krestonmenon.com | Pages 12

APRIL - JUNE 2019 | Vol. 49

NEWS

CHANGING THE LANDSCAPEof Internal Audit

FINTECHChanging the way you bank

TECHNOLOGYin the Driver's Seat

AJMAN FREE ZONEOffering Outstanding Businessand Investment Opportunitiesfor more than 3 Decades

The Government of UAE has announced yet another investor friendly policy. The new long-term visa policy declared recently, will definitely attract more entrepreneurs and exceptional talents to the UAE and thus further cement UAE’s position as the most preferred investment destination in the region. The proposed long-term visa for outstanding students will ensure a vibrant local talent pool of young professionals specializing in the technologies for tomorrow.

As their spouses and children are also benefitted, many scientists and specialists will be encouraged to make UAE their workplace and home. My colleague, Pushpakaran who heads Kreston Menon Corporate Services provides more details in this newsletter.

A.H. Balaji, Partner – Kreston ME Consulting in his article “Changing the landscape of Internal Audit”, describes how disruptions caused by technology and growing competition to be the industry leader have brought to the fore, key questions regarding value creation, effectiveness and relevance of internal audit. He explains how the Internal Audit process have transformed from a typical checklist-based conventional approach

EDITOR’S NOTE

to a more sophisticated, comprehensive and risk-based audit.

The financial space has changed significantly in the past decade with the emergence of new technologies and increased competition in the marketplace. In the previous edition of the Kreston Menon News, I had highlighted the impact of Artificial Intelligence on businesses, while in this edition I am talking about how Fintech is changing the way we bank. In an interesting article on the challenges and opportunities technology brings to businesses, Jikku asks a pertinent question – Is technology in your driver’s seat?

Embracing openness and collaboration will be the key to success in this era of disruption!

CA. Raju Menon

Kreston Menon News 2

Kreston Menon Partners with the Chief Guest, H.E. Sami Al Qamzi, Director General of Dubai Department of Economic Development, H.E. Vipul, Consul General of India to Dubai and Liza Robbins, CEO of Kreston International at the Kreston Menon Launch and “25 Years in UAE” Celebrations.

Raju Menon, Chairman & Managing Partner and Girija Menon, Partner of Kreston Menon with the Chief Guest, H.E. Sami Al Qamzi, Director General of Dubai Department of Economic Development at the event.

Raju Menon with H.E. Vipul, Consul General of India to Dubai and H.E. Majid Saif Al Ghurair, Chairman of Dubai Chamber.

Kreston Menon Launch and “25 Years in UAE” Celebrations

BackgroundThe inadequacy of system to cater to business needs, issues regarding integrity and robustness of data generation (MIS), the absence of management strategy for monitoring risks, lack of control over the operational process, ambiguity over policy and procedures and issues so galore.

The above situations appear familiar? Indeed, these are common challenges that plague many businesses regionally and globally. Conventional belief laid emphasis on achieving business results and cash inflows, relegating the need to address pressing issues. Mounting challenges of varied nature posed by new economic order have made compelling reasons for businesses to introspect, to improve efficiencies, identify and manage risks, control leakages, rationalize costs etc. With matters of risks, control and governance gaining priority, many businesses are viewing internal audit as an important tool to achieve its dynamic objectives.

This article is an effort to shed light on the new approach used in internal audits that has led to increasing acceptance of internal audit activity as an investment that provides a return to an entity and not just reflect as a cost on the income statement.

About Internal AuditInternal Audit as a concept is exhaustive, but broadly refers to an activity carried out by independent professionals to assess whether an entity’s process and controls are adequately designed and are operating effectively, business risks are effectively identified and managed, whether resources are efficiently utilized etc. Based on the observations and findings, solutions and suggestions for improvements are provided in the form of a report to the team entrusted with governance.

