FINANCE RISK REGISTER

EVENT OWNER UBAID MUHAMMAD HANIF

Inherent Residual Risk

Likelihood

Risk Score

Likelihood

Risk Score
Impact

Impact
Bad Debts No timely reversal of provision for doubtful 1) Higher amount of liability being carried. Operational It has been observed that currently the provision for bad and Almost certain Moderate Almost certain Moderate The company should be reversing the provision for
debts 2) Income not recognised on account of not reversing of Financial doubtful debts made against a receivable is not reversed doubtful debts created for any particular debtor or
provision of doubtful debts. subsequently when the provided for amount is subsequently debtors, if subsequently the amount is recovered in full.
3) Expense not recognised in future on account of not collected and it is considered as a reserve for other doubtful By not reversing the provision, the company utilises the
reversing of provision of doubtful debts. accounts (in future) provision not reversed for future provisioning on bad and
4) Lack of true and fair view. doubtful debts.
The company shall be recognising the other income on
account of reversal of provision for monet already
recovered from customer and later on shall be
recognising the expense on account of creation of
provision for bad and doubtful debts for other debtors by
not utilising the provision already created and not
reversed.
This will ensure that true and fair nature of the financial
statements.

Collection No automated process of application of Possibility of wrong application of payments against invoices Operational It has been observed that curently there is a manual WO Almost certain Low Almost certain Low The Company should be interlinking the invoice number
payments against invoices Financial status report maintained and a weekly receivables are and the project number. This way the finance team shall
monitored with the President. The invoices collected are get to know the project number to which the collection of
circulated to the Project financial control responsible for a particular invoice relates to. This shall save the time on
raising the invoices and he confirms the invoice reference to letting the invoices sent back to project financial control,
which the collection relates to. Accordingly collection is whether through mail or in hard copies, and getting
applied against the receivable balance. confirmations on account of which invoice payment
relates to which project code or number or project. Also
there shall be more accuracy by doing so as this shall
eliminate any case of wrong application of money
received against any debtor.

Revenue Recognition No timely accruals for percentage based 1) Possibility of financial statements not reflecting true and Operational It has been observed that the nature of contracts range from Possible Moderate Possible Moderate As a process improvement, the company should modify
revenue fair view Financial supply and erection, pure supply, fire proofing, galvanising the responsibility structure and ideally should make it the
2) Inaccurate Management Information Reporting services to third parties. responsibility of project management team to enter the
At this point of time, finance function is the one putting in percentage of completion status at the end of the
the percentage of completion and triggering the revenue reporting period so that the finance can trigger the
recognition for all projects. Input for this is received from "Percentage of Revenue Model" to recognise the revenue
the project management team. This is currently manual and for the reporting period.
ideally the input on account of this should come from project This will segregate the duties for the effective functioning
management team only so as to have full functionality of the and faster closing.
system.

Consolidation No automated controls over the consolidation 1) More chances of inaccurate reporting Operational It has been observed that there is a documented monthly Possible Moderate Possible Moderate The Company should embed all consolidation protocols
process 2) More time being spent through manual consolidation close process but for IFS purposes, Ras Al Khaima and Saudi for the financial statements at the ERP level itself so as to
Arabia operations are considered as two different entities, achieve a smooth consolidation and faster close process.
financial statements are prepared separately and then Even though it is understood that IFS is currently in the
ultimately consolidated at the Saudi Arabia headquarters. implementation phase, but company should regularly
But currently, the consolidation is done outside the IFS assess and address all challenges which finance
system and done manually. This is for the reason that IFS is department might face on system getting live for
currently in the implementation phase. consolidation of financial statements.

User Needs ERP not sufficiently meeting needs of users 1) Less automation Operational It has been observed that even though the IFS requires more Possible Moderate Possible Moderate As the implementation of IFS is on an live basis as of now,
2) Less integration among multiple departments data to be entered on an manual basis but all the modules the company should analyse the possible micro level
3) Lack of audit trail and other data sets are currently available in IFS and very integration in the system for multiple departments so
well serving the finance department. that there is complete automation. For example: system
There is a need for more data entry required because should take the input of delivery notes and atuomatically
currently there is less integration between multiple create a cost of goods entry to be reflected to the finance
departments on IFS. function.
This helps to create a complete end to end solution,
clearly defined process flow, availability of audit trail.

