARKS$]$

Read the following insert and answer the following questions.

Allan Gray is Africa$$s largest privately$-$owned and independent investment management company. It is focused on

generating long$-$term wealth for its clients who include individuals, retirement funds, insurers, trusts, companies, and

foundations. Who invest through its focused range of unit trusts, retirement products and life insurance investment pools or

in segregated portfolios. Allan Gray Limited is headquartered in Cape Town, South Africa. The company also has a

presence in other locations, and it manages investments for clients both locally and internationally. It is led by a team of

experienced investment professionals and is known for its research$-$driven approach to investment decision$-$making. Like

any financial institution, Allan Gray Limited operates within the regulatory framework of the financial industry. It adheres to

applicable laws and regulations governing the investment management sector. The Executive Board has made it evident

that the primary objective of the organisation is to manage risk exposures across its entire portfolio so that, at any given

time, it incurs just enough of the right kinds of risk $-$no more, no less$$to effectively pursue and achieve their strategic

goals. They are of the firm belief that risk assessment is important and presents the way in which the organisation can get a

handle on how significant each risk is to the achievement of their overall goals.

QUESTION $1(100$ MARKS$)$

You are part of a team from Allan Gray Limited that has been given the responsibility to oversee the process of updating the

Enterprise Risk Management Program for the organisation. The expectations are that you will conduct a risk assessment

that is practical, sustainable, and easy to understand and that is correctly sized to the enterprise$$s size, complexity, and

geographic reach. Your outcomes should be compiled into a report in which the following questions are explored and

investigated. $($Your findings should be relevant to Allan Gray Limited, and relevant secondary research should be

incorporated$)$

Question Scope Grading

$1\mathrm{.}1$ Considering the task highlighted by the Executive Board, justify the significance of

updating the enterprise risk management program for the organisation.

$20$

$1\mathrm{.}2$ Conduct an extensive risk identification process in which you provide a

comprehensive list of risks $($positive and negative$)$ organised by risk category and

sub$-$category in the form of a risk register. This should enable the organisation to

understand the risks making up its profile and enable the risk prioritisation process to

begin.

$20$

$1\mathrm{.}3$ Develop a risk assessment criterion that will be utilised for the risks identified in $(1\mathrm{.}2)$

above. This should present a form of measurement that will be used when comparing

and aggregating risks across the organisation. Your response should define scales for

rating the risks and these should comprise rating levels and definitions that foster

consistent and application by different stakeholders. Scales should allow meaningful

and differentiation for ranking and prioritisation purposes.

$20$

$1\mathrm{.}4$ Considering the various techniques available for managing risk among investment

organisations, examine the relevant techniques that can be utilised by Allan Gray for

managing the risks identified in $1\mathrm{.}2$ above.

$20$

$1\mathrm{.}5$ Construct a heat map $($risk map$)$ so that you can be able to prioritise the risks by

ranking them from the highest to the lowest in terms of risk level. This should be

conducted when each of the risks have been accurately assessed using descriptive

and quantitative scales developed in the previous section of the report. Make use of

relevant diagrams and illustrations.