You have been hired to advise the executive team of a construction and engineering firm on risk matters. On the first week of work, you had to answer a broad range of questions on risk management. To address those, you had to remember some of the practical lessons from your studies at SUSS. 

Mrs. Loo, the Chief Operations Officer, has asked you to prioritise five (5) different risks:

(I) A possible billing dispute with a local developer over a serious $ amount

(ii) An unlikely accident on one of the sites endangering the lives of the neighbourhood 

(iii) A routine rise in foreign workers' wages, which will affect the profit margin by 0.03%

(iv) The  final  adoption  of  a  new  law  forcing  construction  firms  to  contribute  5%  of their profit to an environmental preservation fund

(v) A projected 50% decline in long-term  demand for office space, which represents 90%  of the firm's revenues

(a) Analyse the different risks by plotting them on a risk matrix. (10 marks)

Mr. Rao, the Chief Financial Officer, is thinking to hedge the firm's interest rate risk on the market and would like to understand the workings of forward and futures markets. 

(b) Compare briefly the pros and cons of forwards and futures in risk management terms. (5 marks)

Mrs. Patel, the Chief Communications Officer, has to provide an assessment of the Singapore construction sector risk profile to potential investors coming from Sydney, Australia.

(c) Distinguish at least one (1) strength, one (1) weakness, one (1) opportunity and one (1) threat for Singapore construction industry players by using the PESTEL framework.

Answer rating: 100% (QA)

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