Jahez has developed an Enterprise Risk Management Framework, which is adapted from relevant frameworks including ISO 31000 (Risk Management – guidelines) and COSO (Enterprise Risk Management — Integrated Framework), in a manner consistent with local practices and requirements issued by the local government agencies. It is also integrated into Jahez reporting structure and all that it does to meet compliance. Jahez is monitoring the identified risks against established metrics and through Management’s response to manage, mitigate, or accept risk.

While developing the risk appetite framework and embedding risk appetite, the Company:

  • Sets the strategic plan and objectives as well as the risk strategy and risk capacity.
  • Articulates and cascades risk appetite statements and limits.
  • Monitors and reports risk profile versus appetite.
  • Controls and corrects the risk profile should it deviate from appetite and reassess the risk appetite and its strategy in the light of changes in the business, competitive or control environments.

The diagram below illustrates the components of the risk appetite framework.

Inputs
Founding Objective
Strategic Objectives
Risk Capacity & Constraints
Process
Risk Appetite Statement
Identify Stake-holders
Qualitative Principles & Values Perception
Quantitative Thresholds / Limits
Establish Risk Management Policies
Risk Categories
Market Risk
Currency Risk
Credit Risk
Interest Rate Risk
Conduct Workshops
Limits Targets
Capital Liquidity Limits
ROA / ROE
Complaint Limits
Reports
Risk Appetite Dashboard
Reports
Maintain Status Quo
Expedite Efforts
Conduct Investigation
Re-Allocate Targets

The risk appetite of the Company is determined reflecting and balancing goals for growth, return, and risk.

 

Risk Management Policy

The Group has worked on defining the control and risk management processes following the best international practices. The Board of Directors of Jahez and its Senior Management rely on these principles in the development of the Company’s strategy and decision-making process. The Management then undertakes planning, organizing and directing processes in order to ensure reasonable assurance that the Company’s objectives can be achieved, while ensuring that the relevant risks are within the Company’s risk appetite.

The Board of Directors is responsible for overseeing the risk management and internal control system and reviewing its effectiveness. The system is designed to determine and manage the risk of failure, and not to eliminate it, in order to achieve the strategic objectives of the Company and provide reasonable assurance, not absolute, against errors or gross loss.

The Board also assumes general responsibility for determining the nature and extent of the main risks, which it may bear to achieve its strategic objectives (risk appetite) and ensure management of these risks effectively. The Board has authorized the responsibility for reviewing the effectiveness of internal control systems and risk management methodology in the Company to the Audit Committee.

Risk management governance

The Board has authorized the responsibility for reviewing the effectiveness of internal control systems and the risk management methodology of the Company to the Audit Committee. The Board of Directors of Jahez also oversees the risk management process through the Audit Committee, which is responsible for reviewing the Risk Management Framework to ensure that it is still sound and identifies all potential risk areas. In addition, the Committee reviews the adequacy of policies and processes designed and carried out by the Management for the purpose of managing specific risks and submitting annual reports to the Board of Directors and the General Assembly.

The Audit Committee also conducts regular reviews of applicable internal control systems in the Company, including all related tasks, policies, and procedures to ensure that they are still adequate and sufficient to identify and reduce risks. In the case of transactions and contracts involving a high degree of complexity, we work with advisers to minimise any dangers.

The Executive Management is responsible for determining the nature of risk management. The Management at all levels is responsible for identifying, as appropriate, the risks related to the scope of their work and management. The Company’s functional tasks also support the implementation and facilitation of the risk management process.

Risk management activities

In the year 2023, Jahez hired a third-party consultant to establish the Enterprise Risk Management (ERM) and conducted an Enterprise Risk Assessment exercise and the identified critical risks were associated with the following categories: Governance, strategic, Technology and Information Security, Financial, Operational and Commercial, Regulatory and Compliance, Reputational, Environmental, Health, Safety and Security. Risk management started this year with assessing the risk in the inherent level (before considering the control in place) and the risk in the residual level (after considering the control in place) and developed a mitigation plan of the residual risks.

Jahez focused on raising awareness of risk management in all departments of the Company and its subsidiaries and defining roles and responsibilities. We at Jahez prioritize risks to keep the focus on the most relevant risks. Risks are assessed on the basis of potential impact and probability analysis, and related actions are implemented to manage or mitigate risks.

Risk factors in the Company

The Group is subjected to various financial risks due to its activities including market risk (including currency risk, fair value and cash flows of interest rate risk), credit risk, and liquidity risk. The Group’s overall risk management program focuses on the unpredictability of financial markets and seeks to minimize potential adverse effects on the financial performance of the Group.

The Board of Directors is responsible for risk management. Financial instruments recognized in the consolidated statement of financial position include cash and cash equivalents, trade receivables, due from/to related parties, investments at FVTPL, other current assets, trade payables, accrued expenses, other current liabilities, collections due to customers, and lease liabilities. The particular recognition methods adopted are disclosed in the individual policy statements associated with each item. Financial asset and liability are offset, and net amounts are reported in the consolidated financial statements, when the Group has a legally enforceable right to set off the recognized amounts and intends either to settle on a net basis, or to realize the assets and liabilities simultaneously.

Market risk

Market risk is the risk that arise from changes in market prices such as foreign exchange rates, profit rates and equity prices that will affect the Group’s income or the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters while optimizing the return.

Currency risk

Currency risk is the risk that the value of a financial instrument will fluctuate due to changes in foreign exchange rates. The Group’s transactions are principally in Saudi Riyals and US Dollars. The Saudi Riyal is pegged to the US Dollar. The Management closely and continuously monitors the exchange rate fluctuations.

Interest rate risk

Interest rate risks are the exposures to various risks associated with the effect of fluctuations in the prevailing interest rates on the Group’s financial positions and cash flow. The Group has no significant interest rate risk.

Credit risk

Credit risk is the risk that counterparty will not meet its obligations under a financial instrument or customer contract, leading to a financial loss. The Group is exposed to credit risk from trade receivables, cash and cash equivalents, due from related parties and Deposits with financial institutions.

31 December 2023 31 December 2022
Trade receivables 36,425,399 22,776,390
Cash and cash equivalents 1,109,059,521 902,685,742
Deposits with financial institutions 107,564,031 200,000,000
Total 1,253,048,951 1,125,462,132

Liquidity risk

Liquidity risk is the risk that the entity will encounter difficulty in raising funds to meet commitments associated with financial instruments. Liquidity risk may result from an inability to sell a financial asset quickly at an amount close to its fair value. Liquidity risk is managed by monitoring on a regular basis that sufficient funds are available to meet any future commitments.

The Board of Directors closely and continuously monitors the liquidity risk by performing regular review of available funds, present and future commitments, operating and capital expenditure. Moreover, the Group monitors the actual cash flows and seeks to match the maturity dates with its financial assets and liabilities.

The Group seeks continuously to comply with its legal obligations, including any obligations relating to its financing agreements.