Subject CT9: Business awareness

Online practical exam

Workbook of seven exercises

Answer sheets

Once you have completed the seven exercises within this answer book you must sign and date the
declaration and submit the book to us by email to [email protected]

The completed answer book may be sent any time during the 10 working day period of the business
game. However unless there are mitigating circumstances the completed exercises must be
submitted by 17.00 (UK time) on day 10 of the business game.

Any exercises submitted outside this period will not be eligible for the exam and you will have to apply
to take the exam again. You may commence your work on these exercises at any time before the
start of, or during, the 10 day business game period.

Contents

Exercise 1.............................................................................................................................................. 1
Exercise 2.............................................................................................................................................. 5
Exercise 3.............................................................................................................................................. 7
Exercise 4............................................................................................................................................ 21
Exercise 5............................................................................................................................................ 26
Exercise 6............................................................................................................................................ 33
Exercise 7............................................................................................................................................ 34

Declaration

I declare that the material I have produced for this workbook is my own work and that I understand
any deliberate acts of plagiarism are deemed to be in breach of examination regulations.

Aditya Ajmani
Name:
9050332
ARN:
22/3/2013
Date:

Exercise 3
Copyright © Imparta Limited 2002 - 2005 All Rights Reserved
Exercise 1

Financial Services Companies

Having studied the tutorials on the i-coach website, and identified some relevant news items in your
own country’s newspapers or magazines, complete the proforma below.

How do financial services companies create value for customers – that is, what
underlying needs are they satisfying? Think about:
The need for security…

The need to fulfil desires…

The need to meet responsibilities…

Other…

Comments:

Financial services companies add value to customers by providing them guidance on financial
matters. They have the ability to advise and educate the general public on financial issues
after assessing their personal circumstances, financial status, financial goals and objectives.

Financial service companies offer products that can meet various needs of customers such
as:

1. Security: A customer may be concerned about the wellbeing of his dependents after
his demise. Products such as term insurance offered by financial service companies
meet the customer’s need for financial security of his family members

2. Save for an investment such as purchase of house: Financial services

companies offer products that allow an individual to save from their surplus
disposable income towards an investment such as a house

3. Save for retirement: Endowment insurance products are offered by financial

services companies, the proceeds of which can be used to buy an annuity at pre-
determined rates at the time of policy maturity. The policy maturity is usually set at
the time when the individual in question is expected to retire.

4. Save towards meeting specific responsibilities: Products exist in the market that
allow individuals to save towards meeting specific responsibilities such as a child’s
college education/ marriage

5. Protection against critical illness/sickness/unemployment: Financial services

offer products that provide an individual protection against unforeseen eventualities
such as critical illness/sickness/unemployment etc.

Exercise 3
Copyright © Imparta Limited 2002 - 2005 All Rights Reserved
 Why does anyone place their funds in the hands of financial services companies?

Comments:

There are numerous reasons as to why an individual places funds in the hands of financial
services companies:

1. Technical expertise: Financial services companies have executives who are trained
finance professionals who are better equipped to handle the funds of an individual
than the individual himself

2. Lack of time: At times, individuals do not have the time to focus on their financial
investments and find it easier to employ a financial service company to do this for
them

3. Pooling of risk: Since a lot of individuals invest their money with a financial service
company, the company has sufficient funds to be able to invest in a diverse range of
assets and thus reduce risk

4. Economies of scale: Since the financial services company invests a large volume of
funds, it enjoys economies of scale beyond the reach of an individual

5. Access to certain assets: Investing in a financial services company allows an

individual to gain exposure to assets which he/she would have otherwise not been
able to afford.

What sources of advantages can financial services companies use to create value for
customers?

e.g. Superior assets such as…

Strategic relationships such as…

Distinctive capabilities such as…

Comments:

Financial services companies can use the following sources of advantages to create value for
customers:

1. Expertise: As mentioned in the previous answer, financial services company employ

trained professionals who create value for customers by using their intellectual and
technical abilities and understanding of the workings of finance

Exercise 3
Copyright © Imparta Limited 2002 - 2005 All Rights Reserved
 2. Economies of scale: This is another significant source of advantage for financial
services companies as they are able to reduce costs and work more efficiently than
individuals

3. Multinational networks: Financial services companies usually operate in multiple

countries and thus have access to a wider, more diverse range of assets across the
globe compared to an individual investor

How do financial services companies capture value from the customer for providing
services? i.e. in which ways can they generate profits?

They earn money on a regular basis by…

They earn money for specific transactions when…

Comments:

Financial services companies capture value from the customer for providing services in the
following ways:

1. Margins in charges: Financial services companies levy charges on customers

for providing certain services which usually have a margin over and above the
cost of providing that service

2. Profit loadings: While pricing products, financial services companies usually

explicitly load for profits

3. Innovation: Financial services companies provide financial products to meet the

financial needs of its customers. If a financial services company is able to meet
particular needs of its customers which are not met by products provided by other
players in the market, they can exploit their competitive position to generate
profits

What factors have been changing the levels of profits companies can gain from
specific types of products or segments of the market?