The process areas covered under internal audit activity can be extensive but generally includes inter-alia, review of operational and financial functions of an entity (Operations, Procurement, Finance and Accounts, Human Resources,

Information Technology etc.). Depending on the size of the entity, complexity of operations and the objectives to be achieved, approach to internal audit could assume the form of review, by covering different functions over a period. Alternatively, it may involve review of the design of all the functions at a time, backed by follow-up reviews. Dividing the scope into various functions, covered over a period, facilitates specialized focus on the department’s efficiency in achieving functional objectives as well as entity’s objectives.

Evolving Internal Audit ApproachThere has been a paradigm shift in the expectations of businesses from the internal audit activity. Growing business competition, disruptions caused by advancement in technology and the desire and vision to be the industry leader by clients have brought to the fore, key questions regarding value creation, effectiveness and relevance of internal audit. This entailed an objective response by the internal audit fraternity, transforming the activity from a typical checklist-based conventional approach to a more sophisticated, comprehensive and risk-based audit. Erstwhile ApproachTraditional internal audit approach involved an overall review of process and controls for compliance to established procedures from financial accounting/treatment perspective. Also, the earlier approaches had greater focus on transactional accuracy and compliance with approved procedures.

This, to a large degree, ignored any significant impact of risks arising from operational, market and regulatory factors of the business. As a result, the traditional approach reduced the internal audit to a mere fault-finding activity drawing lesser participation from the client management.

New Approach to Internal AuditWith the advent of the renowned concept of Enterprise Risk Management (ERM) Framework, a model developed by Committee of Sponsoring Organization of the Treadway Commission (COSO) for evaluating the risk management practice of an entity, coverage under internal audit has evolved into a more holistic and objective-based approach.

CA. A.H. BalajiPartnerKreston ME Consultingbalaji@krestonMEconsulting.com

Continued to Page 11

Knowing you. 3

INTERNAL AUDITChanging the landscape of

Mankind and InventionsMankind has always found solutions to the problems at hand or have invented ways to make their life easier. Be it from the primitive age when fire was invented or rather discovered, or the invention of the wheel which revolutionized the world.

There are many enthralling stories of inventions like the electrical bulb, aeroplanes and motor cars. But I would like to draw your attention to more than couple of thousands of years ago, when King Hieron engaged hundreds of people to launch Syracusia, a 55 meters long ship, which can rival the most luxurious modern cruises like RMS Queen Mary 2 or the Harmony of the Seas. Despite the physical labour of hundreds, they couldn’t get the vessel into the sea. That was when Archimedes who proclaimed, “Give me a place to stand and I will move the world” came into the picture. He built a pulley system that allowed him to single-handedly move the ship and set it on to the path for many voyages across the oceans.

Financial Services and TechnologyArchimedes managed to invent and use technology to solve a problem, and today we have advanced technology to help us make financial services more efficient and effective. That technological backbone is called Fintech.

In the 1970s, automated teller machines (ATMs) changed the way people banked. Later, credit cards and internet changed the way people purchase goods and services. Then, it was the penetration of smartphones that radically changed the way consumers interact with business. Today, Fintech is changing the way people do business.With the increased use of smart phones and the development of appropriate interactive tools and platforms, Fintech has captured the market, offering products and solutions for which

banks once claimed that there can be no substitution such as e-payments and online trading.

While Fintech companies were initially viewed as a competitor by banks, the two are now benefitting from working together. The World Retail Banking Report says, 91 percent of banks and 75 percent of Fintechs expect to partner with banks in the near future.

Today, Fintech disruptors are changing the face of financial services. For every aspect of transactions - be it lending, credit, payments and insurance - banks and traditional financial institutions are either partnering with Fintech companies or developing their own solutions.

Integrating Fintech & Banking Application Programming Interface (API) is driving this evolution. Once a jargon only used by technical experts, APIs are becoming part of our everyday vocabulary as they provide more capabilities and opportunities for Fintech companies and financial institutions to work together and serve their customers better.

