The classification system or as named in Arabic language “Tassnif” in the Kingdom of Saudi Arabia is a fundamental tool launched by the Ministry of Municipal and Rural Affairs and Housing to regulate and develop the service sector and enhance the efficiency of city service providers. The system relies on classifying establishments and their specializations within multiple fields according to precise criteria encompassing financial, technical, administrative, and executive aspects. This system is considered a key measure for determining establishments’ capabilities and ability to meet service delivery requirements with efficiency and high quality, contributing to enhanced transparency and reliability for beneficiaries.

By classifying establishments into categories and grades commensurate with their current capabilities and resources, the classification system encourages service providers to improve their performance and raise their standards by adhering to approved quality standards that ensure efficient implementation and mastery of work. This system also contributes to creating a competitive environment among service providers and encourages them to continuously develop across various fields, which positively impacts national projects and the Kingdom’s sustainable development goals.

The importance of the classification system

– Improving project quality: The classification system ensures the selection of qualified companies capable of efficiently implementing projects, which increases the quality of project implementation and reduces the likelihood of failure.

– Enhancing transparency: The system helps create a transparent business environment by providing accurate information about companies’ capabilities and potential, which contributes to reducing risks and improving trust.

– Improving service sector efficiency: By setting a classification level for each company, companies are encouraged to develop their capabilities to meet higher standards, thus increasing the overall efficiency of the service sector.

– Encouraging competitiveness: The system encourages companies to compete and continuously improve their performance, opening up new opportunities for startups to enter the market and compete with established companies.

– Supporting sustainability: The system promotes the implementation of sustainability and quality standards, contributing to achieving the goals of Saudi Vision 2030 by improving project quality and achieving sustainable development.

– Saving time and resources: By adopting digital classification, the company classification process is facilitated and accelerated, saving time and effort for both companies and stakeholders.

– Integration between agencies: The system works to organize and unify standards between different government agencies, which contributes to improving coordination and reducing overlap in projects.

Classification System Criteria

For a company to be listed and classified within the Kingdom’s classification system, it must meet a set of financial, technical, and legal conditions and criteria. Based on these criteria, the institution receives a classification degree commensurate with its current status. The classification system is based on three sets of criteria:

Legal requirements
Credit assessment (financial criteria)
Technical criteria

Classification degrees

Service providers in the Kingdom are classified according to the new classification system into seven different grades, starting with the Excellent grade, which is the highest grade in the classification system, and ending with the Sixth Grade, which is considered the lowest grade in the system. This is down from the previous five grades. The Excellent grade was added to suit larger companies, while the Sixth Grade was added to the new system to provide greater flexibility and allow unclassified contractors and small companies to obtain a classification under the new system. The classification grade is awarded according to a set of established criteria that determine the appropriate grade for the classified company, such as its size, performance, and financial solvency. These grades are as follows:

Excellent Grade: Awarded to large companies with strong financial capabilities, extensive experience, and large-scale projects. These companies are qualified to implement large and complex projects efficiently and with quality, demonstrating transparency and continuity of work.

First Grade: Includes large companies with strong financial and technical resources and the ability to implement medium- to large-scale projects, but may be less than the Excellent Grade in terms of size and capabilities.

Second Grade: Includes companies with good resources and average experience, capable of implementing medium-sized projects, but may not have the capabilities to implement large projects.

Third degree: Includes SMEs with sufficient resources and expertise to implement SME projects, and is considered suitable for projects with limited requirements.

Fourth degree: Awarded to companies with limited capabilities and qualified to implement very small projects or limited-scale businesses.

Fifth degree: This tier is awarded to companies with weak performance or that are arguably unsuitable for the market in terms of quality or achievement of objectives.

Sixth grade: This is the lowest tier in the classification and includes very small companies with limited capabilities. This tier is often awarded to startups that are still in the growth phase, as these companies do not meet the classification requirements and are not qualified to provide acceptable services.

How do I obtain the best classification tier that reflects the company’s capabilities?

The best possible rating can be achieved through proper planning to obtain a classification certificate. This involves properly understanding all administrative and legal requirements and preparing the company’s file accordingly. In addition, follow these guidelines:

• Read the government’s legal and administrative requirements to understand the requirements for obtaining a classification certificate.
• Prepare a classification file that includes all necessary licenses.
• Conduct a credit evaluation of the facility.
• Analyze the facility’s weaknesses and work to close any gaps before applying for the classification certificate.