Profit margins are being squeezed by…

Overall sales volumes are being affected by…

Exercise 3
Copyright © Imparta Limited 2002 - 2005 All Rights Reserved
 Comments:

The following factors have been changing the levels of profits companies can gain from
specific types of products or segments of the market:

1. Increase in competition: Increase in the number of players is a classic example of

how profits are squeezed in any given industry

2. Increase in regulation: Regulators at times enforce rules which adversely affect the
financial services companies leading to a hit in their profits. The enforced regulation
could have a direct bearing on the ability of the company to levy charges, alter other
product design features, tax liabilities etc.

3. General economic environment: In times of recession, the demand from

customers of financial services companies is price sensitive and leads to a reduction
in the margins and profit loadings companies can price in in their products

What external factors are now having an impact on customer needs and how do
companies serve these needs? What will change in the future?

Comments:

The following external factors are now having an impact on customer needs:

1. Regulation
2. Changing lifestyles
3. Globalization
4. Increase in financial awareness
5. Demographics of a country
6. Change in family dynamics

Financial services design appropriate products which are able to cater to needs of customers
resulting from the change in regulations. Financial services companies carry out regular
customer research to understand changes in lifestyle and consumer preferences. Many
companies operate in multiple countries as a result of globalization, leading to an increase in
the demand of overseas assets. Increase in financial awareness allows financial services
companies to design more sophisticated products and use assets better suited to match the
needs of its customers. Financial services companies also keep a close watch on the
demographics and family dynamics of a country it operates in in order to understand the
needs of the market and gauge what products would be successful.

Each of the above external factors mentioned above is dynamic and expected to constantly
evolve in the future. One would expect new regulations to be rolled out, changes in consumer
preferences, further increase in financial awareness, changes in the demographics and family

Exercise 3
Copyright © Imparta Limited 2002 - 2005 All Rights Reserved
 dynamics.

How do financial needs change in relation to an individual’s life stages in adult life?

Young adults

At this stage of an individual’s life, one is usually in their first employment. Financial needs of
a young adult would include meeting day to day living costs, paying off student debts, saving
towards a future needs such as buying a home, marriage etc.

‘Building family’ stage

In this stage, an individual’s financial needs would include protection benefits for
spouse/dependants in the event the earner becomes sick, unemployed or dies. Most people
would begin to save towards retirement at this point. Meeting mortgage payments is also
likely to become a part of an individual’s financial needs in this stage.

Middle age

Individuals in this stage are likely to begin saving towards future needs such as child’s
education/college. One is likely to have progressed in their professional pursuits and have
surplus disposable income for profit seeking investments. Risk appetite of individuals is likely
to become higher in this stage, as certain liabilities would be nearing their end such as
student debts, mortgage payments etc. An individual would increase focus on saving towards
retirement in this stage.

Retirement

Individuals in this stage would have met most of their liabilities such as child’s education,
marriage, mortgage payments etc. Individuals in this stage are likely to have lower personal
expenditure. One is likely to invest in financial products like annuities, critical illness products
etc. in this stage.

Are these life stages as predictably linked to typical age ranges as they once were?

The life stages are not as predictably linked to age ranges as they once were due to change
in lifestyle choices of individuals. There is an increasing trend towards individuals pursuing
higher education which leads to them joining the labour force at a later age than the old
convention. This has also led to individuals marrying at a later age than used to be the norm
in earlier times. Also, the retirement age is seen to have been becoming lower over time
which essentially implies a fall in the duration of the working life of an individual.

Exercise 3
Copyright © Imparta Limited 2002 - 2005 All Rights Reserved
 Exercise 3
Copyright © Imparta Limited 2002 - 2005 All Rights Reserved
Exercise 2

Financial Services Industry

Having studied the Financial Services Industry slides and notes (Item 5 on the Preparatory Study
page), describe in the financial services industry proforma in 900 to 1100 words corresponding
matters applicable to your own country.

Enter your descriptions here

Indian financial markets, broadly comprising of segments like asset management, banking,
insurance, foreign direct investments (FDI) and foreign institutional investors (FII), effectively
promote the savings of the economy by directing them towards suitable investment options.
The Indian financial sector is well developed, competitive and integrated to face all traumas
(like the recent financial turmoil).

World Economic Forum’s latest report ‘Financial Development Report 2012’ has named India
as the world's top-ranked country in terms of life insurance density. Life insurance density is
the ratio of direct domestic premiums for life insurance to per capita gross domestic product
(GDP) of a country. India has been ranked 40th in terms of overall financial development of a
country, but is much ahead of larger economies like the US, UK, Japan and China for life
insurance density.

It has been a common impression that since the developed countries have been mired in
severe economic degeneration and disruption, emerging countries like India and China would
seize the opportunity to showcase themselves as viable and premier investment destinations.
However, both China and India witnessed a slowdown as they struggled with high inflation
and interest rates in recent years.

The silver lining, however, has been that despite the number of setbacks that India has
undergone, the growth potential remains intact. With India’s inflation now showing signs of
moderation and the Reserve Bank of India indicating that further rate hikes may not be
warranted, the outlook appears to definitely be more promising than the previous year.

