Operation Auditing – mini script.

“In continuation of our topic, we based our identified risk and recommendations on their Integrated
Annual Corporate Governance Report for the year ended of 2020. And we had further classified the risk
into two parts: Financial and Operational. With Financial risk pertaining to the possibility of losing
company money on an investment and joint venture, while operational risks are those risk of losses
caused by flawed or failed processes, policies, systems or events that disrupt business operations.

Under the Financial Risks, there are Interest Rate risks that arises from the potential change that the
overall interest rates will reduce the value of a bond or other fixed-rate investment. The
recommendation behind it is that, the company must use derivative instrument to fix the interest rate
over the term of the debt. How this works, basically an interest rate swap turns the interest on a
variable rate loan into a fixed cost based upon an interest rate benchmark. Essentially, holding a
derivative contract can reduce the risk of bad harvests, adverse market fluctuations, or negative events,
like a bond default. And their recommendation, and that is the creation of company policy, enabling to
reduce interest payments and lessen the company’s exposure to bad debts.

Another is the Credit risk, which is the possibility of a loss resulting from a borrower's failure to repay a
loan or meeting contractual obligations. For the corporation, such risks are included … (basahin ang
bullet points) …while the recommendation to lessen such risk is that, in cases of non-collection, such
exposed credit risk must be contained right from the moment of such occurrence, that is by providing
allowance of non-collection. And that by, implementing policy not permitting the company’s exposure to
risk of collection.

While under the Operational risk, there are risk exposures as to the company’s physical assets due to
economic and/or physical factors that may affect its operations. The Recommended procedures to
lessen the burden of the risk, are given … (basahin ang bullet points) … and in essence these ways only
pertain on providing complete transparency of all asset’s data, to enable the company to know the
status, procurement date, location, price, depreciation, and the current value of each asset.

And continuing our report, let us listen to Mr. Nicavera for more Operational risks and
recommendations.