CIMA – P3 Risk Management

Updates for the material for 2015 sittings

Amendments required to Study Text (ISBN 978-1-78415-128-7)
Study Study Amendment
Text Notes
Page Page
Prelims Prelims Prelims Distribution table missing – please see Appendix A
16 – Chapter 1 Please change "£200m" to read "£200bn"
26 11 Chapter 1 TYU 5 Option D should read Growth by acquisition
50 31 Chapter 2 Under heading 3
Sentence begins ‘Chapter 2 examined’ but should read:
‘Chapter 1 examined’
365 277 Chapter 6 TYU15 The correct answer is D only (not A, C and D as it currently states)
474 361 Chapter 9 TYU7 Option E should read:
Relations with stakeholders
695 529 Chapter 12 The ‘without swap’ part of the example:
The second line should read:
Sell 200m pesos @ 40
695 530 Chapter 12 The ‘with swap’ part of the example:
The figures in the last column do not line up.
The 2.5 should be lined up with the line ‘sell 100m pesos @ 40
The (0.5) should be lined up with the line ‘Interest on sterling…’
712 546 Chapter 12 TYU11 Part (c) should be deleted and replaced with:
Generally, the treasury department provides a service to the entity, by
managing cash flows and dealing with banks and other sources of
finance. The treasury aims to reduce the costs borne by the entity and
the intention is that these savings will more than offset the cost of
running the department.
The treasury can only become a profit centre if it develops a revenue
stream. Normally that involves speculating in the financial markets in
order to generate gains. There are two competing arguments relating to
speculation:
One is that the treasury department has considerable expertise.
Speculation is a zero sum game that involves being able to out-think the
market and buy or sell mis-priced financial instruments. The treasury
department could use its natural advantage over other market
participants, who have a lesser understanding and inferior data to trade
at a profit.
The counter-argument is that active trading in the markets involves
leaving positions exposed to loss and so there is a risk. Losses can arise
when trades are unsuccessful. The entity would be bidding
against counter-parties who may be even more skilled and better
informed.
It is generally difficult to make a consistent profit from speculation.
Markets are generally efficient and most participants – even trained
corporate treasurers – should accept that the market prices are correct.
Active trading will increase costs and also increase risks for the entity.
736 569 Chapter 13 Specifically mentions "It is stated in the syllabus that numerical
questions will not be set involving FRAs, IRGs, interest rate futures or
options. Some numerical examples are given in this chapter, however,
to clarify the explanations."
This is incorrect. All hedging techniques may be tested numerically.
784 610 Chapter 14 Under the heading Adjusted Present Value (APV):
The first sentence should be changed to read:
A significant change in capital structure will mean that the existing cost
of capital is inappropriate to use as a discount rate for project appraisal.

Updated: 27 September 2015

 CIMA – P3 Risk Management

Updates for the material for 2015 sittings

793 618 Chapter 14 Under the heading

‘If the business risk of the new project…’
The last sentence should be amended to read:
This often involves the technique of ‘degearing’ and ‘regearing’ beta
factors. This is covered in CIMA F3
793 618 Chapter 14 Under the heading ‘If the capital structure is expected …’
The last sentence should be amended to read:
APV is covered in detail in CIMA F3

APPENDIX A

Updated: 27 September 2015

 CIMA – P3 Risk Management

Updates for the material for 2015 sittings

Amendments required to Exam Practice Kit (ISBN 978-1-78415-146-1)
Exam Amendment
Practice
Kit
Page
Prelims Prelims Distribution table missing – please see Appendix A above
4 Question 13 Where it says "IOS" it should say "OKJ"
5 Question 19 Please change "200,000" to read "$200,000"
11 Question 41 Please change "topical" to read "tropical"
16 Question 58 Please redo slightly to give the following:

Description Type of system

These systems allow senior managers to make Executive information
strategic level decisions
N/A Management
information
N/A Expert
These systems handle large volumes of Transaction processing
operational-level data, and support structured
decision making.
These systems allow any user with basic Decision support
training to make semi-structured or
unstructured decisions.
70 Answer 107 In the answer can we change the word "increase" to "decrease"
Could we also add the following to the answer to make it easier to understand:
"False billing scams are where companies are sent fraudulent invoices with the
hope that some will pay them. Segregation of duties (A) will not prevent such
invoices being received. Similarly, neither regular reconciliations between ledgers
(B), nor maintaining a trial balance (D) will not identify that the invoices are false.
The only way of doing this is to ensure all invoices are authorised as valid before
payment."
75 Answer 142 The answer has a signage error .i.e. USD ($) are labelled GBP (£).
The answer currently reads:
142 A
First calculate the number of contracts using the STRIKE price so
GBP 5m/1.6 = 3,125,000 then at a contract size of GBP 25,000.
SGB will take an option on 3,125,000/25000 = 125 contracts.
The premium is USD 1,000 per contract so USD 125,000 as a premium must
be paid to the exchange when the contract is taken out so this transaction
will be done at the current spot of 1.5500.
125,000/1.5500 = GBP 80,645.
It should read:
142 A
First calculate the number of contracts using the STRIKE price so
USD 5m/1.6 = GBP 3,125,000 then at a contract size of GBP 25,000.
SGB will take an option on GBP 3,125,000/25,000 = 125 contracts.
The premium is USD 1,000 per contract so USD 125,000 as a premium must
be paid to the exchange when the contract is taken out so this transaction
will be done at the current spot of 1.5500.
USD 125,000/1.5500 = GBP 80,645.
78 Answer 156 Please change the answer to read "A, C, D, E"
80 Answer 167 Both references to "252,362" in the answer should read "252,632" instead
80 Answer 170 It should read "D" not "C"
2 2
82 Answer 181 Please change "70/1.17 " to read "70/1.19 "

Amendments required to Revision Cards (ISBN 978-1-78415-137-9)

None reported

Updated: 27 September 2015