Arohan Financial Services Limited | Annual Report 2021-22

The function is supported by a real-time Audit Management System (AMS), named ‘Perdix’ with technological support from Dvara Solutions(FormerlyIFMRRuralFinance).Perdix is a web-based system that enables seamless audit and is programmed to successfully capture audit findings in a structured and scheduled manner. The platform enables real- time tracking of audit progress, allowing quick escalation of significant issues and monitoring closures with optimised working efficiency, all within a measured timeframe. Methodology and Reporting The Internal Audit function at Arohan conducts audit of all operative branches once every quarter. The audit is focused on a three- pronged approach namely: Field Processes: The Field Process includes audit of the logs and practices of business operations including Verification, Collection and Disbursements to name a few. Back-End Activity: The Back-End Activity approach is designed to screen for deviation in any documentation and administration related activities that drive business continuity. Customer Contact: Through the Customer Contact process, the vertical cross-checks all systems and processes that results in customer interaction and business or behavioural transactions. The above heads, along with its various sub- heads, are assigned appropriate weightage within a dynamic range, to reflect the final audit score of each branch. Each branch, having undergone audit every quarter, is assigned an audit grading based on the observations and scores of each quarter. The resultant grade acts as a significant parameter in defining the organization’s quality parameter and contributes to a significant share of the performance appraisal programme of all concerned parties. Branches are covered under regular audit and snap audit alternatively, on a half yearly basis. Snap audit covers the highly important aspects of the full audit process, and is undertaken by a senior audit resource to ensure in-depth exploration and analysis of high risk areas, with a much shorter Turn Around Time. Support functions, including Compliance, Human Resources, Administration,Information Technology, Central Operations, Finance and Accounts are also audited at least twice a year. High emphasis is further enforced on monitoring the adherence to compliance and regulatory requirements as prescribed for NBFC-MFI under different statutes. Impact of COVID-19 lockdown On-site internal audit of branches was affected due to the impact of the pandemic and related restrictions spreading the first two quarters of 2021-22 wherein visiting 100% branches was not possible. The team mitigated the risk by adopting innovative approaches such tele-calling, Remote Audit based on scanned documents, and analysing relevant MIS and records with the help of a focussed team. Vigilance function In the FY 2021-22, Arohan also introduced its own Vigilance Department, headed by an Ex-serviceman, with requisite experience and training intherelevantarea. TheCompanyplans to gradually expand the team. The function is entrusted with the responsibility to deep-dive large frauds, effect liaison with the local police, and assist in the claim filings of insurance. RISK MANAGEMENT APPROACH The Risk Management approach of Arohan, its third pillar of quality, continued to play a significant role for risk mitigation across all functions in the Company, thus enabling it to remain well prepared for facing challenges throughout the FY2021-22, while also ensuring its scope for growth in the future. The Risk Management function of the Company is led by the Chief Risk Officer and has independent reporting to the Risk Management Committee of the Board of Directors, headed by an 77 Annual Report | 2021-2022 Management Discussion & Analysis