Risks and Financial management for Money Cares Investment Corporation


In order for any financial corporation or business company, there is indeed the need to control financial expenditure of the company. If money expenditure is not accounted for, this leads to loss of money, assets, expenditures and even time wastage and as a result the company faces unnecessary losses (Hallenbeck & William, 1986, Pg. 3).

The money Care Investment Corporation is a company that has been experiencing these losses especially in terms of transport, marketing supplies, hospitality and even workshop items as a result of poor budgeting that lead to over expenditure. Another major contributor is the poor financial management by the company’s management as there is no effective control of financial matters. More than seven management officials have direct access to the company’s accounts and they can withdraw money any time (Hallenbeck & William, 1986, pg. 4-8).

It is thus wise to come up with effective measures that ensure that there is proper budgeting, effective financial control and proper monitoring measures. In this case, the risks involved in financial control by a number of people who have no means of being monitored will be mitigated and hence unnecessary losses will be countered. The expenditures of the company will also be well measured and accounted for and in the process unnecessary expenditures eliminated (Frey, Rüdiger, Embrechts & Paul, 2005, pg. 8).

Possible Risks

In this company, there is a very big possibility that any of the eight officials that have direct access to the finance account could steal money and not get detected immediately since there is no measures put in place to control their expenditures. Any of the officials could directly take the money either gradually through over-budgeting their operations or even taking the money directly in small measures undetected (John & Lachin., 1999, Pg.7).

In their opinion, Frey, Rüdiger, Embrechts & Paul, (2005), suggest that the other risk involved is the loss of assets in the company as there are no proper audit measures to ensure that the company assets budgeted to be bought or the ones already bought are misappropriated. There is no control or check measures to confirm that these assets have been bought at the right quality as expected.

Unnecessary losses as a result of poor expenditures are more liable to occur due to poor budgeting by the management. As cited earlier, the company has been experiencing major over-expenditure in some areas that could be controlled if a proper measure to control expenditures is incorporated.

Since there is no effective monitoring system, there is a possibility that there may be under-performance by the employees or even possible poor payment of the employees as there is no enough money to give them a pay-raise as most of the money is lost through unnecessary expenditures or possible fraud by the officials who possess the credit cards (John & Lachin, 1999, Pg.10).

The collapse of the company is another possible risk that may occur if nothing is done to control the way the officials spend the money budgeted for as well as a control measure on withdrawal of money from the account. There should be a centralized financial system that ensures that all expenditures pass through it and have to be passed by a committee (John & Lachin., 1999, Pg.13).

Control measures

The company should embrace the internal control systems that ensure that factors or risks that impede the company from achieving its objectives are mitigated. The system also ensures that there is good governance in the company hence curbing any form of corruption or misappropriation of funds and assets that belong to the company as well as prevent unnecessary losses. Effective management leads to happy employees and objective realization (Hallenbeck & William, 1986, pg. 12).

In their view, John & Lachin, (1999), depict that this is a system that also sets proper policies on how expenditures are to be run in an accountable manner whereby checks and balances are put in place to ensure that no over-budgeting or under-budgeting. Without proper policies the company will definitely collapse since things will be done chaotically and as a result losses will occur.

In accordance to Frey et al. (2005), the first move is to form a centralized financial system run by a financial department whereby all the expenditures are disbursed from a single office. This will reduce the room for fraud whereby any of the eight officials could access the company’s money. It will also reduce the room for over-expenditure since all the expenditures will be managed by a single body and accountability is enhanced.

The company can also employ an independent external audit that will come from time to time and assess the way the internal auditors carry out their work and compare if the financial audit rhymes with theirs. These are crucial in making sure that the internal auditors are not biased in their work. This is one way of monitoring if the system is effective and is being carried out well. This is effected through periodic checking of the inventories (John & Lachin., 1999, Pg.18).

Effective budgeting system should be established under a thorough research which ensures those unnecessary expenditures especially on hospitality; transport and marketing supplies are regulated. This will only be effective through proper channels to be put in place when it comes to the transport department and all the other sectors. The finance department should demand for all the receipts on expenditures and evaluate if they should make a different approach.

The company should also set an Auditing Practice Board that will oversee the expenditures of the company in an effective way. The objectives of this body will be to ensure that the businesses of the company are efficiently conducted in adherence to the company’s policies hence reducing unnecessary expenditures or misappropriation of funds (Frey et al. 2005, pg. 8).

