CGRE ASYNCHRONOUS ASSIGNMENT

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Analysis of The Risk Report of Reliance Industries
Responsibility for internal control /Review of effectiveness
(Aakriti Anwesha Shrivastva 1922001)
● Review of development and implementation of a Risk Management Policy including
identification therein of element of risk;
● Review of cyber security and related risks- Review with the management, the annual
financial statements and auditor's report thereon before submission to the Board for its
approval, with particular reference to:
a) matters required to be included in the Directors’ responsibility statement
b) changes, if any, in accounting policies and practices and reasons for the same;
c) major accounting entries involving estimates based on the exercise of judgement
by management;
d) significant adjustments made in the financial statements arising out of audit
findings;
e) compliance with listing and other legal requirements relating to financial
statements;
f) disclosure of any related party transactions;
g) modified opinion(s) in the draft audit report.
● Review with the management, the quarterly financial statements before submission to
the Board for approval;
● Review with the management, the statement of uses/ application of funds raised through
an issue (public issue, rights issue, preferential issue, etc.), the statement of funds
utilised for the purposes other than those stated in the offer document/prospectus/notice
and the report submitted by the monitoring agency monitoring the utilisation of
proceeds of a public or rights issue, and making appropriate recommendations to the
Board to take up steps in this matter;
● Review and monitor the auditor's independence and performance, and effectiveness of
audit process;
● Evaluation of internal financial controls and risk management systems;
a) Review with the management, performance of statutory and internal auditors.
b) Review with the management adequacy of the internal control systems.
● Review the adequacy of internal audit function, if any, including the structure of the
internal audit department, staffing and seniority of the official heading the department,
reporting structure coverage and frequency of internal audit;
● Discuss with internal auditors of any significant findings and follow-up thereon;
● Review the findings of any internal investigations by the internal auditors into matters
where there is suspected fraud or irregularity or a failure of internal control systems of a
material nature and reporting the matter to the Board;

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 ● Discuss with statutory auditors before the audit commences, about the nature and scope
of audit as well as post audit discussion to ascertain any area of concern;
● Look into the reasons for substantial defaults, in the payment to the depositors,
debenture holders, shareholders (in case of non-payment of declared dividends) and
creditors;
● Review the functioning of the Whistle Blower mechanism / oversee the vigil
mechanism.

Level of detail given in the report on the risks: (Ameesha Manwani 1922007)

Reliance Industries report has a very detailed analysis on the risk factors affecting the
company along with the opportunities mentioned. How the risk can be converted into an
opportunity. They also show what is impacted because of the risk. They also mention the
consequences of the risks and how they plan to mitigate the risk. It is very confined and lets
us know proper risk planning is done by the company. This also helps future investors who
due to some risk would not be wanting to invest but seeing how the company plans to cope
with the risk, they may go ahead.

Risks include:

• COVID-19 and global economic conditions

• Impairment of tangible and intangible assets
• Supply chain disruptions, distributional channels and retailer network
• Credit rating and liquidity risks
• Managing growth strategy and delivering on competitive business efficiency
• Intensifying competition and brand positioning
• Reliance on key markets
• Innovation and rapid technology change
• Environmental regulations and compliance

Whether controls in place to mitigate the risk are mentioned in the report
(Anandita Kesharwani 1922009)

All the board of directors are answerable for the bearing and oversight of the gathering and
build up all internal control. The reliance executive committee is liable for the plan and
activity of the reliance arrangement of internal control which incorporates risk management
and internal control frameworks and for looking into its viability. A few instances of the
relative multitude of activities taken by reliance to relieve risks, for example, the variances in
raw petroleum costs and accessibility. To moderate the risks coming about because of non
accessibility of unrefined and feedstocks, the company has broadened rough sourcing
technique from different geologies under both present moment and long haul plans.

The company also provides a detailed explanation on the risk affecters affecting the
Company’s Business. Hence the level of detail given in the report is very high.
Process for dealing with problems (Annie Jose 1922012)

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The report does not specify how the company will deal with the problems if the risk
materialises, but the company have set in place strong internal control to prevent the risk
from materialising. Reliance developed the Reliance Management system (RMS) as part of
its transformation agenda. The RMS provides an integrated system for risk management and
internal controls. Internal financial controls have been registered, incorporated, and digitised
into business processes. Internal controls are reviewed on a regular basis for operational
effectiveness and design.
Reliance industries have developed an Internal Audit Cell, which functions as an independent
internal auditor. Internal controls, operating systems, and procedures are all checked by the
cell. They have formed a Legal Compliance Cell to ensure that business is done in
accordance with the highest standard of legal compliance.
Reliance have implemented a Legal Compliance programme in accordance with the best
international practises, backed up by a comprehensive online framework that includes both
their production units and subsidiaries. It covers a broad variety of legislation, including
industrial and labour laws, taxation laws, corporate and securities laws, and health, safety,
and environmental regulations.