It has been widely noted that one of the key reasons for India’s endurance is its
demographics:
 60% of India’s population is under the age of 30 years
 India also has a strong middle class, which is currently at 250 million and is expected
to rise to 800 million by 2030
 The services sector, which contributes close to 60% of the GDP, continues to be a
key growth driver of which, financial services is a significant component
 The rising purchasing power of the Indian consumer due to increasing incomes and
improved affordability has assured the exponential growth of the financial services
sector in the coming years

One the other hand, one could argue that the penetration level of the Indian financial services
sector continues to be extremely low. There needs to be a concerted effort to adequately
extract the full potential of India’s savings, which stands at a remarkable 34% of the GDP.
This argument is backed by the fact that as at July 2011, only 1% of households had invested
in mutual funds and a mere 0.72% of households in equity shares. Hence, one of the
foremost challenges will be to encourage households to diversify their savings. Much effort
will need to be expended on financial awareness and literacy.

As regards banks, there are some concerns over the deteriorating asset quality in certain
sectors. However, the overall banking system remains robust as most banks have been

Exercise 3
Copyright © Imparta Limited 2002 - 2005 All Rights Reserved
 disciplined in their lending practices. Further, research tells us that Indian banks are
reasonably well-placed to meet Basel III norms. India’s bankable population has witnessed
rapid strides in previous decade due to the growing demand for consumer loans, housing
loans and credit cards. For instance,
 In the retail loans segment, mortgages have grown from 1.5% of banks’ advances to
10% of advances over the last ten years.
 The Boston Consulting Group estimates that outstanding mortgages will increase 8
fold from Rs. 5 trillion in 2011 to Rs. 40 trillion by 2020
 Further, there will be a requirement of at least 40,000–50,000 additional bank
branches, and
 160,000–190,000 additional ATMs in this decade. This will be 3 times more than the
branches and ATMs launched in the last decade

Going forward, the prospects of the Indian stock market’s performance seem positive. Expert
comments suggest that from a valuation perspective, the timing is favourable for long term
investors. One hopes to see the return of foreign institutional investor inflows this year.

Some of the measures that will strengthen the financial sector are:
 Greater commitment to financial inclusion;
 Allow FDI in pension funds and increase FDI limits in insurance (this is currently
being discussed in Parliament);
 Deepen the corporate bond market to ensure long term funds for infrastructure;
 Revamp archaic financial legislative acts; and
 Strengthen macro prudential framework for financial stability

It needs to be noted that India has a well-regulated financial sector. A determined

commitment from all the stakeholders will ensure that India will able to maintain a favourable
environment for sustainable growth. The stage is now poised to unleash the potential of the
financial services sector.

Financial sector regulators have been proactive in ensuring that new regulations and
guidelines are more or less in tandem with the growth in the financial sector. Financial
intermediaries have gradually moved to internationally acceptable norms for income
recognition, asset classification, provisioning and capital adequacy. These developments
have given a strong impetus to the development and modernization of the financial sector in
India. Going forward the aim would be to achieve international standards in this area within
the shortest possible period.

What should domestic and foreign firms do to thrive in this strategic environment?
 Unification in the shape of cross-over between banking and insurance and the
emergence of bancassurance is a case in point;
 Customer centric approach
 Engage in multi-pronged strategies for expanding economic opportunity
 Increase penetration
 Collaboration
 Anticipate best practices in regulation

Exercise 3
Copyright © Imparta Limited 2002 - 2005 All Rights Reserved
Exercise 3

Strategic thinking

Having studied the tutorials on the i-coach website, complete the strategic thinking exercise indicated
in the table below according to the month of your birthday.

The month of your Your exercise

birthday

January Exercise A: page 11 of this workbook

February Exercise A: page 11 of this workbook

March Exercise A: page 11 of this workbook

April Exercise A: page 11 of this workbook

May Exercise B: page 17 of this workbook

June Exercise B: page 17 of this workbook

July Exercise B: page 17 of this workbook

August Exercise B: page 17 of this workbook

September Exercise C: page 22 of this workbook

October Exercise C: page 22 of this workbook

November Exercise C: page 22 of this workbook

December Exercise C: page 22 of this workbook

I have completed exercise: B

Exercise 3
Copyright © Imparta Limited 2002 - 2005 All Rights Reserved
Exercise 3: Using strategic concepts
Exercise A – Briefing note

The business issue: developing premium rates in a capped environment.

The Scenario for this question is given in the Questions workbook. Read it there and then
complete the appropriate sheets on the following pages.

Grid A (i)

Reviewing VAULT’s existing competitive positioning and issues affecting it

Existing Competitive
How issues outlined in case may affect positioning decisions
Positioning

Customers
Broad base of ‘mid
market’ customers.

Product/Service
Very broad product
portfolio

Geography
Currently operates in
20 countries

Channels to Market
Access to end
customers is through:
 IFA networks.
 Retail outlets
(Bancassurers in
high streets).
 Direct to the
customer (direct
marketing).
Level of Vertical
Integration
Where is the company
active in the industry
Value Chain? Which
functions are ‘in house’
and which are ‘out
sourced’?

