المحاسب الإداري المعتمد الجزء 2 D. Risk Management

Skerrow Island Ferries: Risks of an Electric-Route Concession

Skerrow Island Ferries

Question of 6 Skerrow Island Ferries: Risks of an Electric-Route Concession

Skerrow Island Ferries: Risks of an Electric-Route Concession Case-based question

الحالة

Skerrow Island Ferries runs four diesel car ferries from the mainland port of Aldhaven to three offshore islands, carrying residents, tourists and freight trucks. The Calder Sound Transport Authority has offered Skerrow a 12-year exclusive concession for its busiest route, to Great Skerrow, on two conditions. First, the route must be served by battery-electric ferries within 30 months of signing. Second, the Authority will deduct a performance penalty for each month in which more than 2% of scheduled sailings are cancelled, and the penalty grows with the share of sailings lost. Concession payments and fares on the route would provide about 45% of Skerrow's revenue. Skerrow has never operated electric vessels or high-voltage shore charging.

Skerrow's board requires its risk committee to approve any commitment above $100 million. The chief financial officer and the enterprise risk manager have prepared three exhibits for the committee.

Exhibit 1: Financing and interest coverage. Two electric ferries and the shore chargers would cost $150.0 million, funded as follows:

Source of funds	Amount	Interest terms
Existing cash	$25.0 million	None
New eight-year senior notes	$45.0 million	Fixed 6.8%, locked in a signed commitment
Floating-rate term loan	$40.0 million	Reference rate + 2.25%, reset quarterly; planned all-in rate 6.5%
Shipyard loan	€32.0 million ($40.0 million at the planning rate of $1.25 per euro)	Fixed 5.0%; interest paid in euros

Skerrow's existing $60.0 million of notes mature 20 months after signing, before electric service begins; the plan assumes they are refinanced at 6.4%. Total debt would therefore rise from $60.0 million to $185.0 million. Skerrow's lenders require times interest earned (EBIT ÷ interest expense) of at least 3.0×, tested each fiscal year; a breach lets them demand immediate repayment. For the first full year of electric operation the plan shows EBIT of $46.0 million and interest expense of $11.50 million, a coverage of 4.0×. The board's stress scenarios for that year are applied one at a time, with every other input at plan:

Scenario	Change from plan
S1	The reference rate is 2.0 percentage points higher than planned all year
S2	The maturing notes are refinanced at 8.9% instead of 6.4%
S3	The euro is 15% stronger against the dollar than the planning rate all year: $1.4375 per euro instead of $1.25
S4	EBIT is 15% below plan because fare and freight revenue falls short, while interest on the full $185.0 million of debt must still be paid

Exhibit 2: Performance penalties. The enterprise risk manager's estimate of the total penalties the Authority would deduct in the first full year of electric operation:

Outcome	Probability	Total penalties
Cancellation limit met every month	42%	$0
Limit exceeded in 1–2 months	28%	$450,000
Limit exceeded in 3–5 months	17%	$1,250,000
Limit exceeded in 6–9 months	9%	$2,900,000
Limit exceeded in 10–12 months	4%	$7,600,000

Exhibit 3: Separate risk events. Probability is the chance that the event occurs between signing and the end of the first full year of electric operation; each event can occur at most once in that period.

Event	Probability of occurring	Estimated loss if it occurs
The shipyard building the ferries becomes insolvent and the order moves to another yard	8%	$5,200,000
The shore-charging system fails its acceptance test and electric service starts one quarter late	38%	$950,000
A storm damages the Great Skerrow berth and closes the route for three weeks	12%	$1,650,000
Silt surveys prove wrong and channel dredging costs more than budgeted	25%	$640,000
A battery fire on board forces an evacuation and takes a ferry out of service for four months	2%	$7,400,000

الافتراضات

Amounts are in US dollars unless stated otherwise. Ignore income taxes and the time value of money.
Throughout the first full year of electric operation all borrowing in Exhibit 1 is fully drawn, the maturing notes have been refinanced in full, and no principal is repaid. The shipyard loan's euro interest is converted to dollars at the exchange rate that applies for that year.
Probabilities and loss estimates are the enterprise risk manager's assessments.
Where a question ranks risks, use only the criterion that question states. In practice management would also weigh safety and legal obligations, worst-case severity, risk appetite and the cost of responding.