In an era, where institutions strive to be customer-focused and want to create a superior customer experience this technology ensures simple, frictionless experiences for their customers.

Open banking allows banks to share data with third-party companies or applications securely and in real time, using APIs. The emergence of APIs and Open Banking has changed the image of traditional banking being slow by providing fast and secure banking experience for the customer.

TRENDS TO WATCH

New RegulationsPayment Services Directive 2.0 (PSD2) is the legislation made to create a single market for payments in the European Union and is considered as a giant step to ensure more protection to customer data. PSD2 will end the monopoly of banks on their customer’s data. It will allow merchants like Amazon, to

Changing theway you bank

CA. Raju MenonChairman & Managing PartnerKreston Menonrajumenon@krestonmenon.com

Kreston Menon News 4

FINTECH

retrieve customer account data from their bank - with your permission. That means when the customer buys something from Amazon, the payment can be direct, without having to redirect the customer to another service like Visa or PayPal.

The changes in the directive will enable Account Information Service Providers to access, compare and process data from multiple bank accounts of a single customer. PSD2 will also require stronger identity checks when paying online, particularly for high value transactions.

It is noteworthy that both the General Data Protection Regulation (GDPR) and the PSD2 took effect simultaneously. September 14, 2019 is the final deadline for all EU corporations to comply with PSD2’s Regulatory Technical Standard (RTS).

Regulation Technology (RegTech)As Fintech has to adhere to regulatory compliance, financial institutions are investing in technology to sync the regulatory process with the transactions. Machine Learning (ML) algorithms can help banks to comply to the regulatory standards of controlling bodies like central banks, GDPR (General Data Protection Regulation), etc.

Blockchain AdoptionThough there has been much hype and much more confusion about blockchain technology, Fintech is exactly the industry that is influenced by blockchain. According to a study by PwC, 77% of Fintech companies will adopt blockchain by 2020. The blockchain records transactions and updates the digital ledger online without anyone having complete access to the data stored.

Mobile PayMobile banking is showing a strong upward trend with 36% of smartphone users using payment apps like Paypal, Apple Pay, Venmo and Google Wallet. QR code scanners and NFC (Near-field communication) devices in many points of sales (POS) make mobile transactions so convenient.

AI, NLP, IoT and RPAArtificial Intelligence is revolutionizing individual financial

planning, fraud detection (AML) and process automation. This technology not only enhances the efficiency of financial sector by eliminating human interference but also has proved to be valuable for maintaining the supply chain, reducing the risks of cyber-attacks.

NLP (Natural Language Processing), a branch of AI, can help the digital banking customer support by processing a large number of queries with the aid of virtual customer assistants (VCA) or chatbots.

By integrating Internet of Things (IoT) into Fintech, banks and other financial institutions are enhancing the customer experience as well as ensuring data protection.

Robotic Process Automation (RPA) software will automate human efforts and eradicate human error. Studies say that by 2020 there will be rapid acceptance in the financial service sector to adopt technologies that use bots, automation of employee duties and workflow construction.

Voice RecognitionAfter Siri and Alexa became popular among smart phone users, modern banks are now implementing AI-driven voice technologies to help customers make easy and secure banking transactions. Already major banks are using voice recognition as a reliable authentication method for your bank account.

Fintech Tomorrow The financial space has changed significantly in the past decade with the emergence of new technologies and increased competition in the marketplace. Today, bankers see the rise of Fintech as an opportunity to expand products and services as well as ensure customer satisfaction.

Digital disruption has the potential to shrink the role and relevance of today’s banks, but they are shaking themselves out of institutional complacency and recognize that merely navigating waves of regulation and waiting for interest rates to rise won’t protect them from obsolescence. Embracing openness and collaboration will be the key.

