K151-ind-au - Industry Risk Rating Reports

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| By Damian Mills
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Damian Mills
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Quizzes Created: 24 | Total Attempts: 4,270
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K151-ind-au - Industry Risk Rating Reports - Quiz

Please complete the following self-assessment quiz - This is a closed book quiz so do not refer back to the training materials, manuals and/or other relevant resources to complete the questions.


Questions and Answers
  • 1. 

       

  • 2. 

    Which association did IBISWorld develop a partnership with to develop the Industry Risk Rating product?

    • A.

      Dun & Bradstreet

    • B.

      RMA

    • C.

      Datamonitor

    • D.

      RMC

    Correct Answer
    B. RMA
    Explanation
    IBISWorld developed a partnership with RMA to develop the Industry Risk Rating product.

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  • 3. 

    Which three industry risk factors are used by IBISWorld's model to calculate the overall Risk Rating Score ? 

    • A.

      Structural Risk

    • B.

      Growth Risk

    • C.

      Supply Chain Risk

    • D.

      Sensitivity Risk

    Correct Answer(s)
    A. Structural Risk
    B. Growth Risk
    D. Sensitivity Risk
    Explanation
    IBISWorld's model uses three industry risk factors to calculate the overall Risk Rating Score: Structural Risk, Growth Risk, and Sensitivity Risk. Structural Risk refers to the potential for changes in the industry's structure, such as new regulations or technological advancements. Growth Risk assesses the potential for industry growth or decline based on factors like market saturation or changing consumer preferences. Sensitivity Risk measures the industry's vulnerability to external factors, such as economic fluctuations or changes in input prices. These three factors together provide a comprehensive evaluation of the overall risk associated with the industry.

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  • 4. 

    Which industry risk factor has the greater weighting when used to calculate the overall Risk Rating Score?

    • A.

      Structural Risk

    • B.

      Growth Risk

    • C.

      Sensitivity Risk

    Correct Answer
    C. Sensitivity Risk
    Explanation
    Sensitivity Risk has the greater weighting when used to calculate the overall Risk Rating Score. This means that the impact of Sensitivity Risk on the overall risk assessment is considered to be more significant compared to the other industry risk factors. It suggests that the industry's vulnerability to external factors and market fluctuations is a crucial aspect in determining the level of risk associated with it.

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  • 5. 

    IBISWorld's Industry Risk Ratings reports attempt to quantify the difficulty of an industry's operating environment over the next 18 months. True or False?

    • A.

      True

    • B.

      False

    Correct Answer
    A. True
    Explanation
    IBISWorld's Industry Risk Ratings reports aim to measure the level of challenge faced by an industry in its operating environment for the next 18 months. This suggests that the reports provide an assessment of the difficulty an industry may encounter in conducting its business activities during that period. Therefore, the statement is true.

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  • 6. 

    Which of the following are characteristics of an industry that are used to derive the Structural Risk Score? Mark all that apply.

    • A.

      Barriers to entry

    • B.

      Competition

    • C.

      Forecast revenue growth

    • D.

      International trade

    • E.

      Trade weighted index

    Correct Answer(s)
    A. Barriers to entry
    B. Competition
    D. International trade
    Explanation
    The characteristics of an industry that are used to derive the Structural Risk Score include barriers to entry, international trade, and competition. Barriers to entry refer to the obstacles that make it difficult for new companies to enter the industry, such as high startup costs or government regulations. International trade refers to the import and export of goods and services between countries, which can impact the industry's competitiveness. Competition refers to the rivalry among existing companies in the industry, which can affect market share and profitability. These factors are important in assessing the structural risk of an industry.

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  • 7. 

    A risk score is a quantifiable measure of the difficulty of the business operating environment. True or False?

    • A.

      True

    • B.

      False

    Correct Answer
    A. True
    Explanation
    A risk score is a quantifiable measure that evaluates the level of risk or uncertainty in a business operating environment. It helps organizations assess potential threats, vulnerabilities, and challenges they may face. By assigning a numerical value to the risk, it becomes easier to compare and prioritize different risks. Therefore, the statement "A risk score is a quantifiable measure of the difficulty of the business operating environment" is true.