Exercise 3 (B)
Copyright © Imparta Limited 2002 - 2005 All Rights Reserved
Grid A (ii)

Existing sources of competitive advantage

Superior
Assets

Distinctive
Capabilities

Strategic
Relationships

Exercise 3 (B)
Copyright © Imparta Limited 2002 - 2005 All Rights Reserved
Grid B (i)

Competing in a ‘premium’ position

Competitive
How would you compete in this position?
Decision:

Customers

Product/ Service

Geography

Channels to Market

Level of Vertical
Integration

Exercise 3 (B)
Copyright © Imparta Limited 2002 - 2005 All Rights Reserved
Grid B (ii)

Building competitive advantages for a ‘premium’ position

How could existing advantages help the company compete in a ‘premium’ position? (Or be used to
build new advantages relevant to this position?)

Superior
Assets

Distinctive
Capabilities

Strategic
Relationships

Exercise 3 (B)
Copyright © Imparta Limited 2002 - 2005 All Rights Reserved
Grid C (i)

Competing in a ‘stakeholder’ position

Competitive
How would you compete in this position?
Decision:

Customers

Product/ Service

Geography

Channels to Market

Level of Vertical
Integration

Exercise 3 (B)
Copyright © Imparta Limited 2002 - 2005 All Rights Reserved
Grid C (ii)

Building competitive advantages for a ‘stakeholder’ position

How could existing advantages meet the key success factors for competing in a ‘stakeholder’
position? (Or how could they be used to build an advantage relevant to this position?

Superior
Assets

Distinctive
Capabilities

Strategic
Relationships

Exercise 3 (B)
Copyright © Imparta Limited 2002 - 2005 All Rights Reserved
 Exercise 3: Using strategic concepts
Exercise B – Briefing note

The business issue: educating consumers about why values of funds fluctuate and affect their
pensions and investments.

The Scenario for this question is given in the Questions workbook. Read it there and then
complete the appropriate sheets on the following pages.

PEST Factor Why the factor may have an impact on the value of a fund

Relevant news pieces:

1. Financial companies sell equities to ensure they meet new solvency

requirements

2. Increasing regulatory demands increase cost burden in financial

companies

Pension funds are exposed to legislations/rules enforced by regulators. New

solvency requirements led to the requirement that financial companies sell
equities to show solvency. Pension funds, too, had their asset allocation
effected since they had invested in such financial companies. Such regulation
can’t be foreseen and is difficult to take into account while providing customers
projections of their maturity fund value. Changes in regulation could lead to
pension funds changing their asset allocation that would in turn alter returns
expected from their portfolios. Moreover, increasing regulatory demands
increase cost burdens that too have an adverse impact on the value of pension
Political /
funds.
Legislative

Exercise 3 (B)
Copyright © Imparta Limited 2002 - 2005 All Rights Reserved
 Exercise 3 (B)
Copyright © Imparta Limited 2002 - 2005 All Rights Reserved
PEST Factor Why the factor may have an impact on the value of a fund
Relevant news pieces:
1. Commodities rise in value as growing markets suck in raw materials
for manufacture

2. Money moves from quoted companies to small ventures as investors

look for higher growth

3. Growth in European equity markets expected to lag behind other world

regions

4. Exceptional growth in Asia raises value of specialist regional funds

Value of pension funds are also affected by economic factors including the
general business environment, stage of business cycle, growth trends, inflation
and other economic indicators etc.

The value of the fund and its volatility is affected by the nature of assets it has
invested its money in. For e.g., the commodities market performed extremely
well as growing markets increased the demand for raw materials for
manufacture. However, equity markets did not perform so well in Europe. On
the other hand, high growth in Asia led to solid performances from specialist
regional funds. Given the global nature of investments, it is important to
identify high performing regions ahead of the market. Also, there has been an
Economic increasing trend towards investment in small ventures. Although these
ventures promise high growth, they are also very risky adding to volatility of the
fund.

Pension fund managers invest in risky assets as they seek high returns.
However, at times due to external forces that are out of their control, the value
of the pension fund behaves in a volatile manner and is significantly different
from the projections communicated to the pension policyholders at the time of
taking out the policy.

Exercise 3 (B)
Copyright © Imparta Limited 2002 - 2005 All Rights Reserved
PEST Factor Why the factor may have an impact on the value of a fund
Relevant news pieces:
1. Longer-living populations raise concern about looming pensions crisis
2. Low deposit rates attract cautious investors into bonds

Using the information regarding maturity fund value communicated to pension

policyholders, the policyholders come to expect a regular income stream that
they can hope to buy (in the form of an annuity) from the pension amount at
the time of retirement. Given the increase in longevity, financial companies
are offering lower rates of annuities as they expect to be paying out annuity
payments over a longer duration. This, in turn, implies lower annuity payments
that the policyholders will receive as compared to what they expected which
leads to further disappointment and bad publicity.

