FINAL ONLINE SUMMATIVE ASSESSMENT

PROGRAMME Postgraduate Diploma in Risk Management

MODULE Project Communication and Risk Management
INTAKE January 2022
DATE 23 November 2022
TOTAL MARKS 100
SECTION A [40 Marks]

Read the case study below and answer ALL the questions that follow.
Chip shortage: Has Europe's plan arrived too late?

All his customer wants is a white, standard model, manual transmission VW Golf. But Umesh Samani, a car salesman in
Stoke-on-Trent, can't say when it will arrive. It could be many months, or he fears even a year until delivery. Extraordinary
delays have hit car dealerships up and down the country during the pandemic.

Mr Samani, who is also chairman of the Independent Motor Dealers Association, says manufacturers often tell him
the computer chip shortage is to blame. Europe's car makers did not stockpile enough chips from their suppliers - mostly
based in Asia - at a time of booming global demand. This and other factors have led to shuttered car factories and fewer
new cars entering the market.

"Used car prices have just gone unbelievable - almost a 30% increase on some of the models," says Mr Samani, while
recounting stories of Range Rovers that have added £6,000 to their price tags in just 12 months. There are also people
selling used cars for a higher price than they paid for them.

The chip shortage has exposed just how dependent the world is on semiconductor manufacturers in Asia, with the vast
majority of chips produced by TSMC in Taiwan alone. Among those who want to wrestle back some of that market share is
the European Commission (EC), which in February announced a Chips Act.

The EC will plough 43bn euros (£36bn) of public and private investment into Europe's semiconductor industry. The
Commission hopes to, among other things, increase the region's share of global chip manufacturing - from less than 10% to
20%.

But can Europe really catch-up with the rest of the world? And could this mean the European Union's (EU) car industry - the
second largest in the world - will be shielded from future supply shocks in the long-run?

First of all, it is worth noting that not only is the EU currently well behind on chip production, it must also compete with big
investment elsewhere.

China poured $33bn (£25bn), purely in subsidies, into its own chip manufacturing industry in 2020. South Korea, also plans
to spend almost half a trillion dollars via support packages, tax incentives and other measures over the next decade.

In order for Europe and the US - which also has ambitions to increase its market share in this sector - to truly compete,
huge sums of money are required from both public and private sources, says Anisha Bhatia, an analyst at GlobalData. But
spending it is important, she argues, for geopolitical and business reasons, since Asia currently totally dominates the
semiconductor industry.

"There needs to be a little more balance," she argues.

The trouble is that Europe is behind on multiple fronts, not just the manufacturing of chips. There are also relatively few
firms within the EU that design new chips for use in technology products. That is in stark contrast to the US, which already
has a sizeable semiconductor design industry. US firms lead the way in determining which chips actually get made.

There is little sense in spending huge sums of money on manufacturing capabilities in a region as expensive for that sort of
thing as Europe, without having more control over chip design, explains Alicia Garcia-Herrero, chief economist for Asia-
Pacific at Natixis, an investment bank.

"I'm not sure this is the right strategy, to be frank," she says, referring to the Chips Act, "We should spend more money on
design."

This sentiment is backed up by a report from German think tank, Stiftung Neue Verantwortung (SNV), which published a
policy brief last year on the lack of semiconductor manufacturing in Europe. The report suggests that with few Europe-
designed chips, any new chip factories, or "fabs", in the region would need to seek orders from elsewhere, such as the US.
"Why would [US firms without semiconductor-manufacturing capabilities] choose to manufacture their chips not in South
Korea, Taiwan or the United States but in Europe?" the brief asked.

There are other problems, too. Chip makers have been offering smaller and smaller "node sizes", currently measured in
nanometres (nm), to indicate the ever greater technical achievements of their manufacturing processes.

Also, semiconductors are manufactured on large discs called wafers, which are then split into thousands of smaller pieces -
the individual chips themselves. Over time, the size of these wafers has increased to allow more chips to be made at once.
Cutting-edge chips are generally made on 300mm wafers today, says Koray Köse, an analyst at Gartner.

While Europe does have some production capacity for 300mm wafers, it is very far behind the US and Asia. That leads to
the question - what sort of chips Europe should be aiming to produce and why - as Europe is currently behind on everything
and must choose its battles.

"There is no Apple, or Foxconn, manufacturing location in Spain that would consume gazillions of 300mm wafer products,"
says Mr Köse.

European industry, in general, does not require many of the cutting edge, sub-10nm chips, says Julia Hess at SNV, who
adds, "The demand in Europe is basically focused on industrial and automotive demands and these kind of chips do not
rely on cutting edge fabrication."

In theory, Europe could try to improve its capacity for producing the older, larger chips. But this strategy wouldn't be easy to
do either, because of equipment constraints and the fact that many countries around the world - including those with much
lower costs - are trying to do this right now.