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  • 8. 

    Which of the following factors could typically play a role in determining the Sensitivity Risk Score of an industry? Mark all that apply.

    • A.

      Goods and Materials Inputs

    • B.

      Recent Revenue Growth

    • C.

      Government and Legislative Change

    • D.

      Demographic and Consumer Changes

    • E.

      Barriers to Entry

    • F.

      Life Cycle Stage

    Correct Answer(s)
    A. Goods and Materials Inputs
    C. Government and Legislative Change
    D. Demographic and Consumer Changes
    Explanation
    The Sensitivity Risk Score of an industry could typically be determined by factors such as Goods and Materials Inputs, Government and Legislative Change, and Demographic and Consumer Changes. Goods and Materials Inputs refer to the resources and materials required for production, which can affect the industry's sensitivity to supply chain disruptions. Government and Legislative Change can impact industry regulations and policies, influencing its sensitivity to changes in laws. Demographic and Consumer Changes, such as shifts in population demographics and consumer preferences, can also affect the industry's sensitivity to market trends and demand.

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  • 9. 

    What level of risk would a Risk Score that is greater than 7 be considered?

    • A.

      Very Low

    • B.

      Medium

    • C.

      High

    • D.

      Very High

    Correct Answer
    D. Very High
    Explanation
    A Risk Score that is greater than 7 would be considered as "Very High" level of risk. This implies that the risk associated with the given score is significantly high, indicating a high probability of negative outcomes or severe consequences. It suggests that immediate action should be taken to mitigate the risk and implement appropriate risk management strategies to minimize potential damages.

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  • 10. 

    In a broad sense what risk level do the majority of classified industries fall under?

    • A.

      Very Low to Low

    • B.

      Medium Low to Medium High

    • C.

      High to Very high

    Correct Answer
    B. Medium Low to Medium High
    Explanation
    The majority of classified industries fall under the risk level of Medium Low to Medium High. This suggests that these industries have a moderate level of risk associated with them, neither too low nor too high. This implies that while there are some inherent risks involved, they are not extreme or negligible. It indicates that these industries require a certain level of caution and risk management measures to be implemented, but they are not among the highest-risk sectors.

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  • 11. 

    A high industry growth rate is typically associated with a higher risk for operators in that industry. True or False?

    • A.

      True

    • B.

      False

    Correct Answer
    B. False
    Explanation
    A high industry growth rate is not necessarily associated with a higher risk for operators in that industry. While rapid growth can bring about challenges and uncertainties, it can also present opportunities for expansion and profitability. The level of risk in an industry depends on various factors such as competition, market conditions, regulatory environment, and the financial health of the operators. Therefore, it is incorrect to assume that a high industry growth rate always indicates a higher risk.

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  • 12. 

    Which is NOT one of the four chapters in a standard Industry Risk Rating Reports? 

    • A.

      Risk Overview

    • B.

      Competitive Landscape

    • C.

      Structural Risk

    • D.

      Growth Risk

    • E.

      Sensitivity Risk

    Correct Answer
    B. Competitive Landscape
    Explanation
    The correct answer is "Competitive Landscape." The other four chapters, Risk Overview, Structural Risk, Growth Risk, and Sensitivity Risk, are commonly found in standard Industry Risk Rating Reports. These chapters provide an analysis of the overall risk level, the structural factors affecting the industry, the potential for growth, and the industry's sensitivity to external factors. However, the Competitive Landscape chapter typically focuses on the competitive dynamics within the industry, including market share, key players, and competitive strategies.

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  • 13. 

    A higher level of competition increases the structural risk score of an industry. True or False?

    • A.

      True

    • B.

