FINANCIAL AND OPERATIONAL RISK MANAGEMENT

AT
PSO CARDS DIVISION

Project Presentation
January, 2017

Presented by: Syed Anwer Bakht – ACCA (UK), CPA, CGA (Canada)
ERP Id: 08056
EMBA-2
AIMS AND OBJECTIVES

• Identification of financial and operational risks

• How are the risks identified and managed

• Results of weak internal controls

• A conclusion drawn regarding the present financial and operational situation

• A brief proposal to improved risk management

COSO FRAMEWORK

Following processes were done in line with COSO’s ERM-Integrated Framework

• Identification of risks related to key activities

• How are the risks measured?

• Risk response and control activities

• Results of weak internal controls

Z-SCORE MODEL

The purpose of credit risk evaluation model used within PSO Cards are:

• Identification of credit risks and its risk level

• Risk mitigation

• Proposal to improved risk management

COSO FRAMEWORK – IMPLICATION

Following processes were done in line with COSO’s ERM-Integrated Framework

• Identification of risks related to key activities

• How are the risks measured?

• Risk response and control activities

• Results of weak internal controls

COSO FRAMEWORK – IMPLICATION

Risk
Credit worthiness

Measurement
GoP accounts: Request v Budget
Non GoP accounts: Credit score & risk level?

Response
SD/BG High Credit Low, Request<budget
COSO FRAMEWORK – IMPLICATION

Risk
Form filling

Measurement
Fuel consumption column

Response
Rejected or requested to re-submit after correction
COSO FRAMEWORK – IMPLICATION

Risk
Pre-requisite documents

Measurement
Audited financials National Tax Number
Sales Tax Number Bank Guarantee

Response
Non provision of pre-requisites: Reject application
COSO FRAMEWORK – IMPLICATION

Risk
Unauthorized signatory

Measurement
Amount approved against fake request

Response
- Updated signature database
- Verification before REF
COSO FRAMEWORK – IMPLICATION

Risk
Poor payment history

Measurement
> 90% timely payments = Excellent > 75% = Good
> 50% = Average < 50% = Poor

Response
Excellent = Credit granted For rest, CEC decides
COSO FRAMEWORK – IMPLICATION

Risk
Outstanding receivables

Measurement
Daily receivables report

Response
Hold request until receivables completely recovered
COSO FRAMEWORK – IMPLICATION

Risk
Default in LPS Short/Late payment No payment

Measurement
LPS to Non GoP customers @ 2%
No LPS to GoP customers
Waiver authority with MD

Response
No CE unless defaults cleared
Reversal in case of uncontrolled events
Account blockage
COSO FRAMEWORK – IMPLICATION

Risk
Account closure

Measurement
Erroneous closure instead being blocked

Response
Caution while closure
Update master file on customer request only
Z-SCORE MODEL – IMPLICATION
Non Financial
Corporate Status, Company’s Age, Auditor’s Rating

Liquidity
Operating Cash Flow Ratio, Quick & Current Ratios

Profitability
OCF,OP,NP Margins & CLR Ratio

Coverage
Operating Cash Flow (OCF) coverage
 RECOMMENDATIONS

•Industry specific risk evaluation models

•Elimination of unnecessary processes

•Reconciliation of unidentified customers

•Detailed workings and presentation on telecom and GoP sectors

•Profitable rate of service charge

THANK YOU