Knowing you. 5

FINTECHIMPACTZONE

Companies selling insurance digitally or providing data analyticsand software for (re)insurers

INSURANCE

CAPITALMARKETS

WEALTHMANAGEMENT

MONEY TRANSFER/REMITTANCES

MORTGAGE/REAL ESTATE

LENDING

BLOCKCHAIN/CRYPTO

REGTECH

PERSONALFINANCE

PAYMENTS/BILLING Sales & trading, analysis and

infrastructure tools for financialinstitutions

Investment and wealth management platforms & analytics tools

International money transfer & tracking software

Mortgage lending, digitization & financing platforms

Payments processing, card developers, & subscription billing software tools

Tools to manage bills & track personal and/or credit accounts

Audit, risk & regulatory compliance software

Companies leveraging blockchain technologies for

financial services

Marketplace lending & alternative underwriting platforms

Courtesy: CB INSIGHTS

Technology is impacting everyone’s life directly or indirectly in today’s world. The selection of this topic is made carefully to ensure that the importance is conveyed while not putting any of the readers in panic mode.

One of the major challenges for businesses in today’s world is the failure to cope up with the emerging technologies. Let me share two classic examples which are often used to describe how two of the biggest super companies in their respective fields have lost its leadership because they were not willing to or could not embrace new technologies. Kodak, which once dominated the photographic film market succumbed to technology as it could not move into the digital world. Nokia is another classic example of digital disruption which lost its leadership in the mobile phone segment as it could not adapt itself to effectively meet the user’s expectations. Nokia had a market share of 49% in worldwide mobile sales in 2007 and today it is less than 1%.

How can technology help businesses?Adopting the latest technology such as Robotic Process Automation (RPA), the businesses could automate the mundane, repetitive, high volume and rule-based tasks. Removing these responsibilities from employees’ workload would mean that they can focus on tasks that are yielding higher productivity levels across the organization.

Furthermore, using Artificial Intelligence (AI) would help in processing, handling and analyzing large amounts of data far more efficiently and utilizing it to create meaningful business inference and insights. As a result, the chances of errors would be minimized and firms can get more accurate insights into various areas of business including sales, operations, supply chain and more. Also, the information gathered can be used by the businesses to augment their offerings and services to clients.

In years to come, the values of clients will be tested even more on following fronts: brand recognition, agility to change, speed of change and innovation.

Challenges faced by businesses in adopting to new changesIt can be a bit daunting and overwhelming for businesses to invest in change, especially in technology. With the array of technological applications in the market, the fear of choosing the wrong tools and differentiative feedback by peers may push back clients from shifting towards new technologies. Another challenge for businesses can be integrating the latest technology with the existing systems as sometimes latest technologies do not integrate with older information systems and hence requiring a complete revamping of the technology’s architecture. With the surge in cyber-crimes throughout the world, taking necessary steps to secure the data would also be a challenge for businesses.

Apart from the technological challenge which the businesses may face would be the resistance from the employees towards change as they might become wary of their individual jobs.

Reinventing business in the digital era

Jikku LukeSenior ManagerMMJS Consultingluke@mmjs.co

Technology in thedriver’s seat?

Kreston Menon News 6

What is the role of Consulting firms?As the times change the expectations of clients have also changed, and it is important for a consulting firm to understand the clients’ long term vision.

Considering the complexity involved in the recent technological developments, it will be imperative for clients to turn to consultants or advisors in order to help them navigate the steps that lie ahead.

Clients would require support and insight to help them understand the effects of technology both today and in twenty years’ time so that they can plan the transitions. With the buzz words such as AI, Crypto, Blockchain, RPA being used more in recent times, it is important for a business to understand what is relevant and how to be futuristic in its approach. Without clear guidance and understanding, adopting any of the new technology is a disaster waiting to happen.

Consulting firms will play a critical role in guiding the clients in selecting these disruptive technologies and implementing them. The role of consultants would not be restricted to explaining the technological changes to clients but also include steering them towards the best platform and designing the appropriate vehicle to get them there. The potential market opportunity to create value (and share in that value creation) could be huge.