Weakness resulting in material losses (B. Gayathri 1922021)

• The management has identified items that can lead to material losses with the help of
material assessment. The classification of material concerns has been fundamentally
aligned to the Company’s risk management framework. The company’s financial risk is
governed by appropriate policies and it is identified, measured and manged with respect
to risk objectives
• Reliance also has risk management framework to manage volatility in commodity price
• In case of natural calamities that result in pure risk reliance maintains detailed disaster
recovery, crisis and business continuity management plans.
• Controls are embedded at multiple levels to take account of the risk before it materialises
• Reliance has also made provision according the accounting standards for foreseeable
material losses or long term contracts that has have significant impact on the company’s
financial positions.

Report on effectiveness of controls over financial reporting, accompanied by external

audit report: (Sehjha Mahajan 1922065)
As Reliance Industries is a listed company, having its controls and financials reviewed by an
external audit is mandatory.
In its statutory audit report, it is stated that there is a qualification related to preservation of
documentary evidence of the input/output parameters used in extracting system generated
reports to validate the controls over the completeness and accuracy of financial information
used in the performance of various process level and management review controls.

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The assessment conducted to review their financial controls stated the ineffectiveness of the
controls over financial reporting as on March 2020.
However, the auditors have also stated that this material weakness didn't result in material
misstatements and therefore, didn't affect their opinion on standalone financial statements of
the company.
In response to this, the company (further in the Management Discussion and Analysis
section) has instituted remedial measures to address the material weakness identified and
continually review and evaluate its internal control systems to allow management to report on
the sufficiency of its internal controls and controls that affect its reporting.

Requirements of shareholders/other stakeholders (Treesa Jogi Cheeramvelil 1922073)

• Reliance maintains sufficient liquidity, buffer to be able to meet all its financial
commitments on due dates and is not forced to obtain funds at higher interest rates. It has
access to markets worldwide and uses a range of products and currencies to ensure that its
funding is efficient and well diversified across markets and investor types. Reliance
borrows funds from domestic and international markets to meet its long-term and short-
term funding requirements. It is subject to risks arising from fluctuations in interest rates.
Reliance prepares its financial statements in Indian Rupee, but most of the payables and
receivables of hydrocarbon business are in US Dollars, minimizing the cash flow risk on
account of fluctuations in foreign exchange rates. All long-term liabilities which are due
for maturity in FY 21 have already been refinanced and the company continues to
maintain enough liquidity buffer to meet additional demands that may emerge on account
of COVID-19 crisis. The interest rate risk is managed through financial instruments
available to convert floating rate liabilities into fixed rate liabilities or vice versa and is
aimed at reducing the cost of borrowings. Foreign exchange risk arising from mismatch
of foreign currency assets, liabilities and earnings is tracked and managed within the Risk
Management Framework. The foreign exchange market is highly regulated, and Reliance
ensures compliance with all the regulations.

• COVID-19 has led the government to announce a range of notifications which companies
needs to adopt swiftly and effectively. The evolution of the regulatory environment
globally and at home, the Government of India’s ambition for reforms and transparency
have resulted in increased regulatory scrutiny that has raised the bar with regards to
regulatory compliance. This requires the alignment of corporate performance objectives,
while ensuring compliance with regulatory requirements. “Governance” has been
expanded to cover more laws, that companies would be expected to comply with such as
SEBI changes to Governance policy, Ministry of Corporate Affairs National Guidelines
on Responsible Business Conduct.

Risks that have significantly changed (Vaishnav Sajeev Nair 1922075)

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From the risk report we can see that all the risks that increased due to the pandemic. The
company states that there was a risk of reduced demand for the products of the company due
to the pandemic, this kind of a risk was non-existent in the last financial year.
Cyber security risk was also a risk now stated in the risk report stating that as lockdown came
into effect there was an increase into the adaptation of newer technology along with the
increased chances of hacking. These risks can be avoided or at the least be minimized with
sufficient technology but are cropping up only due to the pandemic.
There is now also an added risk of customer retention, so this made the customer interaction
very hard for the company.
Now since the company is starting its operate, there are new mandates that the company has
to adhere to, for curbing the spread of the pandemic, so this could potentially prove a risk to
the company, so there is a added risk of compiling to the law and with the health and safety
of the employees.
We can see that many new risks have popped up in the company mainly due to the pandemic.
It spans from the reduced demand due to the economic crunch, to the threats in cyber security
and risks to the health of the employees.

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