Or, you can seek the assistance of an accredited consulting firm to properly complete all necessary procedures.

Why do we recommend that companies use Tatweer Alpha Company to obtain a classification certificate?

Tatweer Alpha Company is a leading company in issuing classification certificates for all economic establishments in the Kingdom of Saudi Arabia, across various specialties.
Tatweer Alpha Company is distinguished by its preliminary study of the companies to be classified, to analyze their strengths and weaknesses, and to provide a comprehensive analysis that includes all the necessary steps. This helps keep decision-makers fully informed of all the procedures that must be followed to improve the establishment’s activity and financial figures, thus achieving the best classification score that reflects the establishment’s correct performance.

High transparency in performance, combined with field experience and extensive relationships, has made Tatweer Alpha Company a partner of major companies from various sectors in the Kingdom of Saudi Arabia.

You can request a free consultation by contacting the company. Request a free consultation.

Governance has become a concept that has been frequently mentioned recently in various administrative sectors. Its application in companies and economic entities has become a necessity after it was adopted by many economic institutions and called for by many government agencies.

Historical overview:

The study of governance, its elements, and components dates back to the nineteenth century, as a result of the emergence of public joint-stock companies and the accompanying emergence of numerous accounting and administrative problems resulting from the separation of ownership from management, known as the agency problem. This required numerous arrangements, procedures, and rules obligating companies to respect the rights of stakeholders and shareholders, in addition to the responsibilities of the board of directors, its members, and the audit committees that represent the elements and principles of governance. Governance principles were subsequently approved and implemented after the concept developed and its elements crystallized clearly worldwide.

The accounting and administrative methods and approaches followed by companies have failed to address any financial problems or shocks that may be encountered in financial markets, including those experienced by major companies on global stock exchanges in 2008, as occurred in the United States of America, which led to numerous financial collapses and turmoil in stock markets, proving the failure of traditional procedures in confronting financial collapses and financial and administrative corruption.

What is governance?

There is no unified definition of corporate governance globally among economists, analysts, and legal experts, given the concept’s overlap with numerous economic, financial, regulatory, and social issues affecting businesses, impacting the economy and society as a whole. However, many professional and academic institutions have focused on defining corporate governance as…

Governance is defined as the structure through which the behavior of corporate executives is monitored and directed in various areas, such as the financial unit implemented by the board of directors and investors. The impact of corporate governance can also extend to various administrative aspects of the company.

The International Finance Corporation (IFC) defines it as: “The process by which companies are directed and controlled.” It explains that good governance helps companies operate more efficiently, improves access to financing, reduces risk, protects against mismanagement, makes companies more accountable and transparent to investors, and provides them with the tools necessary to respond to stakeholder concerns.

The importance of governance:

The importance of governance has increased recently, with the aim of achieving several economic objectives. This is evident in:

1. Preserving the rights of stakeholders, especially small shareholders, and ensuring the sound financial performance of financial and non-financial investment instruments that generate an appropriate return on their investments.
2. Increasing and maximizing the market value of the company’s assets and utilized resources, and activating competition between companies in global financial markets through the development of modern methods, tools, and mechanisms.
3. Supporting the implementation of privatization programs and guiding companies toward optimal use to prevent any associated corruption.
4. Working to provide local and international funding sources for institutions, whether through the banking system or capital markets, in light of the increasing speed of capital flows.
5. Avoiding accounting and financial problems, achieving support and stability for the activities of economic institutions, and working to prevent collapses or financial shocks in financial and banking institutions to achieve economic stability.

The classification system in the Kingdom of Saudi Arabia is a fundamental tool launched by the Ministry of Municipal and Rural Affairs and Housing to regulate and develop the service sector and enhance the efficiency of city service providers. The system relies on the classification of establishments and their specializations according to precise criteria encompassing financial, technical, administrative, and executive aspects. This system is considered a key measure for determining establishments’ capabilities and their ability to meet service delivery requirements with efficiency and high quality, contributing to enhancing transparency and reliability for beneficiaries.