What is MMJS doing in Technology?As a consulting firm, understanding the changing technological framework and taking actions at an appropriate time will determine the relevance of their role in the future as advisors. MMJS Consulting, a group entity of Kreston Menon was formed with a vision to be driven by two major factors that is knowledge and technology.

As a testimony to this, MMJS has partnered with FTA approved VATeGenie (tax engine) to revolutionize the VAT compliance process in the GCC. Clients using multiple source systems and having unstructured data find it extremely challenging to file their tax returns.

The preparation and review of tax returns are manually done which increases the chances of human error and this can easily be filtered through logics and algorithms embedded in VATeGenie with minimal human support. VATeGenie combines MMJS’ tax consulting expertise and advancement in technology to become a disruptive solution and a true value add for businesses.

MMJS has also partnered with CCH Tagetik to develop applications and automation tools for IFRS implementations, budgeting, reporting etc. Internal Audit (IA) and Statutory Audit (SA) are very ripe for disruption and as a firm driven by technology, we have started working on how RPA can be used to perform IA and SA.

While above are some of the examples of technology driven solution, there are many others which the team at MMJS is working in the background with a single goal of adding true value to the clients and their businesses.

ConclusionAs can be inferred from above, although the impact of these emerging technologies is profound, the real impact is yet to be fully understood. Businesses should work with consultants to achieve the common goal i.e. to remain competitive in this fast-paced economy. Consulting firms should embrace different skills and equip themselves to be able to advise and support the businesses. We believe that with the right support, businesses can make immeasurable returns out of these changes and disruptive innovation.

At MMJS we have embraced technology to be in our driver’s seat and are aligned to our vision of becoming a technology company that provides consulting services. Who is in your drivers’ seat?

Knowing you. 7

“Without clear guidance and understanding, adopting to any of the new technology is a disaster waiting to happen.”

“MMJS has partnered with FTA approved VATeGenie (tax engine) to revolutionize the VAT compliance process in the GCC.”

“At MMJS we have embraced technology to be in our driver’s seat and are aligned to our vision of becoming a technology company that provides consulting services.”

Established in 1988, Ajman Free Zone (AFZ) offers outstanding investment opportunities to both local and foreign businessmen and investors. We provide progressive infrastructure and top-of-the-line facilities to foster competitive privileges allowing companies to realize their full potential.

Ajman Free Zone has revolutionized the business sector of the United Arab Emirates (UAE) through its immense initiative in Ajman’s industrial expansions. AFZ’s strategic location enables an ultimate accessibility to seaports, airports and to an international road network that enables AFZ to serve and connects with its neighboring countries.Ajman Free Zone is a haven for all investors and business start-ups from around the world as it offers a complete range of custom-made business solutions for all its stakeholders. İts unwavering integrity, credibility, creativity, and innovation are what put AFZ onto the map of marked excellence. İt continuously thrives in the fast-paced economic evolution and adapts to the ever-changing rules and regulations of the country.

Supported by our strong fundamental values, and driven by our purpose, AFZ is designed to be the ultimate business destination in the Gulf region extending its service throughout the western and eastern markets. AFZ is committed to creating a lasting legacy for future generations by delivering a sustainable business environment for investors combined with growth and prosperity of the local community.

Ajman Free Zone is committed to creating attractive and sustainable investment opportunities for future generations to positively reflect on the development and growth of the local community. The region includes more than 8000 registered companies whose activities range from general trade, e-commerce, services and industrial companies.

Our Commitment to InnovationAs part of Ajman Vision 2021 and the greater UAE Vision 2030, the Free Zone has become more future focused and is investing heavily in diversifying its portfolio in areas such as advanced technology, artificial intelligence and nano- technology, as well as education, health and retail.

These new target sectors and partnerships aim to not only attract new businesses but equally important, create a dynamic and holistic environment for the Emirate of Ajman, that has greater access to international markets and a bigger opportunity for collaboration.

