Rex Bhd. is currently considering a project of building a shopping complex in the countryside to provide convenient shopping avenue to the surrounding residents. The local government has been putting continuous effort in developing the area into tourist spot due to the beautiful scenery. As the company is aware of the potential risks of such a project, a group of consultants had been appointed to analyse the potential risks involved in the project.

After detailed analysis, the consultants replied with the following comments:

The first risk is the risk of low number of local shoppers which will result in low demand. However, considering the result of the survey among the local respondents showing positive reaction towards the building of shopping complex, the risk consultants commented that this risk is less likeiy to happen. Besides, considering the government's effort, tourists might be visiting the countryside and therefore the impact of such risk will not be big.

The second risk is the risk of low teoant rate from local suppliers. Due to the lifestyle of the residents in consuming imported goods, the risk coosultants commented that this is highly likeiy to happen. However, as the company has good connections with international suppliers, the impact of such risk will not be big as the company is able to get those suppliers to fill up the shops in the complex.

The third risk is the risk of building being destroyed by flood. Although the complex will be built near the countryside, the government's effort in developing the countryside area will justify appropriate safety measure. Therefore, the risk consultants viewed this as less likely. However, if it does happen, the complex will be destroyed and therefore the impact will be huge.

The fourth risk is the risk of intense rivalry. Considering the residents welcome the developers, more and more shopping complexes might be built in near future. Therefore, the risk consultants considered this as very likely to happen. When the shoppers have choices, the demand will be spread among the complexes which will in turn result in very high impact on the company's profitability.

(a)Based on the findings from the risk consultants, analyse the risks of the project and suggest appropriate ways that Rex Bhd. can undertake to deal with the risks.(8 marks)

{b)

Analyse the importance of Rex Bhd. in managing the risks.(8marb)

(c)In your opinion, what is the reason to involve Executive Directors (EDs) in a Risk Committee?