CASE STUDY: 3 EMERGENCE OF FINTECH Fintech is generally described as a sector that leverages technology end-to- end. Fintech companies extensively use software and other current technologies used in the businesses for providing automated financial services solutions to customers. Financing business faces higher risk when large loans are given and at the same time enjoy the reward in the form of interest receipts. The Credit Manager knows that in order to survive in the market, there has to be a proper balance between risk and reward and an optimal decision might maximise the return. MNO FINTECH LIMITED (MFL) – A NEW STARTUP MFL was commenced as a start-up company as a view to tap the potential of the financial services industry. MFL has to subsist in the stiff competing financial world and comply with various regulations. It has a team of enthusiastic and resolute professionals who strive to achieve excellence. MFL knows that for the purpose of centralised risk monitoring, the financial services industry of the country is heading towards a risk-based supervision regime involving real-time risk monitoring through automatic data transfer to the regulators and in the given scenario, the biggest risk would be cyber risk. NEW PRODUCTS A Fintech Start-up company will have to face the challenges in the form of customer loyalty and stakeholders’ growing expectations. Having these in mind, MFL is launching many new products. The Chairman of MFL wants the sales manager to evaluate :- i) the efficacy of the new products especially in the wake of new technology deployed, ii) track whether the controls are exercised properly by designated individuals who are vested with the power of approving new modules and iii) highlight issues and potential gaps in the processes. RISKS AND REWARD The Chief Financial Officer (CFO) cautioned the management that there might be defaults in payments by some customers, as the customers would assume that there would be laxity in controls in the collection mechanism of a Start-up company. The Chairman of MFL wants to know what are the inherent risks of a fintech start-up company. Evaluating and assessing governance risks plays a vital role in any organisation. For achieving the above purpose, a risk appetite framework is to be approved ensuring that business strategy and financial plans are linked to the same. The Chairman of MFL Is thinking of entrusting the above task to appropriate persons. The management is conscious that a well-managed risk management process helps to resolve problems when they occur rather than following an impulsive and reactive approach. Having realised the importance of the checklists of ISO 31000 meant for risk management, the management requested the manager’s assistance in preparing a mandatory report on risk. They also needed explanation for the concepts : i) risk aware, ii) critical controls and iii) control weaknesses. The management likes to take into account the impact of adverse and external conditions which can be a big threat to the survival of MFL. For this purpose, it would like to select the scenarios for testing purposes. TECHNOLOGY PLATFORM FOR ACCOUNTING The Internal Auditor of MFL, Mr Shreyas, told the management that from an audit and accounting perspective, the most intensive focus area is the technology platform that is used for accounting. Operational risks of misstatements in financial reporting would arise as several types of transactions that have a financial impact are performed in various systems and there might be inconsistent data in the final reports. Based on the above, you are requested to answer the following questions: Multiple Choice Questions Choose the most appropriate answer from the given options.