Our commitment to innovation is central to all of our operations; most importantly, it enables our investor businesses to enjoy convenience and high efficiency from the moment they decide to establish their company here. We recently launched a new and innovative mobile app to make business management easier and faster, at an event attended by Sheikh Ahmed bin Humaid Al Nuaimi, Chairman of the Free Zone. The newly-launched app will reduce the time and effort it takes for business owners to obtain a new license or to renew a current license, and to make online payments, amongst other features.

The new app will assist the Ajman Free Zone business community to manage their companies via their smart mobile phones. The app boasts a number of features including new license requests, renewal of the existing license, notification alerts and safe payment processes.

Kreston Menon News 8

AJMAN FREE ZONEOffering Outstanding Businessand Investment Opportunitiesfor more than 3 Decades

Fatma Mohammed SalemDirector General -ActingAjman Free Zoneinfo@afza.gov.ae

The introduction of it follows the launch of a revamped and user-friendly website at the end of last year aimed at enhancing the users’ experience, and it forms part of a larger endeavor by Ajman Free Zone to innovate digital services.

Ajman Free Zone is also working closely with the Global Innovation Academy (GIA) to ensure its personnel become certified innovation practitioners. The GIA is an international knowledge power-house committed to spreading innovation culture through research, design and development of world-class competency-based modular training and learning programs leading to the certification of practitioners, as well as the licensing of innovation trainers, assessors and consultants.

Showcasing Benefits Abroad and at HomeShowcasing the myriad benefits of establishing a business here to an international audience is a crucial part of our mission. Earlier this year, senior representatives of Ajman Free Zone attended the 25th edition of The Partnership Summit in Mumbai and Bosco conference at Mosco & St. Petersburg and showcased the many benefits for Indian and global investors of locating their businesses in the Emirate.

AFZ has locally participated at Future Build 2019 as a strategic partner and number of other local conferences. Ajman free zone has a permanent location at Dubai Trade Center to provide information to investors and highlight the great opportunities and preferential advantages.

Modern Business OperationsAjman Free Zone offers a variety of options for investors such as modern warehouses ranging from 100 square meters and offices of all sizes and types including shared offices, business center and freelancer license.

The practicalities of business operation is an area to which we have given great consideration. We have recently entered into an agreement with Al Zorah, one of Ajman’s leading developers, which sees us managing a state of the art Business Centre offering up office premises to investors who can benefit from well-appointed accommodation and a range of excellent support services.

For businesses within the wholesale and retail trades, China Mall offers a superb opportunity. This Chinese Merchandise Procurement Centre is the third largest transfer center after Singapore and Hong Kong. Established in 2010, it benefitted from an extension in 2015 and now boasts over 1600 outlets representing a variety of merchandise sectors including textiles, hardware, appliances and home décor items.

AWARD WINNINGThrough Ajman Free Zone’s consistency, transparency and reliability as a leading business service provider, have managed to secure numerous recognitions and awards locally and internationally from various entities.

FURTHER INFORMATION:For further information on Ajman Free Zone, please visit the website: www.afz.ae

Knowing you. 9

The UAE Government has decided to grant investors a ten-year residency visa, as well as to grant residency visas of up to 10 years for specialists in the medical, scientific, research and technical fields, and for scientists and creative talents of culture and arts, including their spouses and children. The decision aims to maintain the position of the UAE as an optimal business environment.

InvestorsThe decision defines two categories of investors: Investors in a property of a value of 5 million dirhams or more will be granted a residence for five years, and investors in public investments through a deposit, an established company, business partnership of 10 million dirhams or more, or a total investment of not less than 10 million dirhams in all areas mentioned as long as non-real estate investments are not less than 60per cent of the total investment, will be granted a renewable residency visa every 10 years.