Fund value is also affected by the investor mood in the market. A cautious
investor mood has led to an increase in investor demand of bonds away from
riskier assets such as equity/property. A pension fund which has a higher
proportion of its assets invested in bonds and a lower proportion invested in
equities/properties would experience an increase in its value and vice versa
since an increase in investor demand in bonds would result in an increase in
their value.

Societal

Exercise 3 (B)
Copyright © Imparta Limited 2002 - 2005 All Rights Reserved
PEST Factor Why the factor may have an impact on the value of a fund

Relevant news pieces:

1. Computerised Exchanges have raised interdependence and volatility

of markets

2. Computer virus wipes millions off corporate profits…and share values

The computerization of exchanges has made information very mobile and

dynamic as a result of which proceedings and developments in one market
have a repercussion on other markets almost instantly. This interdependency
of markets springing out of the internet and information revolution has in turn
increased the volatility of markets which are today exposed to developments
all over the world.

Another consequence of computerization has been the threat of virus. Recent

news suggests that a computer virus compromised the position of many
companies, hampering huge sums of corporate profits and share values.

Thus, technological advancements, which have otherwise led to a lot of

progress in the financial world, also pose a threat to the security of investor
money. Pension fund values in the past have also been volatile due to
technology related reasons such falling equity values due to a computer virus
Technological
attack and high volatility of assets resulting on dynamic information systems.

Exercise 3 (B)
Copyright © Imparta Limited 2002 - 2005 All Rights Reserved
Exercise 3: Using strategic concepts
Exercise C – Briefing note

The business issue: treating customers fairly

The Scenario for this question is given in the Questions workbook. Read it there and then
complete the appropriate sheets on the following pages.

Grid (A)

Task 1: Should AZURE pay out on the policy?

Advantages:

Option 1
Disadvantages:

Advantages:

Option 2
Disadvantages:

Advantages:

Option 3
Disadvantages:

Exercise 3 (C)
Copyright © Imparta Limited 2002 - 2005 All Rights Reserved
Grid (B)

Objective To put shareholders first, giving them the highest return on investment
available in the general insurance sector.
For the next five years, create a year-on-year improvement on the margin
between insurance revenues and payouts.
Comments:

Strategic To be the nation’s favourite financial services company.

Intent Comments:

Mission To offer the widest range of products in general insurance.

To continuously innovate in our processes.
To make use of the most sophisticated technological aides in pursuit of our
profit objectives.
To conduct ourselves with integrity and win customer trust.
Comments:

Strategy To proactively seek out low risk, high income customers.

Comments:

Tactics Information sharing to avoid fraudulent claims. Use data warehouse for
customer profiling on past claims made across insurance categories.
Increase number of claims investigators.
Raise level of proof required for payouts and rigorous analysis prior to claims
payouts
Comments:

Exercise 3 (C)
Copyright © Imparta Limited 2002 - 2005 All Rights Reserved
Exercise 4

Problem solving

Having studied the tutorials on the i-coach website that relate to problem-solving (see i-coach -
Introduction - Problem-solving, including the 'Explore' items), read the problem solving exercises
below.

You may choose any one of the four problems given in the Questions workbook. Read them there
and for the one you choose, complete the problem solving proforma below.

Problem solving proforma

Which problem have you chosen? Problem no 1

Go through the five stages described below, entering items in each of the tables.

STAGE 1: Generate a list of 25 issues/questions (divergent thinking) against the bullet

points below

1. How many people should I invite?

2. How should I send out invites – should I create an event on Facebook or should I send
out cards or make phone calls/send out texts?
3. Should I invite work colleagues, social friends and family to the same party or have a
separate do for each group?
4. Should I invite friends/family who live out of station or should I limit the guest list to
friends/family in my city?
5. What should be the venue for my party?
6. Should I do the party at my residence or should I have it at a restaurant/bar/club?
7. How big would I need the venue to be?
8. Should I get a professional to decorate the place?
9. Should I have the party indoors or outdoors?
10. What is my budget going to be for the party?
11. How much should I spend on food?
12. How much should I spend on alcohol?
13. How much should I spend on the venue?
14. How much should I spend on invites?
15. How much should I spend on events/performances I plan to keep at my party?
16. What should the theme for the party be?
17. Should I have a dress code for the party to make it more fun?
18. Should I have a brunch party, dinner party or a late night party at a club?
19. How elaborate should the food spread be?
20. What cuisines should I order?
21. What kind of alcohol should I order – variety, brand etc.
22. Should I serve desserts?
23. Should I arrange for any sort of performances at my party – dance performance, other

Exercise 5
 shows etc?
24. What kind of music should I have at my party – live band, sober instrumentals, DJ?
25. Should I arrange for soveneirs/return gifts for guests at my party?