It is also worth noting that current headaches with chip production, although still ongoing, are beginning to clear up.
Analysis from Gartner suggests that there will actually be a global surplus of chips again in around two years' time.

It's not that Europe can't improve its position in the semiconductor industry, but these analysts tend to agree that reacting to
the recent shortage by attempting to boost manufacturing alone would not be a straightforward, or wise, decision.

And as Jan-Peter Kleinhans, also of SNV, says, trying to shore-up production of chips in Europe to shield the car industry
from future supply shocks will likely not be effective, since the industry will still, inevitably, rely on global supply chains.

"A modern car needs hundreds of different chips sourced from countless fabs worldwide," he says. "How does it increase
your resilience against supply disruptions if you source [a percentage] of those chips domestically?

Instead, he suggests, car makers and other industries in Europe should make their supply chains more resilient by making
them more transparent - and stockpiling chips in advance of the next crisis.

Source: Baraniuk, C. (2022) Chip Shortage: Has Europe’s plan arrived too late? [online]. Available from:
https://www.bbc.com/news/business-60554228 [Accessed on: 05 April 2022]

Answer ALL the questions in this section.

QUESTION 1 (20 Marks)

The case study argues different impacts on the car industry and the issues with the chip industry. Using the ISO 31000:
2009 and an appropriate diagram, summarise each step of the risk management process that a chip manufacturing
company will follow to identify all the risks facing their organisation in Europe.

QUESTION 2 (20 Marks)

Assuming that most of the European chip manufacturing organisations’ objective is to remain sustainable going forward,
compile a risk register showing at least five (5) risks clearly showing the Risk ID, Risk description identifying the risk, cause
and impact of the risks for these organisations.

SECTION B [60 Marks]

Answer ANY THREE (3) questions in this section.

QUESTION 3

“It has taken five years, but work is finally underway to repair the Peter Brown bridge. The R3 million-to-R5 million project to
repair the bridge and level the N3 on Townhill started on Thursday.
South African National Roads Agency (Sanral) Eastern Region project manager Thabiso Dladla said the bridge was
temporarily closed from 9 am on Thursday morning for jacking to take place.

Work has finally started to repair the Peter Brown bridge over the N3 after one of the bridge’s supporting pillars was
seriously damaged by a truck in late 2016.”

Source: Sinkins, E. (2021) Work finally starts on damaged Peter Brown bridge [online]. Available at:
https://www.citizen.co.za/witness/news/kzn/work-finally-starts-on-damaged-peter-brown-bridge-20210507/ [Accessed on: 07
July 2022].

3.1 Identify atleast five (5) risks that the contractor will face on this project. Each risk needs to include the Risk (10
ID, Risk description identifying the risk and cause impact. Your response must be tabulated. marks)

3.2 Using an appropriate diagram and the five (5) risks listed above as examples, discuss how the risks profile (10
(probability of risk occurring and cost to fix the risk) of this project will change across the lifecycle of this marks)
project? Your response must be tabulated.

QUESTION 4

“It has taken five years, but work is finally underway to repair the Peter Brown bridge. The R3 million-to-R5 million project to
repair the bridge and level the N3 on Townhill started on Thursday.
South African National Roads Agency (Sanral) Eastern Region project manager Thabiso Dladla said the bridge was
temporarily closed from 9 am on Thursday morning for jacking to take place.

Work has finally started to repair the Peter Brown bridge over the N3 after one of the bridge’s supporting pillars was
seriously damaged by a truck in late 2016.”

Source: Sinkins, E. (2021) Work finally starts on damaged Peter Brown bridge [online]. Available at:
https://www.citizen.co.za/witness/news/kzn/work-finally-starts-on-damaged-peter-brown-bridge-20210507/ [Accessed on: 07
July 2022].

4.1 Using an appropriate diagram, propose a risk break down structure for the project showing at least five (5 marks)
(5) risk categories.
4.2 Discuss at least (3) three of these risk categories identified above in relation to the case study above. (15 marks)

QUESTION 5 [20 Marks]

Summarise the building blocks for an effective operational risk framework.

QUESTION 6

TymeBank is new bank. They are a digital bank that’s all about keeping things easy, clear and affordable. Their mission is
to help you understand how money really works by giving you a clear picture of every Rand and cent you have. This helps
you make decisions about your money today that has the power to grow into a secure financial future.

6.1 There are three operational risk methodologies that can be applied under the Basel II framework. (10 marks)
Summarise the three operational methodologies proposed under the Basel II.
6.2 Summarise how TymeBank should set up a Scenario Analysis process using the 2011 Basel II AMA (10 marks)
guidelines.

END OF PAPER