Briefing Paper on Key Business Risks

1. Market Risk

Market risk arises from changes in the market price of key items, such as raw materials or commodities. These price changes can lead to increased costs or reduced revenues, depending on the direction of the price movements.
In the case of COM, the company faces market risk due to price ceilings imposed by the regulator. The imposition of a 30% Asymmetrical Interconnect rate and other pricing measures could reduce COM’s revenue from voice, data, and other services.

2. Credit Risk

Credit risk refers to the potential losses from customers defaulting on their obligations or delaying payment. Companies that extend credit to customers are exposed to this risk.
COM is exposed to credit risk as it has over GH¢475 million in trade receivables. If significant customers default on their payments or delay settlement, COM will have to write off bad debts or increase impairment provisions, impacting profitability.

3. Liquidity Risk

Liquidity risk is the risk that a company may not have sufficient cash flow to meet its short-term obligations, even if it is profitable.
COM has a current ratio below 1, with a five-year average of 0.86:1, indicating potential liquidity risk. The company has a five-year average of GH¢225 million in liabilities exceeding current assets. This suggests that COM may struggle to meet short-term liabilities if it cannot generate sufficient cash or access external funding.

4. Technological Risk

Technological risk refers to the potential for a company’s technology infrastructure to become obsolete or inadequate, impacting its ability to compete or serve customers.
COM faces technological risk from the rapid pace of technological change and issues with mobile money fraud and poor network connectivity. If COM fails to invest in new technologies or improve its infrastructure, it risks falling behind competitors and losing market share.