06. Liquidity Risk Liquidity risk is defined as the risk of an entity being unable to secure the liquidity necessary to meet obligations related to financial instruments Liquidity risk may result from the inability to sell a financial asset quickly and at a value close to its fair value ARDCO manages liquidity risks by ensuring that the necessary financing is available to the company whenever needed 07. Currency Risk Currency risk is the risk of change in the value of financial instruments due to changes in exchange rates of foreign currencies As our major transactions are made in SAR , we believe that currency risk is insignificant 08. Fair Value This represents the fair value at which an asset is exchanged or a liability is settled between willing parties under fair negotiating terms Since the company ’ s financial statements are prepared according to the historical cost principle , it may result in differences between the book value and the estimated fair value We believe that the fair value of our financial assets and liabilities is not significantly different from their carrying value
Risk Management
Risk management falls under the Internal Audit Department , whose responsibility is to manage company risks , address them , and develop methods and policies to avoid or resolve them In 2023 , actions have been taken in preparing the internal audit department’s work charter and guide Risks were also assessed , including all the company ’ s management and risk classification , in line with the company ’ s strategy In addition , a review plan was prepared , constituting fiscal years 2023 , 2024 , and 2025 A draft policy for reporting violations was also prepared Whistleblowing Policy It is worth noting that the International Standards for Internal Auditing (IIA) were followed and awareness was raised within the company As a result , a set of recommendations were presented to activate control and oversight processes and improve daily workflow
ARDCO’s Potential Risks
The list of risks described below is not comprehensive It is possible that there are additional unknown risks that may hinder our operations or risks that we may consider immaterial 01. Volatility in Company Operations and Reliance on Public Good Services Projects ARDCO’s business is based on two main lines (1) public good services projects (2) real estate development projects and commercial centers The future income of these projects may be affected by the extent of their demand , which may result in a negative impact on our operating results and financial condition Our activity in public good services projects may also be affected by any change in seasonal demand witnessed in Riyadh in particular and the Kingdom as a whole However , we have turned to projects that provide various services and goods in the fields of transportation , cars , vegetables , fruits , meat , and commercial centers , and their growth correlates directly with Riyadh’s population growth 02. Revenue Collection ARDCO’s revenues from its centers and markets are collected via checks , bank deposits , and cash , with cash being the most prevalent However , we have addressed these risks by preparing accurate documentation cycles and digitizing and automating our systems , monitoring , and follow-up to reduce such risks 03. Obstruction of the Company’s Business ARDCO relies on the high quality infrastructure of our assets , which has contributed to increasing our customers’ confidence in us We have taken the necessary actions to protect our properties from natural disasters or terrorist incidents by applying the highest levels of safety and security through regular maintenance and security protection However , there cannot be any guarantee against any hindering or obstruction of our business operations , whether directly or indirectly , by such obstacles 04. Saudization We do not view any risk regarding Saudization at ARDCO as the company is classified as platinum according to the Ministry of Labor’s Nitaqat system However , there is no guarantee that we will be able to maintain the current Saudization rate It is pertinent to note , however , that we have accurate , modern and documented systems , regulations and procedures for all practical tasks , in addition to adopting a policy that seeks to employ Saudis and keep the rate of Saudization high within the company 05. Credit Risk Credit risk represents the inability of one party to fulfill its obligations , resulting in the other party incurring financial losses ARDCO constantly seeks to reduce credit risks through periodic follow-up of any outstanding receivables from other parties
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