Credit Rating (Financial Criteria):

A credit rating is one of the basic requirements for obtaining a rating certificate in the Kingdom. It relies on a set of financial criteria that analyze a company’s figures and activities to produce a credit rating that reflects the company’s financial condition and stability. Financial criteria are the criteria used to obtain a company’s credit rating. The credit rating is based on an assessment of the company’s financial capabilities and its ability to meet its financial obligations and repay its debts on time. It also determines the company’s degree of financial risk and its ability to manage working capital in projects.

A company’s credit rating is based on four main elements:

-The financial position of the company
-The level of governance in the company
-Comparing the company’s position to its peers in the market
-The total number, type, and value of projects implemented by the company

The financial status of the facility:

It includes the company’s financial performance and financial statements, including the company’s assets, profits, and cash flow. The entity’s credit rating is assessed according to a set of criteria, the most important of which are:

-Liquidity Analysis
-Financial Leverage Analysis
-Gross Profit Analysis
-Profit Margin Analysis
-Asset Turnover Analysis
-Cash Cycle Analysis
-Debt and Financial Arrears Analysis

Governance ratio:

Here, the duration of implementation of governance procedures within the company is measured. This includes the presence of clear risk management mechanisms and quality and performance evaluation mechanisms within the organization. The evaluation is based on three main points:

-Administrative governance
-Risk management mechanism
-Publishing periodic performance reports

Comparing the facility’s position with its counterparts in the market

The facility’s position is compared to similar companies in terms of size and activity to assess its creditworthiness. This includes focusing on:

-The facility’s sources of income
-Fixed and variable assets
-Technologies used to monitor projects
Equipment

Total number, type and value of projects

This is the total number and value of projects implemented by the contractor or currently being implemented inside or outside the Kingdom, provided that the project completion rate is no less than 50% for implementation projects and 30% for maintenance, operation, and services projects.

The credit rating is a basic requirement for an establishment to obtain a classification certificate from the Ministry of Municipal and Rural Affairs and Housing. The credit rating is expressed using letters with a sign to indicate the establishment’s credit rating, ranging from AAA to D, as will be explained in the credit rating table.

Credit Scores:

After the facility’s credit assessment is completed, the facility receives a credit score based on its compliance with the aforementioned criteria. Credit scores range from D (the lowest) to AAA (the highest).

Credit Scores Table:

Note:

For an establishment to obtain a classification certificate, its credit rating must be CC or above. A D or C rating will not allow it to be obtained.

Rating paths to obtaining an entity’s credit rating:

The rating process in Saudi Arabia follows several approved paths for providing credit assessments to entities seeking a rating. The assessment procedures are carried out according to the following paths:

Regular Path: The credit assessment service is provided electronically to entities seeking a rating through the Ministry’s rating agency. This service is free and takes an average of 30 business days.
Fast Path: This is a paid path that provides electronic credit assessments through the same applications, but at a faster rate. The assessment is completed in approximately 3 business days, based on the entity’s most recent budget.
Integrated Path: A paid service that focuses on a comprehensive assessment of the entity’s current situation, adding business risk criteria, including governance standards, through field visits and interviews with board members, employees, and customers. The final assessment is based on these visits and the opinions of specialists. The process takes an average of 5 business days.

How do I get the best credit rating that reflects the facility’s capabilities?

The best possible credit rating can be achieved through proper planning to obtain a rating certificate. This includes a thorough understanding of all administrative and legal requirements and preparing the company’s file accordingly. In addition, follow these guidelines:

• Read the government’s legal and administrative requirements to understand the requirements for obtaining a rating certificate.
• Prepare a rating file that includes all necessary licenses.
• Review the financial statements, focusing on transparency in the company’s financial figures.
• Analyze the company’s weaknesses and work to close the gaps before applying for the rating certificate.

Or, you can seek the assistance of an accredited consulting firm to properly complete all necessary procedures.

Why do we recommend that companies use Tatweer Alpha Development Company to obtain a classification certificate?

Tatweer Alpha Company is a leading company in issuing classification certificates for all economic establishments in the Kingdom of Saudi Arabia, across various specialties.
Tatweer Alpha Company is distinguished by its preliminary study of the companies to be classified, analyzing their strengths and weaknesses, and providing a comprehensive analysis that includes all the necessary steps. This helps keep decision-makers fully informed of all the procedures that must be followed to improve the establishment’s activity and financial figures, thus achieving the best classification score that reflects the establishment’s correct performance.