Conditions to be met• The amount invested should be wholly owned by the investor and not loaned and should be proven by supporting documents.• Investment retention for at least 3 years• A standard financial liability with a financial solvency not exceeding Dh10 million• The long-term visa could also be extended to include business partners, provided that each partner contributes Dh10 million, the spouse and the children, as well as one executive director and one advisor.• The decision allows investors to enter the country for a six-month period, multiple entry, to apply for the long-term visa requirements.

EntrepreneursThe decision also includes the terms to grant long-term visa to two categories of entrepreneurs - those having a previous project with a minimum of Dh500,000, or having the approval of an accredited business incubator in the country. Entrepreneurs will be granted a five-year visa with a possibility for upgrading to an investor’s visa provided they meet the requirements.

The benefits of the entrepreneurial visa include entrepreneurs, partners, three executive directors, spouse and children. The entrepreneur is allowed entry into the country for six months, multi-entry visa period, with renewal for another six months.

Other Categories1. The decision further extends to grant a 10-year visa for specialized talents and researchers in the fields of science and knowledge for doctors, specialists, scientists, inventors, as well as creative individuals in the field of culture and art.

All categories are required to have a valid employment contract in specialised fields of priority in the UAE, and the conditions for each category are defined as follows:

Criterion for doctors and specialists [requires at least 2 of the conditions mentioned below]

• Holder of a PhD degree from one of the top 500 universities in the world• Holder of an award or certificates of appreciation for the work in the applicant’s jurisdiction• Contribution to a major scientific research related to the work of the applicant• Published articles or scientific books in distinguished publications in the field of work of the applicant• Membership in an organisation related to the work of the applicant, which requires excellent work to accept membership• A PhD degree in addition to 10-year professional experience in the applicant’s field of work.• Specialisation in areas of priority to the UAE (additional requirement for the doctor)

2. Creative Individuals in Culture and Art – who have been accredited by the Ministry of Culture and Knowledge Development

3. Inventors – who obtained a patent of value added to UAE’s economy with the approval of the Ministry of Economy

4. Exceptional Talents – Those who have exceptional talents that are documented by patents or scientific research published in world-class journals

5. Executives – Owners of leading, well-known and internationally recognized companies, holders of high academic achievement, professional experience, and position (eg, an engineer in a rare specialty with a university degree and working in a private company in the UAE)

6. Outstanding students – The decision also includes provisions for granting a 5-year visa to outstanding students with a grade of at least 95 per cent in public secondary schools in public and private schools, and a distinction of at least 3.75 GPA upon graduation from universities within and outside the country. Benefits include families of the outstanding students.

Pushpakaran K ParambathPartnerKreston Menon Corporate Servicespushpan@krestonmenon.com

Long Term Visa for Investors & Entrepreneurs Industry Update

Kreston Menon News 10

One of the components of ERM framework calls for risk assessment at all levels of the business organization setup including Entity Level, Division, Operating Unit and Function. Risk Assessment is a process of identifying and appropriately managing any adverse event (risk) that may impede or pose a challenge to an entity in achieving its goals or objectives (long term or short term).

The relevance and importance of timely risk assessment were greatly felt by corporates across the globe when market leaders faced an overnight catastrophe or near business closure event. Famous examples are Yahoo not assessing risk related to consumer preferences and eventually losing out on user experience and search engine business (market risk), BlackBerry losing out its relevance as they did not focus on bigger touchscreen displays (product technology obsolescence risk). More recent example is when Imagination Technologies Group suffered a major setback when Apple, its single largest customer (customer concentration risk), discontinued using their product.

This concept of risk assessment was adopted by internal auditors to develop a risk-based audit approach to help businesses achieve operational, reporting and compliance objectives by becoming agile, transparent and resource efficient.

A risk-based audit approach requires a complete understanding of the entity’s business, industry, market segments, customers, suppliers, operations and expectations of the stakeholders. This understanding is transformed into objective statements at all organizational levels of the entity and risks (events having an adverse impact) impeding achievement of such objectives are identified, assessed for their risk levels and mitigation strategy is implemented.

