SUBCONTRACTING RISK REGISTER

EVENT OWNER MOHAMMED ADWI

AUDITOR INTERNAL AUDIT TEAM
AREA SUBCONTRACTING

Inherent Residual Risk

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

Risk Score

Risk Score
Likelihood

Likelihood
Impact

Subcontracting for Lack of clear definition of roles and 1) Loss of valuable time for managing undefined Operational The subcontracting department has the responsibility of
Construction Projects responsibilities responsibilities Financial terms of arranging the subcontractors during the buyout
2) Possible accountability issues aso to who is responsible period. The subcontractor can be an approved vendor on
for what and what customer's vendor master or could not be.The buyout
material can either be delivered to the site directly or
brought to facility for some fabrication and then ultimately
delivered to the site. This is pure supply.
It has been observed that the subcontracting responsibility
for services, specially for the construction projects, is also
given to the subcontracting department. The team has
clearly highlighted that this needs to taken off their
responsibility for the reason that conditions change
frequently post the buyout period and the blame from the
project team comes on to the subcontracting team if
something goes negative with the subcontractor. The nature
of this subcontracting is different from the supply
subcontracting discussed above.
Impact
Likely Moderate There are no current control as of now. Likely Moderate The company should look into the possibility of taking
this responsibility off the subcontracing team so that they
are only responsible and be held accountable for the
registration of subcontractor onto the IFS, drafting and
finalising the contractual terms, coordinating for delivery
and invoicing.
Management of the subcontractor executing on site and
their quality assessment should be undertaken by the
projects team and should ideally not be made the
responsbility of subcontracting team. The company
should clearly define the roles and responsibilities across
the organisation as has been highlighted under the Risk
Assessment for the Human Capital and Talent
Management functions.

Invoicing Lack of automated notifications for timely
invoicing with respect to deliveries
1) Stretched cash flow cycle Operational The current process of invoicing the cutomer for the supply
2) No real time updations Financial made by the subcontractor at the customer' site is receiving
the delivery note from the subcontractor basis which the
GRN note is made either by the subcontracing team(if
material delivered directly) or by the stores manager(if
material is received first at AIC facility for some fabrication).
The issue here is that there is no notification to the project
managers that the material has reached the site and to do
timely invoicing to the client. As this is a case of pure supply,
ideally invoicing should be done to the client the moment
the materials are delivered by the subcontractor at the
customer's site. There are no back to back arrangements
with the subcontractors in respect of payment. The whole
channel of communication to the project managers with
regards to delivery is through mails and hence manual.
Likely Moderate The current controls are manual with respect to Likely Moderate The company should develop a mechanism to have real
notifying the concerned project managers and not time information with respect to such deliveries so that
automated. timely invoicing can be done. This would help greatly in
improving the cash flow cycle.
We advise the company to get in touch with IFS team and
explore the possibility of assigning a child code to
subcontracting jobs under the main parent project with a
separate code number so that the momemt the GRN is
registered in the system, an automated mail notification
is generated and marked to all concerned stakeholder,
especially the project managers for timely notification
and timely billing.