The risk committee asks the chief financial officer to name the risk, among the four below that the board has stress-tested, that leaves Skerrow the least headroom above its 3.0× coverage covenant. She tests each risk with its matching board stress scenario in Exhibit 1, applied on its own to the first full year of electric operation. Which risk should she name?

الإجابة Refinancing risk: the $60.0 million of existing notes mature before electric service begins and may have to be replaced at a higher coupon than planned. Leverage and debt-service risk: with debt rising to $185.0 million, the interest must be paid in full even if the year's EBIT falls short of plan. Interest-rate risk: the $40.0 million term loan resets every quarter at the reference rate plus a fixed margin, so its interest rises if that rate climbs. Currency risk: interest on the shipyard loan is paid in euros, while Skerrow earns its fares and concession income in US dollars.

Skerrow's risk policy files a risk as strategic when it concerns whether the direction the board chooses, the organization's capabilities or the future needs of its customers will support the plan. Select the THREE risks below that are strategic.

اختيار 3 إجابات. المحدد 0 / 3

الإجابة A freight hauler that owes Skerrow $2.1 million in unpaid crossing fees has missed two payment dates and could enter bankruptcy before it settles the account. Accepting a 12-year exclusive concession worth about 45% of revenue would turn Skerrow into a contractor whose future rests on one authority's transport policy. Deckhands on the diesel ferries sometimes skip the vehicle-lashing checklist on short crossings, so an unsecured truck could shift and damage the vehicle deck. Skerrow's engineers have maintained diesel engines for decades, but the plan to lead the region in electric ferries needs high-voltage skills it has never had. A fire in the diesel fuel store at the Aldhaven terminal could injure staff, damage the pier and close the terminal to all sailings for several days. The regional government is studying a road tunnel to Great Skerrow; if it is built, many residents and truckers would no longer need the ferry.

Exhibit 2 gives the enterprise risk manager's distribution of the total performance penalties the Authority would deduct in the first full year of electric operation. The five outcomes are mutually exclusive and collectively exhaustive: together they form the complete, unconditional distribution, including the outcome with no penalty. Calculate the expected penalty for that year. Enter a positive amount in whole US dollars; no rounding is needed.

الإجابة USD

رقم صحيح.

For this exercise only, Skerrow ranks the five risk events in Exhibit 3 by expected monetary loss: the probability that the event occurs multiplied by the loss if it occurs. Evaluate each event on its own; no joint probabilities are needed. Enter the expected monetary loss of the top-ranked event as a positive amount in whole US dollars; no rounding is needed.

الإجابة USD

رقم صحيح.

Identify the response Skerrow has chosen in each situation. Skerrow fits collision-avoidance radar to its diesel ferries and adds a second officer on the bridge in fog, which lowers how often berthing collisions happen and how much damage they cause but cannot rule them out; for collision risk, Skerrow has chosen to Response to berthing-collision risk the risk. Skerrow raises the deductible on its hull insurance to $250,000 per claim in exchange for a lower premium, after the board confirms that absorbing losses of that size is within its risk appetite; for hull damage below the deductible, it has chosen to Response to hull damage below the deductible the risk. The Authority also invites Skerrow to run an overnight service for trucks carrying hazardous cargo, which would need a dangerous-goods certification Skerrow does not hold, and the risk committee declines that service; for hazardous-cargo exposure, Skerrow has chosen to Response to hazardous-cargo exposure the risk. Finally, the concession adjusts the Authority's payments for changes in the price of the grid electricity used to charge the ferries; for electricity-price changes, Skerrow has chosen to Response to electricity-price changes the risk.

Classify each risk by where the uncertainty comes from: inside Skerrow (its own people, processes, systems and decisions) or outside it (markets, customers, suppliers, regulators, nature and the wider economy). Judge where the risk originates, not whether Skerrow could act on it. Each category may be used more than once.

Skerrow's traffic forecast for the electric route was built from one unusually busy summer and was never back-tested or reviewed by anyone outside the project team.

Movements in the euro–dollar exchange rate that change the dollar cost of interest on the shipyard loan.

Skerrow's bonus plan pays captains for on-time departures but contains no measure linked to completing safety checklists.

Skerrow's IT team has never tested whether the online booking system can be restored from its backups after a failure.

A downturn in the regional economy cuts the number of tourists traveling to the islands.

Skerrow's maintenance manager postpones scheduled engine overhauls to keep this year's costs within budget.

تظهر الدرجات والإجابات الصحيحة والشروح فور تسليم الإجابات. ولا يحصل السؤال غير المُجاب على أي درجة.

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