Manual Adjustments Too many manual accounting 1) Possible delays in financial close process Operational It has been observed that there are quite a few accounting Possible Moderate Possible Moderate The Company should embed the concept of multi
entries/adjustments 2) More chances of errors being made entries/adjustments done at every month end at a manual company vouchers so that if one leg of the accounting
level. entry is passed by the system through any uder
department, the other leg should be automatically given a
hit through the operation of multi country voucher. As
and when this is accessed by other department, they can
verify, approve and post the accounting entry.

Advances No documented policy for supplier advances 1) Possible high amounts of cash outflow Operational It has been observed that there is no standard documented Almost certain Moderate Possible Moderate The company should have a approved and documented
2) No avoidance of conflict of interest Financial policy for advance to suppliers. The norm is to have credit policy for supplier advances covering general provisions
whereas in case of new suppliers or the existing one asking regarding advance payments including the requirement
for advance the percentage is agreed upon case by case basis for Purchase Order notation, the submission of invoice,
by procurement team. accounting
reconciliation, receiving and documentation, and
required approvals.

Budget Committee No budget committee In place 1) Possible irresponsible budget decision Strategic It has been observed that currently there is no budgeting Almost certain Low Almost certain Low Considering the scale of operations the company has, it
2) Possible unfairness in budgeting protocols Operational committee as such. Based on the order backlog together with shall be ideal for the company to have a budget
3) Unfair allocation of resources new orders to come, the potential years' sales is calculated committee in place. Having a budget committee prevents
while according to the actual expense in the preceding year any one department from enacting an unfair or
plus any potential changes as may be required amounts are irresponsible budget decision without support from other
projected which is approved by the President. The budgets departments. This can lead to a greater sense of fairness
are prepared on a monthly basis which is accumulated to and prevent resentment between departments that have
arrive on the yearly figure. conflicting budget needs. It also enhances shared
accountability because the entire committee, and the
organization it represents, is responsible for spending
decisions.
Job Costing Lack of integration of job costing with IFS Operational It has been observed that currently the job costing exercise Almost certain Moderate Almost certain Moderate The company should be integrating the job costing
is outside the IFS ERP exercise or module with the IFS ERP and covering
following areas:
1) Tagging of job numbers to individual items of expense
2) System based allocation of overhead costs to multiple
jobs
3) Monthly variance analysis reports
4) Uploading of documents for the job cost sheet
STEP I Choose one of the following to define the likelihood of the risk happening
LIKELIHOOD
Level of risk Assessment
Almost certain Is expected to occur in most circumstances
Likely Would probably occur in most circumstances
Possible Could occur at some time
Unlikely Is not expected to occur
Rare May occur only in exceptional circumstances

STEP 2 Choose one of the following to define the impact is the risk happens
IMPACT
Level of risk Assessment
Extreme Significant impact on the achievement of goals/objectives
High High impact on the achievement of goals/objectives
Moderate Moderate impact on the achievement of goals/objectives
Low Impacts on a limited aspect of the activity
Negligible The consequence are dealt with by routine operations

STEP 3 Use these two ratings to determine the overall risk rating
(green,yellow,amber,red)

Likelihood Impact
Rare Negligible
Rare Low
Unlikely Negligible
Unlikely Low
Rare Moderate
Rare High
Unlikely Moderate
Possible Negligible
Possible Low
Likely Negligible
Rare Extreme
Unlikely High
Possible Moderate
Possible High
Likely Low
Likely Moderate
Almost certain Negligible
Almost certain Low
Unlikely Extreme
Possible Extreme
Likely High
Likely Extreme
Almost certain Moderate
Almost certain High
Almost certain Extreme
 Product Color Coding Risk Rating
RareNegligible G
RareLow G
UnlikelyNegligible G
UnlikelyLow Y
RareModerate Y
RareHigh Y
UnlikelyModerate Y
PossibleNegligible Y
PossibleLow Y
LikelyNegligible Y
RareExtreme A
UnlikelyHigh A
PossibleModerate A
PossibleHigh A
LikelyLow A
LikelyModerate A
Almost certainNegligible A
Almost certainLow A
UnlikelyExtreme R
PossibleExtreme R
LikelyHigh R
LikelyExtreme R
Almost certainModerate R
Almost certainHigh R
Almost certainExtreme R