Risk management is not in a silo any more but is a, ‘holistic, co-ordinated and
integrated process which manages risk throughout the organisation’ (CIMA, 2008)
Discuss the requirements for an effective risk management framework and critically
evaluate the use of Enterprise Risk Management within organisations.
[Maximum 1000 words]
Pick Ltd is a medium sized dairy farmer specialising in providing local organic produce
in the East Midlands. It is proud of its premium quality dairy food, produced organically
at its farms and processed and packaged on site, delivered as fresh as possible to its
The Senior Management Accountant has introduced Activity Based
Costing/Management (ABC/M) within the company and is now using this to evaluate
customer profitability. Information for its two largest customers are detailed below.
Customer X has recently developed links with local farmers so that stores can offer
locally produced goods; it has found that demand for locally produced dairy foods
such as milk and yoghurts is significant and growing.
Last year, the annual revenue from the Customer X account was £625,000, with an
operating profit contribution of £250,000.
Customer X took 30 deliveries last year with average mileage being 25 miles per
delivery. The company placed 7 orders in the year, within this figure there was 1 priority
order. A sales person visits Customer X’s HQ three times per year to manage the
relationship and introduce new product developments. Customer X requires an invoice
Customer Y stores are smaller than Customer X stores and are usually located within
local shopping areas. Customer Y markets itself as a supplier of local goods and this
account has been long established with Pick’s. Last year, the annual revenue was
£750,000, with an operating profit contribution of £350,000.
Last year 85 deliveries were made with an average mileage of 90 miles per delivery. A
sales person visits Customer Y‘s HQ every month to finalise the order for that month.
In addition to the monthly orders Customer Y averages 1 priority order per month.
Customer Y requires an invoice per month.
The ABC/M database includes the following customer related cost drivers and rates.
Order taking £50 per order
Order processing £95 per order
Delivery £250 per trip and £2.50 per mile
Additional cost of priority orders
(Order taking, processing and delivery)
£800 per order
Visit to customer £700 per visit
Invoicing £45 per invoice
Critically evaluate the benefits and potential challenges of customer profitability
analysis, and prepare a customer profitability analysis for customers X and Y before
drawing on your calculations to provide a commentary for Pick’s management
including any specific recommendations for action.
[Maximum 650 words. Calculations are not part of the word count]
Type of service-Academic paper writing
Type of assignment-Term Paper
Pages / words-6 / 1650
Language style-UK English