STAGE 2: Identify about 5 key themes within these questions and enter them against the
bullet points below

 Invitations
 Venue
 Budget
 Food/Alcohol arrangements
 Theme/Entertainment

STAGE 3: Arrange against the bullet, sub-bullet, and sub-sub-bullet points below, your
issues/questions from Stage 1 into top level questions and sub-questions based on your
themes in Stage 2
 Invitations
o How many people should I invite?
 Should I invite work colleagues, social friends and family to the same
party or have a separate do for each group?
 Should I invite friends/family who live out of station or should I limit the
guest list to friends/family in my city?

o How should I send out invites – should I create an event on Facebook or should I
send out cards or make phone calls/send out texts?

 Venue
o What should be the venue for my party?
 Should I do the party at my residence or should I have it at a
restaurant/bar/club?
 How big would I need the venue to be?

o Should I have the party indoors or outdoors?

o Should I get a professional to decorate the place?

 Budget
o What is my budget going to be for the party?
 How much should I spend on food?
 How much should I spend on alcohol?
 How much should I spend on the venue?
 How much should I spend on invites?
 How much should I spend on events/performances I plan to keep at
my party?

 Food/Alcohol arrangements:
o How elaborate should the food spread be?
 What cuisines should I order?

Exercise 5
 o What kind of alcohol should I order – variety, brand etc.
o Should I serve desserts?

 Theme/Entertainment
o What should the theme for the party be?
 Should I have a dress code for the party to make it more fun?
 Should I have a brunch party, dinner party or a late night party at a
club?

o Should I arrange for any sort of performances at my party – dance performance,

other shows etc?

o What kind of music should I have at my party – live band, sober instrumentals,
DJ?

o Should I arrange for souvenirs/return gifts for guests at my party?

Add to or remove some of these bullet points at all levels so that you include ALL the themes that
you identified in stage 2 and ALL the points you raised in stage 1.

STAGE 4: Refine your wording in Stage 3 to ensure no gaps and no overlaps (so mutually
exclusive, completely exhaustive). Suggest copy your points from Stage 3 into the table
below and then refine your wording

 Invitations
o How many people should I invite?
 Should I invite work colleagues, social friends and family to the same
party or have a separate do for each group?
 Should I invite friends/family who live out of station or should I limit the
guest list to friends/family in my city?

o How should I send out invites – should I create an event on Facebook or should I
send out cards or make phone calls/send out texts?

 Venue
o What should be the venue for my party?
 Should I do the party at my residence or should I have it at a
restaurant/bar/club?
 If I choose not to have my party at my residence, how big would I need
the restaurant/bar/club to be?

o Having chosen the venue of my party, should I have the party indoors or
outdoors?

o Should I get a professional to decorate the place?

 Budget

Exercise 5
 o What is my budget going to be for the party?
 How much should I spend on food?
 How much should I spend on alcohol?
 How much should I spend on the venue?
 How much should I spend on invites?
 How much should I spend on events/performances I plan to keep at
my party?

 Food/Alcohol arrangements:
o How elaborate should the food spread be?
 What cuisines should I order?
o What kind of alcohol should I order – variety, brand etc.
o Should I serve desserts?

 Theme/Entertainment

o What should the theme for the party be?

 Should I have a dress code for the party to make it more fun?
 Should I have a brunch party, dinner party or a late night party at a
club?

o Should I arrange for any sort of performances at my party – dance performance,

other shows etc?

o What kind of music should I have at my party – live band, sober instrumentals,
DJ?

o Should I arrange for souvenirs/return gifts for guests at my party?

Add to or remove some of these bullet points at all levels so that you include ALL the themes that
you identified in stage 2 and ALL the points you raised in stage 1.

Exercise 5
STAGE 5: Identify the dominating questions and the key hypotheses (no more than 3 of
each) and enter them against the bullet points below
Dominating questions
 How many people should I invite?
 What should be the venue of my party?
 What is the budget of my party?

Key hypotheses
 I am going to go ahead and have a dinner party at my favourite restaurant ‘Celebrate
your 30th Birthday here!’
 I am going to invite friends living in my city only, will not extend the guest list to out of
town friends
 I am going to set aside half of my monthly income as a budget for the party

Exercise 5
Exercise 5

Case studies
Having studied the professionalism slides and notes, you are required to consider three case studies
in accordance with the table below according to the month of your birthday. The case studies are
given in the Questions workbook. Read them there and then complete the professionalism case
studies proformas below.

The month of your Your case studies

birthday

January Case studies 1, 3 and 4

February Case studies 2, 4 and 5

March Case studies 3, 5 and 6

April Case studies 1, 4 and 6

May Case studies 1, 2 and 5

June Case studies 2, 3 and 6

July Case studies 3, 4 and 6

August Case studies 3, 4 and 5

September Case studies 2, 4 and 5

October Case studies 1, 3 and 6

November Case studies 1, 2 and 5

December Case studies 1, 2 and 6

I have completed case study numbers: 3, 4 and 5

Exercise 5
Exercise 5: Case study 1 – Offer of gifts

Case study 1 proforma

Study the material given in the Questions workbook. Enter the 2 most important points you can think
of for each of the gifts (a) to (g) relative to any of the positions (i) to (iii), indicating in each case which
position you have used.

