Question 5 Assume you have just being hired as an Actuarial analyst by Ashberry Limited, a midsized company that spe hat specializes in creating exotic sauces from imported fruits and vegetables. The firm's CEO, Ash Ayi, recently from an industry corporate executive conference in South Africa, and one of the sessions he attend was on the pressing n g need for smaller companies to institute enterprise risk management programs. Since no one at Ashberry Limited is familiar with the bas basics of derivative and enterprise risk management, Ash Ayi has asked you to prepare a brief report that the firm's executives could use to gain at least a least a cursory understanding of the topics. To begin, you gathered some outside materials on derivatives and enterprise risk management and use these materials to draft a list of pertinent questions that need to be answered. In fact, one possible approach to the paper is to use a question-and-answer format. Now that the questions have been drafted, you have to develop the answers. a. Why might shareholders be indifferent whether or not the firm reduces the volatility of its cash flow? (1 mark) b. State four (4) reasons risk management might increase the value of a firm (2 marks) c. Risk that firms face can be categorized in many ways. Define the following types of risk: i. speculative risk (1 mark) ii. Pure risk (1 mark) iii. Demand risk (1 mark) iv. Input risk (1 mark) V. Property risk (1 mark) vi. Environmental risks (1 mark) vii. Liability risks (1 mark) viii. Insurable risks (1 mark) d. Describe the following concepts and techniques that can be used to reduce financial risks: 1. Derivative (1 mark) 2. Futures markets (1 mark) 3. Hedging (1 mark) 4. Swaps (1 mark) END OF PAPER