P. 1
Risk Management and Internal Audit

Risk Management and Internal Audit

|Views: 617|Likes:
Published by HONG RY

More info:

Published by: HONG RY on Dec 26, 2009
Copyright:Attribution Non-commercial

Availability:

Read on Scribd mobile: iPhone, iPad and Android.
download as PDF, TXT or read online from Scribd
See more
See less

06/16/2011

pdf

text

original

Risk Management
and Internal Audit for MFI

&'

Summarized by Hong Ry,
Senor Internal Auditor
2007

OPERATIONAL RISK

Vulnerabilities that MFI faces in it’s
operations: portfolio quality, fraud
risk and theft.
There are 3 types of operational risk
I.Credit Risk
II.Fraud Risk
III.Security Risk

Reduced Risk Factors

Operational risk can be reduced
through developing policies and
procedures that form organization’s
Internal control system.

These controls usually included
preventive and detective aspects

Preventive Controls

Preventive Controls inhibit undesirable outcome
from happening:
Hiring trustworthy employees who can make
good credit decision
Ensure that loan are backed by collateral
Segregating staff duties
Requiring authorization to prevent improper
use of resources
Maintaining proper record keeping procedures
to deter improper transactions
Installing sufficient security measures to
protect cash and other assets

Detective Controls

Detective Controls identify undesirable outcome
when they do happen
Reconciling bank statement with cash receipts
Monitoring early warning signals for signs of
pending portfolio quality problems
Implementing delinquency management policies to
prevent late payments from escalating into bad debts
Monitoring staff performance to ensure policies and
procedure are followed
Visiting clients to ensure that their loan and saving
account balances and transaction dates correspond
with the MFI’s records

I. Credit Risk

Deterioration in loan portfolio quality
that result in loan losses and high
delinquency management cost. Credit
risk related to client failure to meet the
terms of a loan contract.
This risk can be livestock disease for
portfolio quality.
In this point we focus on Credit risk
controls
and Credit risk monitoring.

You're Reading a Free Preview

Download
scribd
/*********** DO NOT ALTER ANYTHING BELOW THIS LINE ! ************/ var s_code=s.t();if(s_code)document.write(s_code)//-->