B. Resource Optimisation Internal Audit involves thorough scrutiny of all business aspects including organi-zation structure, process design, opera-tional efficiency, safety and security of employees & assets and location feasibility among others to ensure all the resources are contributing towards achieving the entity’s objectives. Internal Audit provides arecommendation on process deficiency and control gaps to help entities reduce the cost and achieve their goals.

D. Risk Management Risk-Based Audit Approach requires development of a Risk and Control Matrix (RCM) or Risk Register. RCM consolidates identified risks, applicable controls, risk scoring and risk mitigation strategy in one place. RCM helps the internal auditor in targeting the review of key risk areas and assess whether the entity is better prepared to manage the risk.

A. Process Benchmarking Benchmarking of processes and customizing to suit the entity’srequirement is the key outcome of an internal audit. Benchmarking with the industry leaders improves service quality; enabling clients to achieve better results.

C. Risks Assessment Paves Way for Opportunity Identification An entity may be exposed to many types of risk including market risk, financial risk, technology risk,compliance risk, operational risk, economic risk and so on. The process of identifying risks also facilitates the identification of new business opportunities that could be tapped by the entity.

E. Reasonable Assurance to the Board

An internal audit provides independent and objective assurance to the Board / Audit Committee that the affairs of the entity are being carried in a manner that facilitates achieving thestakeholder’s expectations.

F. Continuous Monitoring

Risk factors of an entity change constantly due to dynamic business environment. A cyclical internal audit involves a periodic review of risk and assessment of their impact levels which enables the management to take appropriate and timely action.

G. Greater Cooperation from Management

An objective-based approach has transformed the internal audit into a value-adding activity resulting in greater cooperation and participation of the management. This, in turn, has helped the internal auditors to provide better insights into operational challenges and suggest practical solutions.

Continued from Page 3

Outcome/Benefits of Risk Based Audit ApproachSome of the major benefits arising from risk-based internal audit approach are listed below:

ConclusionThe above internal audit approach and outcomes/benefits derived in recent times, has made internal audit activity pivotal to corporates looking to unlock their potential and be prepared to face any adversity.

Further, the advancement in data analytics has led the internal auditors to employ advanced technologies to effectively correlate the performance of the controls over risk, which an organization might encounter.

Kreston M E Consulting (formerly Morison (UAE) Consulting) has been providing internal audit services including, systems review, business process review, drafting of policy and procedure manuals etc., for many years creating considerable value to its clients from varied industries.

Knowing you. 11

The information conveyed in the newsletter are the individual opinions of the respective authors and is not the combined opinion of Kreston MenonDISCLAIMER

Kreston Menon News 12

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Sharjah203, Liberty Al Soor Building,P.O. Box 5199, Sharjah, UAE, T +971 6 575 8899F +971 6 575 8896 | sharjah@krestonmenon.com

Kreston Menon Chartered Accountants

CONSULTING

Kreston MenonGroup Entities

CHARTERED ACCOUNTANTS CORPORATE SERVICES

DISCLAIMER: Mutual fund investments are subject to market risks. Please read the scheme information and other related documents before investing. Past performance is not indicative of future returns.Returns of individual clients may differ depending on time of entry in the strategy. Also, consider your specific investment requirements before choosing a fund, or designing a portfolio that suits your needs.

Wealth Management

Succession Planning

Investment Banking

Consulting

Trust Formation

MUTUAL FUNDPERFORMANCE

3Timesin 8 Years

Vs 2 times of NIFTY 50

PMS 2PERFORMANCE

2Timesin 3.5 Years

Vs 1.4 times of NIFTY 50

PMS 1PERFORMANCE

4Timesin 8 Years

Vs 2 times of NIFTY 50

Contact us! investorservice@ladderup.com | +91 22 4246 6363