2 The risk committee at Southern Continents Company (SCC) met to discuss a report by its risk manager, Stephanie Field. The report focused on a number of risks that applied to a chemicals factory recently acquired by SCC in another country, Southland. She explained that the new risks related to the security of the factory in Southland in respect of burglary, to the supply of one of the key raw materials that experienced fluctuations in world supply and also an environmental risk. The environmental risk, Stephanie explained, was to do with the possibility of poisonous emissions from the Southland factory. The SCC chief executive, Choo Wang, who chaired the risk committee, said that the Southland factory was important to him for two reasons. First, he said it was strategically important to the company. Second, it was important because his own bonuses depended upon it. He said that because he had personally negotiated the purchase of the Southland factory, the remunerations committee had included a performance bonus on his salary based on the success of the Southland investment. He told Stephanie that a performance-related bonus was payable when and if the factory achieved a certain level of output that Choo considered to be ambitious. ‘I don’t get any bonus at all until we reach a high level of output from the factory,’ he said. ‘So I don’t care what the risks are, we will have to manage them.’ Stephanie explained that one of her main concerns arose because the employees at the factory in Southland were not aware of the importance of risk management to SCC. She said that the former owner of the factory paid less attention to risk issues and so the staff were not as aware of risk as Stephanie would like them to be. ‘I would like to get risk awareness embedded in the culture at the Southland factory,’ she said. Choo Wang said that he knew from Stephanie’s report what the risks were, but that he wanted somebody to explain to him what strategies SCC could use to manage the risks. Required: (a) Describe four strategies that can be used to manage risk and identify, with reasons, an appropriate strategy for each of the three risks mentioned in the case. (12 marks)