I'm having problems with question X9.4 (ii). The notes only give two sentences to cover "risk financing" and don't really give me much idea what's involved. So a couple of questions really: (1) What actually is "risk financing"? (2) What do you think this question is after? Is it things like "invest in long-term, real assets to match future liabilities"?
Not doing it so can't really help. But go with your instinct. You won't be able to 'phone a friend' in the exam room. You have 2 choices: leave it out, or give it a stab. Latter is better as you should get feedback as to why you're off track (if that's the case). Marks now don't really matter. You can have a look at the solutions when you get them. By the way you write, I'm guessing you haven't get them already
Risk Financing Risk financing involves two stages: 1) working out how much a risk is going to cost your business 2) deciding how you will finance that loss So your idea about holding matching assets is a good example of step 2. Think about how you might finance any shortfall if the funds are inadequate. And also talk about step 1 above - how you would estimate the cost.