The other task will be to ensure that the assets of the company are safeguarded. We noted earlier that one of the main problems that the company is facing is the risk of misappropriation or even loss of the company’s assets. Assets enable the company to achieve its objectives and if not well safeguarded, the company will stall.

On the other hand, detecting any fraud or errors that may occur in any department is a very crucial role. This is a form of corruption when funds disappear and the loss cannot be accounted for and hence the need for the audit body. The aim is to create a sense of accountability for each and every dollar spent in any expenditure (Hallenbeck & William, 1986, pg. 15).

The body will also see to it that financial records are well completed and properly accounted for in every expenditure. Financial records are very crucial in determining if the company is heading in the right direction in realization of its objectives. These records could be used to make an effective budget in future through reference to previous expenditures and cost comparisons (John & Lachin., 1999, Pg. 14).

The APB should also ensure that all financial information on expenditures and costs are finished and submitted for assessment in a timely manner. Time is of essence in a company willing to remain relevant in the competitive market. Planning involves completion of objectives in a timely manner so that events don’t inconvenience other pre-planned events (John & Lachin., 1999, Pg. 20).

Advantages of the Auditing Practice Board

When the APB is given full mandatory to exercise its mandate on financial matters, there will be effective efficiency in all the financial operations of the company and as a result minimization of recurrent losses will be eliminated, (Hallenbeck & William, 1986, Pg. 7).

According to Hallenbeck & William, (1986), the system will also boost a proper budgeting system that will be effected through reliable financial reporting system that acts as the check and balance on how expenditures are made in the company. This is to say that all the frauds that may occur will be detected through the financial records.

The APB also ensures that the policies and regulations of the company are adhered to and as a result there will be restoration of order in all sectors. This is to mean that when all the policies are followed, the risks they are meant to curb will definitely be mitigated or rather minimized if not effectively controlled (Hallenbeck & William, 1986, Pg. 11).

The objectives of the company will as a result be realized with ease since the probable risks have been mitigated and controlled. The aim of any company is to maximize profits and minimize losses and this can only be realized through proper management of resources, adherence to policies and effecting them and effective mitigation of risks which will be effected through proper checks on the management of the company (Hallenbeck & William, 1986, Pg. 14).

Vulnerable areas in the company

The financial sector is the most vulnerable in this company as there are no proper channels or system to monitor the expenditure of the company. There are too many people controlling finance in the company instead of setting up an effective centralized finance body.

The hospitality area is also vulnerable since there is no immediate measure to determine how much was spent on visitors in terms of hospitality. The credit holders may use this sector as a scapegoat to misappropriate funds and since there is no properly set budget for this sector, (Hallenbeck & William, 1986).

Departments where most money is spent

The marketing supplies sector spends most of the money since the company is still an infant and it requires creating an expansive market for the company. Without proper strategies to market its services, the company has been spending so much to attract an appreciative market. The overspending is due to poor marketing programs incorporated. They should try effective strategies such as online marketing which is cost effective (John & Lachin., 1999, Pg.7).

Budget regulatory strategies

According to John & Lachin., (1999), the first strategy is the periodic checks of the inventory and gathering of periodic reports on the state of the assets in the company and documenting the reports for evaluation by the audit body by the end of financial year. The company should also demand for a proper recording of transactions in each department for accounting purposes.

According to Hallenbeck & William, (1986), the arithmetic calculations should be double-checked to ensure that there is no room for errors in the budget. The incorporation of external auditors is also an effective measure for the company to monitor the expenditures of the company.

An effective inventory and assets control training should be introduced so that various staff is able to account for probable losses in the company. Another effective measure is the centralization of the finance department for transparency and bearing of responsibility in case of a loss (Hallenbeck & William, 1986, pg. 4).


Hallenbeck, William H., (1986). Quantitative risk assessment for environmental and occupational health.

John M., Lachin., (1999). Biostatistical methods: the assessment of relative risks.

Bartram, Söhnke M.; Brown, Gregory W.; Waller, William, (2004).Journal of Financial and Quantitative Analysis. forthcoming.

Frey, Rüdiger; Embrechts, Paul (2005). Quantitative risk management: concepts, techniques and tools.

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