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Apr 2022 Q2(iii)

K

kntg24

Active Member
Hi,

The question asked for actions that the company may take as a result of positive investment variance.
From the sample solution given, Why the actions given are mostly about reducing risk. Isn't it a good thing to have positive investment variance since it means actual investment return is better than expected? Or did i interpret it wrongly?

Thank you
 
The fact that there is an investment variance could indicate that the company has a mismatched asset-liability position and is taking on a material degree of investment risk. OK, so this risk-taking went well for it during this period - but there's a good chance that it could go badly in another period. So it might want to avoid that.
 
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