Gift Point Your view

(a) 1
2
(b) 1
2
(c) 1
2
(d) 1
2
(e) 1
2
(f) 1
2
(g) 1
2

Exercise 5
Exercise 5: Case study 2 - Privileged information

Case study 2 proforma

Study the material given in the Questions workbook. Enter the 2 most important points you can think
of for each of the 7 topics in answer to the question posed by the case study.

Topic Point Your view

1 1
2
2 1
2
3 1
2
4 1
2
5 1
2
6 1
2
7 1
2

Exercise 5
Exercise 5: Case study 3 - Errors

An error is discovered in your work/another actuary's. What action do you take?

Study the material given in the Questions workbook and then complete the proforma below.

Case study 3 proforma

Enter the 5 most important points you can think of in answer to the question posed by the case study.

1 Have a colleague/peer verify the error

2 Identify relevant parties that will be affected by the error

e.g. colleagues that are using the work produced in which the error was found,
clients to whom results were communicated on the basis of the work done in which
the error was found

3 Inform relevant parties that the error has been made

4 Identify and communicate the seriousness/ramifications of the error made

5 Identify why/how the error was made

e.g. due to lack of time, too much work and tight deadlines; due to negligence;
genuine mistake etc. and take appropriate steps to ensure that such a mistake is
not repeated

Exercise 5
Exercise 5: Case study 4 - A friend of a friend

A friend’s father feels he has lost out by his insurance company merging with another. Your friend
believes that you know something about how insurance companies work and asks you to find out
something for her father. What should you do?

Complete the proforma below.

Case study 4 proforma

Enter the 5 most important points you can think of in answer to the question posed by the case study.

1 Understand why the friend’s father feels that he has lost out due to the merger

2 Carry out research on:

 the reasons for/objectives of the merger of the companies
 whether the merged company has been able to meet its objectives from the
merger
 whether there has been any change in the strategy/ideology of the merged
company

3 Understand the short term and long term impacts of the merger on the policyholders
of the company

4 Analyse if the merger results in the company not meeting Policyholder’s Reasonable
Expectations (PRE) or if it is in line with the company’s Treating Customers Fairly
(TCF) policy

5 Communicate to my friend’s father the findings of my research and steps he can

take (e.g. reach out to the regulator, contact consumer grievances forums) if I
actually hypothesize that he has lost out and there is scope, under the legal
framework, for him to make his situation better

Exercise 5
Exercise 5: Case study 5 - Can’t sign / won’t sign

You are a senior experienced student providing reports for review by a qualified but less experienced
actuary. The less experienced actuary refuses to provide official sign off for your work. What should
you do?

Complete the proforma below.

Case study 5 proforma

Enter the 5 most important points you can think of in answer to the question posed by the case study.

1 Ask the less experienced actuary why he/she is refusing to provide official sign off
for my work

2 In case there are errors in my work, I should correct them and pass them back to the
less experienced actuary for an official sign-off

3 In case there is no substantive reason for the less experienced actuary to not sign-
off my work, I will let higher authorities (my manager/director) know of the matter

4 Understand the repercussions of the delay in sign-off to the purpose of the prepared
report and communicate the same to higher authorities in my firm

5 In case the report needs to be signed off soon and cannot wait till the authorities
look into the matter with the less experienced actuary, seek out another qualified
actuary suitable to pick up the task for an official sign-off

Exercise 5
Exercise 5: Case study 6 - Working late

Case study 6 proforma

Study the material given in the Questions workbook. Enter below the 5 most important points you can
think of in answer to the question posed by the case study.

Exercise 5
Exercise 6

Business game proforma

Describe briefly in the table below 10 business related points you have learnt, or increased your
knowledge of, as a result of participating in the business game.

1 Importance of team work in arriving at business decisions

2 Importance of strategy in business
3 The interdependence of decisions made by players in a market and how one
player is not independent of another
4 Understanding the importance of alignment of a company’s objectives,
values, image, pricing strategy etc.
5 The role of the board of directors in providing direction to a company
6 Importance of monitoring previous decisions made and evaluating/reviewing
those decisions
7 Importance of employee management, delegation of authority and responsibility
and how the amount of autonomy given to a business unit or culture propagated by
a company is essentially part of company strategy
8 Importance of monitoring actions of competitors/changing nature of the market.
Essentially, understanding that managing a business is a dynamic proposition
requiring constant attention and a proactive attitude
9 Importance of not only doing the right things or taking the right decisions but also be
‘seen’ as doing the right things and taking the right decisions
10 Importance of laying out and understanding the short term and long term goals of
the company and how they complement each other

Exercise 6
Exercise 7

Legal awareness case study proforma

Study the material given in the Questions workbook. Select a minimum of 5 of the 10 questions below
and enter a total of 10 key points in answer to the questions posed with a maximum of 3 points for any
particular question.