High transparency in performance, combined with field experience and extensive relationships, has made Tatweer Alpha Company the first choice for major companies from various sectors in the Kingdom of Saudi Arabia.

You can request a free consultation by contacting the company. Request a free consultation.

The classification system in the Kingdom of Saudi Arabia is one of the basic tools adopted by government agencies to regulate the contracting and engineering services sector, which contributes to ensuring the quality of implemented projects and enhancing the efficiency of companies operating in this field. The classification system aims to evaluate companies based on their financial, technical and administrative capabilities, and determines their eligibility to implement government and private projects according to specific standards.

The classification certificate is one of the basic requirements for any establishment wishing to implement government projects or participate in official tenders, as this certificate ensures that the company has the necessary efficiency to implement projects according to the approved standards. The classification is based on two main evaluations: financial evaluation and technical evaluation, and in this article we will highlight the technical evaluation as one of the most important factors affecting the classification of establishments.

Technical evaluation and its importance in obtaining a classification certificate

Technical evaluation is an essential element in the company classification process, as it aims to measure the technical and organizational capabilities of the facility and its readiness to implement projects efficiently and with high quality. This evaluation is conducted by the competent authorities based on several basic criteria, including:

Previous experience and implemented projects

The company’s record is examined in terms of the number of projects it has implemented, their sizes, specializations, and its success in implementing them according to the required timetables and quality. The greater the number of successful and completed projects, the higher the company’s technical evaluation.

Human resources and technical specializations

The efficiency of the company’s human resources is evaluated in terms of the number of engineers and technicians, their educational levels, and their practical experience, in addition to their possession of accredited professional certificates. The extent to which these specializations are compatible with the requirements of the projects that the company seeks to implement is also considered.

Technical equipment and supplies

Equipment and machinery play a crucial role in implementing projects efficiently, so their availability, quality, periodic maintenance, and compatibility with the nature of the projects that the facility is working on are evaluated.

Administrative System and Quality

The company’s internal administrative systems are evaluated, including project management policies, planning, quality control, and safety procedures, as these factors are essential in improving productivity and ensuring implementation in accordance with approved professional standards.

Company’s commitment to standards and regulations

The company’s professional licenses and permits are reviewed, in addition to its commitment to local and international labor systems and regulations, to ensure that they meet all legal and professional requirements.

Technical evaluation and its importance in obtaining a classification certificate

Technical evaluation is an essential element in the company classification process, as it aims to measure the technical and organizational capabilities of the facility and its readiness to implement projects efficiently and with high quality. This evaluation is conducted by the competent authorities based on several basic criteria, including:

The limits of these standards vary according to the size of the facility as follows:

The criteria are divided into two groups, each group has a specific number of points:

• Basic criteria, which are worth 80 points, which are the criteria that the facility must achieve at least in order to be classified
• Additional criteria, which are worth 20 points, which are the additional criteria that can raise the degree of improvement of the facility when they exist

These criteria differ according to the sector, as does the mechanism for calculating points, according to the size of the facility. Below we will explain the basic and additional criteria approved in the real estate development sector

Real estate development sector:

Basic criteria: (80 points)

Additional criteria: (20 points)

Technical evaluation and scoring mechanism

After collecting and analyzing the information, the company’s technical evaluation score is determined based on the points it achieves in each criterion. This evaluation is added to the financial and credit evaluation to obtain the final score for the classification certificate. For example, if the company obtains a technical evaluation between 70-100 points and a high financial evaluation, it will be classified in the first category, which reflects its ability to implement large and complex projects.

Why do we advise companies to rely on Tatweer Alpha Company to obtain the classification certificate?

Tatweer Alpha Company is a leading company in issuing classification certificates for all economic establishments in the Kingdom of Saudi Arabia in its various specializations.

