a. Explain how being able to obtain long term financing affects OMEGA STEEL'S interest rate risk; 

b. Explain how OMEGA STEEL'S inability to find an SPV to help it convert its accounts receivable to cash will affect its credit risk.

2. What cost allocation method or how can the "total cost of risk" be allocated equitably throughout the organization? Background Information for OMEGA STEEL OMEGA STEEL ("OS") is a steel processing operation that specializes in cutting light weight high grade steel. OS has 5 plants (two of which also provide warehousing) in Gogo Town, Ontario and one plant in PoorTown, Ohio USA. Its head office is in GogoTown, in fact all plants in GogoTown are in very close proximity to each other and within a 1 km radius. GogoTown is 30 minutes away from Hamilton a major City with 2 internationally renowned steel mills and main highways and railways throughout Ontario and into the USA. GogoTown has a population of 75,000 people while Hamilton is just over 500,000. GogTown has a volunteer fire department and in the event of a major disaster, Hamilton supplies back up Emergency Services. OS uses their own trucking fleet (100 Tractor Trailers) for the delivery of their own goods but also customers' goods. Sometimes customers will also arrange for contract carriers, independent transportation brokers to transport their goods. The plants in GogoTown collectively employ 300 people - with 35 being administrative, office staff. There are two owners/partners that should have retired 20 years ago but just keep going. There is an executive team of 5 members that very loyal and dedicated to the organization. The plant in PoorTown in Ohio is much smaller and only employs 75 people and primarily is used for warehousing of finished product that comes from Ontario for delivery to US customers by either rail or trucking. Property: All Plants are sprinklered; approx. 25,000 square feet each and two plants (#2 and #3) are used for warehousing finished cut steel awaiting delivery to customers Plant #1 which is also the head office includes all the administrative staff and IT servers. Plant #4 also houses the maintenance operations where Steel Risk's mobile equipment (forklifts) and trucks are repaired and maintained (excluding any major body work). There are various flammables and other materials stored on the premises for lubrication of equipment and general repairs and maintenance. Plant #5 has just finished renovating a small space approx. 3,000 square feet for an "in house" gym for its employees to work out and exercise on the 5 bikes, 5 treadmills and 2 elliptical trainers. There is also a section with free weights. Plant #5 also has a cafeteria that is run by two ladies (job share) that serve light breakfast and lunch orders - they are not employees of OS but are paid an hourly rate