Strategy, Governance and Risk Management
What the exam tests
Strategy, Governance and Risk Management tests whether you can evaluate strategic fit, design board oversight and quantify risk. Case questions often ask for a recommendation to the board or a risk register.
Core rules
- Strategy: test options against mission, capabilities, market attractiveness and financial return; use scenarios, not a single forecast.
- Governance: the Nigerian Code of Corporate Governance 2018 applies on a “comply or explain” basis; the board should be independent-minded, with separate chair/CEO roles and an independent audit committee.
- Risk: identify, assess likelihood and impact, treat, monitor and report. Risk appetite is the level the board will accept; tolerance is the operational limit.
- Internal control: segregation of duties, authorisation, reconciliation and whistleblowing reduce fraud risk.
Worked example
A manufacturer has a $20m payable in six months. The risk register scores FX risk as likelihood 4 and impact 5 on a 5×5 matrix = 20, high. A forward contract fixes the rate and reduces likelihood to 2; residual score 10, medium. The cost is a forward premium of 2%, or $0.4m. The board must decide whether the certainty is worth $0.4m. Reasoning: quantify the exposure, compare hedging cost with the downside, and document the residual risk and owner.
Traps
Treating risk only as downside; confusing risk appetite with tolerance; listing controls without testing design; and recommending a strategy without linking it to cash flow, capability or governance approval.