Whitecotton Mills Inc. manufactures premium cotton fabric. The company has a high growth rate of 15% due to increased global demand. The company plans to purchase a new warehouse that is centrally located for its business. However, the warehouse is prone to fire accidents. It is estimated that if there is a fire accident, it could result in a loss of at least 50% of the goods before the fire is extinguished. On seeking advice, the management is told that by installing a fire extinguisher and a security alarm, the loss could be reduced to 35%. By employing a fire and security team round the clock the loss can further be brought down to 25%. The management decides to incorporate all the suggestions. However, they are not happy because they do not want to have a loss of more than 10% of the goods in case of an unfortunate event. Based on this, answer the following questions. A. For questions 1 through 3, find out the percentage of target residual risk, inherent risk and actual residual risk. B. For questions 4 through 10, identify the risk response Whitecotton Mills Inc. should take once the risk is identified and assessed.

Question-1: Calculate Actual residual risk

Select one:

a. 50%

b. 35%

c. 25%

d. 10%

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Question 2

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Calculate Inherent risk

Select one:

a. 50%

b. 35%

c. 25%

d. 10%

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Question 3

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Calculate Target residual risk

Select one:

a. 50%

b. 35%

c. 25%

d. 10%

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Question 4

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Implement JIT inventory to reduce the risk of loss. Entity Objective view-Risk Profile?

Select one:

a. Strengthening balance sheet

b. Enhancing operation excellence

c. Growing market share

d. Maintaining higher cash flow from operations

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Question 5

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Insurance policy that would cover up to 92% of the total loss. Entity Objective view-Risk Profile?

Select one:

a. Strengthening balance sheet

b. Enhancing operation excellence

c. Growing market share

d. Maintaining higher cash flow from operations

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Question 6

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Insurance policy that would cover up to 92% of the total loss. Risk mitigated?

Select one:

a. Financial Risk

b. Operational Risk

c. Compliance Risk

d. Customer Risk

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Question 7

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Periodic inspection of electrical wiring and equipment Entity Objective view-Risk Profile?

Select one:

a. Strengthening balance sheet

b. Enhancing operation excellence

c. Growing market share

d. Maintaining higher cash flow from operations

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Question 8

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Periodic inspection of electrical wiring and equipment Risk Mitigated?

Select one:

a. Financial Risk

b. Operational Risk

c. Compliance Risk

d. Customer Risk

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Question 9

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Purchase more warehouses in different locations

Select one:

a. Strengthening balance sheet

b. Enhancing operation excellence

c. Growing market share

d. Maintaining higher cash flow from operations

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Question 10

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Purchase more warehouses in different locations Type of Risk response?

Select one:

a. Avoid

b. Reduce

c. Share

d. Accept

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