QUESTION 2

Operating a small retail business in Dar es Salaam comes with its own set of risks. Managing
these risks effectively is crucial for the business's success and sustainability. Here are four
applicable risk response strategies for such a business:

Avoidance:

 Applicability: This strategy involves eliminating the risk altogether. In Dar es Salaam,
this might involve avoiding renting a shop in a high-crime area, choosing not to stock
easily perishable goods, or avoiding dependence on unreliable suppliers.

Mitigation:

 Applicability: This strategy involves reducing the likelihood or impact of a risk. In Dar es
Salaam, mitigation strategies might include installing security cameras and alarms,
diversifying suppliers, negotiating favorable payment terms with vendors, or
implementing robust inventory management systems.

Transference:

 Applicability: This strategy involves shifting the financial responsibility of the risk to
another party. In Dar es Salaam, this could involve taking out business insurance against
fire, theft, or property damage, or outsourcing security services to a professional
company..

Acceptance:

 Applicability: This strategy involves acknowledging and accepting the risk after
implementing all possible mitigation measures. Sometimes, it may be more cost-effective
or practical to accept certain risks with minimal consequences, especially if they offer
potential rewards.
QUESTION 3

 Compliance risks:

Compliance risks arise from the potential failure to adhere to internal policies, external
regulations, or industry standards. This can lead to financial penalties, reputational damage, legal
action, and operational disruptions. Common examples of compliance risks include:

 Legal non-compliance: Breaches of laws, regulations, or contractual obligations.

 Financial reporting errors: Inaccurate or misleading financial information.

 Hazard risks:

Hazard risks stem from potential events or conditions that could cause harm to people, property,
or the environment. These risks are often associated with physical dangers or events like:

 Natural disasters: Earthquakes, floods, fires, etc.

 Technological accidents: Equipment failures, cyberattacks, product malfunctions, etc.

 Control risks:

Control risks arise from weaknesses in internal controls, which are the processes and procedures
designed to safeguard assets, ensure data integrity, and promote ethical conduct. Examples of
control risks include:

 Segregation of duties: Lack of adequate separation of responsibilities, increasing the risk

of fraud or error.
 Improper financial oversight: Inaccurate or outdated financial records, inadequate
budgeting, and lack of due diligence.
  Speculative risks:

Speculative risks arise from uncertainties in the future and the potential for unexpected events to
impact an organization or individual. These risks are inherent in decision-making and
forecasting, and examples include:

 Market fluctuations: Economic downturns, interest rate changes, commodity price

volatility, etc.
 Competition: New market entrants, disruptive technologies, changes in consumer
preferences, etc.

QUESTION 4

The risk management cycle is a continuous process for identifying, assessing, and mitigating
potential threats to an organization or individual. It's not a linear process, but rather an iterative
one where ongoing monitoring and feedback can lead to adjustments and improvements. Here
are the steps involved:

Identify risks:

 This involves brainstorming and actively seeking out potential threats. Techniques like
SWOT analysis, FMEA (Failure Mode and Effect Analysis), and stakeholder workshops
can be helpful.
 Consider different categories of risks, such as financial, operational, reputational, legal,
and safety.

Assess risks:

 Analyze the likelihood and potential impact of each identified risk.

 Determine the severity of the consequences, considering financial losses, operational
disruptions, reputational damage, legal implications, and other relevant factors.

Develop response strategies:

After assessing the risks, formulate strategies to address them. Consider the following options:
Avoidance: Eliminate the risk altogether if possible. Mitigation: Reduce the likelihood or impact
of the risk.

Transference: Shift the financial responsibility of the risk to another party (e.g., insurance).

Acceptance: Acknowledge and accept the risk if deemed manageable or unavoidable.

Implement controls:

 Put the chosen response strategies into action by implementing specific controls. These
controls can be policies, procedures, technological safeguards, training programs, or
physical security measures.
 Ensure the controls are clearly documented, understood, and followed by all relevant
stakeholders.

Monitor and review:

 Regularly monitor the effectiveness of the implemented controls and the overall risk
management program.
 Track any changes in the risk landscape and update the risk assessment accordingly..

QUESTION 5

Introduction:

This report aims to analyze the potential risks associated with starting a mobile money transfer
business in Kariakoo, Dar es Salaam, and propose a workable risk management system for
mitigating them. The report considers a 200 million Tsh investment covering both startup costs
and working capital.

Risk Identified:

The business faces various risks categorized into:

Strategic Risks:
Competition: Established agents, banks, and fintech startups pose significant competition.

Technological advancements: Rapid changes in mobile money technology might render current
systems obsolete.

Regulatory changes: Unforeseen regulatory changes by the Bank of Tanzania could impact
operations.

Operational Risks:

Fraud and theft: Cash losses due to employee/customer fraud or cyberattacks.

Technical failures: System outages or network disruptions causing service interruptions.

Human error: Mistakes by employees leading to financial losses or customer dissatisfaction.

Liquidity issues: Managing cash flow and ensuring sufficient float for customer transactions.

Reputational Risks:

Poor customer service: Negative customer experiences damaging brand image.

Money laundering accusations: Strict anti-money laundering regulations pose reputational risks.

Data breaches: Loss of customer data leading to trust issues and potential legal repercussions.

Risk Management System:

Strategic Risk Mitigation:

Market research and differentiation: Conduct thorough research to understand the competition
and identify unique selling points to attract customers.

Embrace innovation: Stay updated on technological advancements and invest in systems that
adapt to changes.

Build strong relationships: Cultivate good relations with banks, telecoms, and regulators to stay
informed and gain support.
Sound financial planning: Develop robust financial models and contingency plans to navigate
economic challenges.

Operational Risk Mitigation:

Implement robust internal controls: Establish clear policies and procedures for cash handling,
transaction processing, and employee conduct.

Invest in secure technology: Use secure IT infrastructure and regularly update software and
security protocols.

Regular training and awareness: Train employees on fraud prevention, cybersecurity, and
customer service to minimize human error.

Maintain adequate liquidity: Develop cash flow management strategies and maintain sufficient
reserves to meet customer demands.

Data security measures: Invest in data encryption, access controls, and regular backups to protect
customer information.

Crisis communication plan: Develop a plan to effectively communicate with stakeholders in case
of negative incidents.

Monitoring and Review:

Regularly monitor and update risk assessments: Adapt the risk management system based on
changes in the environment or the business.