I have completed questions: 1, 4, 5, 6 and 7

Charlesworth

1. Please identify any potential liability to which you or your firm may be exposed in acting for
your clients (that is, who could bring an action against you and on what grounds?)
Poin Your view
t

1 Negligence – My firm and I could have legal action taken against us in case we are
found to be negligent in the work we have delivered

Fraud – My firm and I could have legal action taken against us in case we are found
2
to be have committed any sort of fraud in the course of our engagement with the
client

Breach of confidentiality – As part of our engagement with any client, my firm and I
3 are likely to have agreed on certain terms of non-disclosure. In case we are found to
have breached the terms of confidentiality, we could expect to have legal action taken
against us

2. How might Charlesworth seek to limit any potential liability?

Point Your view

1
2
3

3. What restrictions are there on Charlesworth’s ability to limit its liability?

Point Your view

1
2
3

Exercise 7
Contract

4.You have a first meeting with a client. At what point might you enter into a contract with the
client?

One would enter into a contract at the point when one of two involved parties makes an offer which is
accepted by the other. The offeror could be the client and I could be the offeree or the other way
round.

The 2 requirements of an offer are:

 Willingness to be bound
 Certainty of terms
An offer is seen to be accepted when the offeree:
 Provides an unqualified assent to the terms of the offer
 Which is then communicated to the offeror within the stipulated time

At the point where the above requirements are met, I might enter into a contract with my client.

5.You are at a party and in response to a request, promise to provide professional advice to
someone for a fee. Do you have a contract?

There are 3 important elements of formation of a contract –

 offer and acceptance,
 intention to create legal relations, and
 consideration

A contract is made when an offer is accepted. The ‘someone’ has made an offer seeking professional
advice in return for a fee which I accepted. This results in us having a contract. Since this contract is
commercial in nature, the presumption is that there is an intention to create legal relations. Also, in
case the offeror here wishes to enforce my promise, he would be successful in doing so since the
offeror has provided ‘sufficient’ consideration in return for my professional services (whether the
consideration is adequate or not is not relevant).

6.You agree to do work for someone free of charge. You then decline to do the work. Can the
other party sue you?
Point Your view

1
No. Since the other party did not provide any consideration for my services

In contract law consideration is concerned with the bargain of the contract. A

2 contract is based on an exchange of promises. Each party to a contract should be a
promisor and a promisee. They must each receive a benefit and each suffers a
detriment. This benefit or detriment is referred to as consideration.
3
Consideration must be something of value in the eyes of the law. This excludes
promises of love and affection, gaming and betting etc. A one sided promise which
is not supported by consideration is a gift. The law does not enforce gifts unless they

Exercise 7
 are made by deed.

An agreement made without consideration is void unless it is expressed in writing

and registered under the law for the time being in force for the registration of
4
documents and is made on account if natural love and affection between the parties
standing in near relation to each other.

Rules of consideration
1. The consideration must not be of past
2. The consideration must be sufficient but need not be adequate
3. The consideration must move from the promisee
5
4. An existing public duty will not amount to valid consideration
5. An existing contractual duty will not amount to valid consideration
6. Part payment of a debt is not valid consideration for a promise to forego the
balance

Tort

Six months ago, Charlesworth prepared an actuarial valuation report for Daltech Ltd in respect of its
defined benefit pension scheme. Charlesworth was negligent in preparing the report with the result
that the deficit on the scheme was significantly undervalued.

Last week, a director of Daltech asked Charlesworth for a copy of the report “for a corporate matter.”
The report was handed over. Apparently,, Daltech handed the report to Secco Ltd who used it to base
a valuation to purchase the entire issued share capital of Daltech.

7.Does Charlesworth owe Secco a duty of care?

Point Your view

In considering whether a duty of care may be owed by a professional person to

a 3rd party with whom he is not in a contractual relationship, the courts have
formulated a number of different principles. The approaches adopted by the
1 courts are:
1. Whether there has been an assumption of liability
2. Whether a threefold test of foresee ability, proximity and 'fairness,
justice and reasonableness' has been satisfied, and
3. Whether the alleged duty would be 'incremental' to previous cases
2
Charlesworth would argue that:
1. It would be inconceivable that any reasonable businessman would
consider that the company (Charlesworth) had voluntarily assumed an
unlimited responsibility; and
2. It would not be fair, just and reasonable to impose a duty of care

Exercise 7
 exposing the company (Charlesworth) to an unlimited liability

3
The law recognizes that professionals may, in certain circumstances, owe a duty
of care to third parties. In general term the courts have adopted a reasonably
restrictive approach and have been reluctant to find a duty of care in
circumstances where there has been no clear assumption of duty

Focal is having cash flow problems. Last week Focal sold land it owned to George Whale (“GW”), a
director and shareholder of Focal. The book value of the land was £200,000. The board agreed to sell
the land to GW for £120,000 for a quick sale.

The board of Focal have discovered that James Kear, a director who resigned six months ago has set
up his own business competing with Focal and is obtaining business from Focal’s customers

8. Do the directors of Focal face any potential liabilities if they continue to trade in the present
circumstances?

Point Your view

1
2
3

9. Is the sale of the land to George Whale open to challenge?

Point Your view

1
2
3

10. Is there anything the directors of Focal can do about the activities of James Kear?

Point Your view

1
2
3

Exercise 7