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FORMATIVE ASSESSMENT 2 

Answer ALL questions in this section:

FreshMart (Pty) Ltd is a privately-owned, mid-sized grocery retail chain with 28 stores across three provinces in South Africa. The business focuses on providing affordable groceries and fresh produce to lower- and middle-income communities. It employs over 1,200 staff, including many from local communities, and has recently expanded its footprint into semi-urban areas.

The company is growing rapidly, but this growth has come with several challenges. FreshMart operates in a highly competitive and dynamic environment and is increasingly exposed to various risks that could impact its operations, reputation, and financial stability.

To date, FreshMart has managed risk informally. Store managers and finance personnel respond reactively to incidents, but there is no formal risk register, no defined appetite for risk, and no integrated risk governance structure. The Board has recognised the need to embed a risk-aware culture and has commissioned the development of a structured risk management framework.

As the Risk Manager, you have been appointed to assist the company by performing a series of risk-related tasks as follows:

QUESTION 1

In relation to FreshMart, discuss the concept of risk within its business context and examine the role of formal risk management in supporting organisational performance and decision-making. Using the four (4) categories of external risk, identify and assess at least two (2) risks per category based on research within the South African grocery retail industry, and present your analysis of each risk in a basic qualitative risk register that includes likelihood and impact and risk scores.

QUESTION 2

In the context of FreshMart, discuss the concept of operational risk and its potential impact on the company’s performance. Based on practical research into retail operations, identify and assess at least five (5) operational risks that could arise within FreshMart’s daily activities. For each risk, recommend suitable internal controls or interventions to reduce its likelihood or impact. Present your findings in a basic qualitative operational risk register that includes likelihood and impact and risk scores.

QUESTION 3

Critically discuss the concepts of risk appetite and risk tolerance, highlighting the differences between the two and their importance in organisational risk decision-making. Using selected risks from your previous external and operational risk registers (Questions 1 and 2), analyse how FreshMart should apply its risk appetite and risk tolerance to guide appropriate responses. Combine and update your qualitative risk registers to demonstrate how inherent, residual, and desired risk scores are used to inform mitigation decisions. For each risk, recommend a suitable response strategy using the 4Ts of risk treatment.

QUESTION 4

Compare and contrast the key features of ISO 31000 and COSO ERM as risk management standards. Focus your comparison on their approach to principles, structure, and risk governance. Based on your analysis, recommend the most appropriate standard for a mid-sized retail business such as FreshMart. Justify your choice by considering FreshMart’s current level of risk maturity and outline a practical plan to implement the chosen standard. Your plan should address governance roles, integration with business processes, and steps t