ESTIMATION RISK REGISTER

EVENT OWNER AQEL A AL AREEDH

AUDITOR INTERNAL AUDIT TEAM
AREA ESTIMATIONS MANAGER - COMMERCIAL PROJECT

Inherent Residual Risk

Area Risk Description Potential Impact Risk Category Observation, if any Current Controls Risk Response Recommendation

Impact

Impact
Likelihoo

Likelihoo
d

d
Risk Score

Standard Estimation Lack of standard estimation sheets 1) Uncertaininty in terms of tonnage required.
Sheets 2) More time spent on estimation due to lack of
standarisation.
3) Excel sheet being developed every time for estimation
leading to errors.
4) Multiple revisions happening in the estimated numbers.
Risk Score
1) Strategic Basis the discussion with respective process owner, it has Likely High The standarisation process has already been Likely Moderate The Company should focus on developing standard
2) Operational been observed that there is no standarisation of estimation started by the process owner so that estimation process and sheets for various projects.
3) Financial process in terms of availability of standard estimation estimation process becomes more smooth,
sheets to estimate the raw materials required, number of less time taking and more accurate.
people, number of man hours and pther related costs. This
has the effect of inaccurate price estimates leading to non
competitive prices and hence possibility of losing on the
contracts.

Inter Departmental Valuable time spent on coordination and follows ups 1) Delay in estimation 1) Strategic Basis the discussion with respective process owner, it has
Coordination 2) More time spent on repititive tasks relating to 2) Operational been observed that currently a lot of the time is being spent
coordination for prices, manhours etc. on coordinating with the procurement team for getting the
prices for raw materials, buy-outs, transportation cost, on
coordination with respective managers from engineering,
fabrication ect for getting the number of man hours
required for the job. This coordination for every project
leads to huge amount of time spent which could rather be
invested in analysing the design and specifications.
Likely High Currently, there are no controls or Likely High The Company should be using a real time access window
processes in place to reduce the time spent within the IFS so that per unit prices for all cost
on coordination. variables, operational department wise manhour rates
are visible on the system and can be easily linked with
the estimation window(currenlty being standardrised
and later on to be automised). This would in turn save a
lot of time which is currently being spent on
coordination within multiple departments. For this to
happen, procurement team is also to get the annual
procurement plan from the respective GM's of sales so
that oppurtunity for entering into longer term contracts
can be utilised and prices can be locked and used for
various estimation efforts.

Variance Anaysis Variance analysis not being done item wise and rather on 1) Independent cost variables not being analysed for 1) Strategic Basis the discussion with respective process owner, it has
a wholesome basis variances. 2) Operational been observed that currently no information is being
2) Chances of same estimation errors being repeated again tracked and received for the variance analysis on a per cost
and again. variable basis and rather this is being on total project value
basis. This has the effect of not being able to manage item
wise variances and similar errors being repeated again on
similar projects leading to cost overruns or decrease in
profit margins and possible inaccurate MIS reporting.
Likely Moderate Currently, there are no controls or Likely Moderate The Company should be developing a process for the
processes in place to track variances per same but ideally this can be done if there is an automated
cost variable included in the estimation system in place within IFS or linked with IFS, having a
sheet. finalised standard estimation sheet, linked with
procurement and operational modules for per item wise
prices or man-hours. Once done, every estimation sheet
on a per cost variable wise per project basis can be
analysed for tracking the variance and more emphasis
can be stressed on those variables where there is
actually a variance.

Staff Retention Labour turnover in respect of trained staff 1) Trained employees moving out after years of training
leading to more stress on the estimation.
2) Project delays because of delays in estimation.
3) Inaccurate estimation or more time spent on reviewing
the estimation done by the newer employees.
4) Leakage of price sensitive information to competitors.
1) Strategic Basis the discussion with respective process owner, it has
2) Operational been observed that staff, specially the foreign staff, after
years of dedicated training from the seniors and on the job
training as well, quit for multiple reasons leading of
shortage of qualified staff in the estimation process or
activity.
Likely High Currently, there are no controls or Likely High The Company should be automating the estimation
processes in place for the same. process as discussed above. This would make the
process system or process driven and not people driven.
More time can be spent on brainstorming or analysing
the estimation process rather being spent in actually
filling in the cost variables or coordinating with multiple
departments, currently being done by staff.