      False

    Correct Answer
    A. True
    Explanation
    A higher level of competition in an industry leads to increased structural risk. This is because when there is intense competition, companies are forced to lower prices, invest more in marketing and innovation, and constantly improve their products or services to stay ahead. This can result in higher costs and lower profit margins, making the industry more risky. Additionally, competition can lead to market saturation and price wars, further increasing the structural risk for companies in the industry.

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  • 14. 

    The Industry Risk Trend chart shows a comparison of risk for which of the following? Mark all that apply.

    • A.

      The industry

    • B.

      The division

    • C.

      Specific companies within the industry

    • D.

      The overall economy

    Correct Answer(s)
    A. The industry
    B. The division
    D. The overall economy
    Explanation
    The Industry Risk Trend chart compares the risk for the industry, the division, and the overall economy. This means that the chart provides information on the level of risk within the industry as a whole, within specific divisions or sectors of the industry, and also how the industry's risk compares to the overall economy. The chart may not provide information on specific companies within the industry, as it focuses on broader trends and comparisons.

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  • 15. 

    Referring to the chart displayed from the Risk Report for Landscaping Services. In 2013, what was the risk of the Landscaping Services industry in relation to the Division risk in the same year?

    • A.

      Higher

    • B.

      Lower

    • C.

      Equal risk

    Correct Answer
    A. Higher
    Explanation
    Based on the given information, the risk of the Landscaping Services industry in 2013 was higher in relation to the Division risk in the same year.

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  • 16. 

    Referring to the chart displayed from the Risk Report for Landscaping Services. In 2008, what was the risk of the Landscaping Services industry in relation to the overall economy risk in the same year?

    • A.

      Higher

    • B.

      Lower

    • C.

      Equal risk

    Correct Answer
    B. Lower
    Explanation
    The correct answer is "Lower". This can be inferred from the phrase "what was the risk of the Landscaping Services industry in relation to the overall economy risk in the same year?". Since the question is asking about the risk of the Landscaping Services industry in comparison to the overall economy, if the risk of the industry is lower, it means that it is less risky than the overall economy.

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  • 17. 

    Referring to the chart displayed from the Risk Report for Landscaping Services. What has been the trend in industry risk over the past 12 months?

    • A.

      Increasing Risk

    • B.

      Stable Risk

    • C.

      Declining Risk

    Correct Answer
    C. Declining Risk
    Explanation
    The chart displayed from the Risk Report for Landscaping Services indicates that the industry risk has been decreasing over the past 12 months. This means that the level of risk associated with operating in the landscaping services industry has been decreasing, suggesting a more stable and favorable environment for businesses in this sector.

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  • 18. 

    Which of the following would typically increase the Structural Risk Score of an industry? Check all that apply.

    • A.

      High barriers to entry

    • B.

      High level of industry competition

    • C.

      High industry volatility

    • D.

      Industry is in the growth stage of its life cycle

    Correct Answer(s)
    B. High level of industry competition
    C. High industry volatility
    Explanation
    High level of industry competition and high industry volatility would typically increase the Structural Risk Score of an industry. This is because high competition indicates a greater risk of market share erosion and reduced profitability, while high industry volatility suggests a greater risk of unpredictable market conditions and potential financial instability. Both factors contribute to increased uncertainty and risk within the industry, leading to a higher Structural Risk Score.

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  • 19. 

    Which of the following are ways in which our Risk Rating Reports can be used by financial institutions? Check all that apply. 

    • A.

      By Banking and Finance departments as part of commercial lending assessment process

    • B.

      By Credit Officers and Relationship Managers for loan assessments

    • C.

      As stress testing for loan portfolios and early warning systems

    • D.

      All of the above

    Correct Answer
    D. All of the above
    Explanation
    The Risk Rating Reports can be used by financial institutions in multiple ways. The Banking and Finance departments can utilize them as part of the commercial lending assessment process. Credit Officers and Relationship Managers can use the reports for loan assessments. Additionally, the reports can be employed for stress testing loan portfolios and as early warning systems. Therefore, all of the options mentioned are applicable uses of the Risk Rating Reports by financial institutions.

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