Assessment cover sheet

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Task 1 – Written activities

Pure risk can usually be mitigated by transferring the risk to another party, such as an insurance company through the use of insurance policies.

3. What are the four steps in the risk management process?

4. In assessing credit risk from a single borrower, a lender must consider what three issues?

6. What are the more common types of security?

The more common types of security are: 1) Mortgage of land; 2) Guarantees; 3). Liens; 4) General and Specific Securities Agreements (formerly fixed and floating charge); 5) Mortgage of goods or chattels; 6) Credit sale (hire purchase) and lease contracts; and 6) Bill of Sale.

1. 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.

According to The Australian Standard AS/NZS ISO 31000:2009 Risk management – Principles and guidelines, for risk management to be effective, an organisation should at all levels comply with the following principles:

1. Risk management creates and protects value;

6. Risk management is based on the best available information;

7. Risk management is tailored;

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 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 bit of cash available to assist in meeting the repayments if required.

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.

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.

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.