Tatweer Alpha Company is distinguished by conducting a preliminary study of the companies to be classified in order to analyze the strengths and weaknesses, while providing a comprehensive analysis that includes all the necessary steps to improve the company’s position, in order to keep decision-makers in the establishments fully informed of all the procedures that must be followed to improve the establishment’s activity and financial figures, and thus ensure obtaining the best appropriate classification degree that reflects the correct performance of the establishment

The company develops an integrated classification plan dedicated to each case separately, so that the procedures are consistent with the company’s position to reach the best possible classification degree that reflects the company’s capabilities

High transparency in performance in addition to field experience and extensive relationships made Alpha Development Company the first choice for major companies from various sectors in the Kingdom of Saudi Arabia

You can request a free consultation by contacting the company. Request a free consultation

To obtain a classification certificate, the facility needs to develop an integrated plan that ensures meeting all the requirements and standards set by the Ministry of Municipal and Rural Affairs and Housing in the Kingdom. This plan includes a set of basic steps that contribute to enhancing the facility’s capabilities and enabling it to successfully pass the classification requirements. Proper planning includes going through the following steps:

1- Classification Requirements Analysis:

Understanding the official requirements: The plan begins by reviewing the regulations and systems approved by the relevant authorities to ensure a comprehensive understanding of the classification certificate requirements, such as financial, technical, and administrative standards.

Choosing the appropriate path: Determining the optimal path for submitting the classification application, such as the regular, fast, or integrated path, depending on the size, capabilities, and needs of the facility.

2- Improving financial performance:

Controlling financial records: The facility must ensure that its financial data is updated and audited financial statements are prepared in accordance with the approved accounting standards.

Improving financial solvency: Financial stability enhances the facility’s chances of obtaining a higher classification, so it is important to raise financial solvency and reduce debts.

3- Developing technical and administrative capabilities:

Employing qualified personnel: Ensuring the availability of an experienced and efficient work team to implement the projects undertaken by the facility, including engineers, technicians, and administrators.
Improving operations management: Establishing effective systems for project management and ensuring the quality of operational processes in line with the required standards.

4- Implementing governance standards:

Establishing governance mechanisms: The plan includes implementing governance policies and procedures that ensure transparency and integrity, such as forming an active board of directors, defining clear powers, and managing risks.

Internal audit: It is recommended to establish an internal audit unit to ensure compliance with standards and avoid errors in projects.

5- Preparing the required documents:

Collecting the necessary documents: Preparing all supporting documents such as the commercial register, audited financial statements, certificates of achievement, human resources documents, and proof of application of quality standards.

Ensuring the validity of documents: Reviewing the accuracy and validity of documents and updating them if necessary to ensure their compliance with official requirements.

6- Submitting the application via the Baladi platform:

Registering on the platform: Logging in to the Baladi platform and selecting the appropriate classification service.

Entering data and uploading documents: Entering all required facility data and uploading documents to the platform according to the instructions.

7- Conducting credit and technical assessment:

Conducting financial assessment: The services of accredited assessment companies can be used to conduct the financial assessment based on the facility’s solvency.

Technical assessment: The technical assessment includes a full examination of the facility’s efficiency in the specified specializations and reviewing previous projects.

8- Preparing for field visits (if required):

Preparing for visits and interviews: If the chosen path requires field visits, the facility team must be prepared to receive specialists and answer their inquiries.
Preparing a presentation: A presentation can be given explaining the facility’s capabilities, successful projects, and development plans.

9- Follow-up on the status of the application:

Update and follow-up: Follow-up on the status of the application through the Balady platform, and respond to any inquiries or comments from the relevant authorities.
Dealing with any comments: If there are comments from the entity, they must be addressed immediately to ensure the smooth running of the application.

10- Continuous improvement:

Internal evaluation after obtaining the classification: After obtaining the certificate, the facility must work on improving weaknesses and following up on performance to ensure that the classification is maintained and updated when needed.
Preparing for renewal: Ensuring readiness to renew the classification certificate by continuing to adhere to the standards and updating data.
This plan helps the facility achieve compliance with all classification certificate requirements by following organized steps, and contributes to raising the level of efficiency and competitiveness, which enhances its chances of obtaining large projects and expanding in the Saudi market.

Why do we advise companies to rely on Tatweer Alpha Company to obtain the classification certificate?

Tatweer Alpha Company is a leading company in issuing classification certificates for all economic establishments in the Kingdom of Saudi Arabia in its various specializations.

Tatweer Alpha Company is distinguished by conducting a preliminary study of the companies to be classified in order to analyze the strengths and weaknesses, while providing a comprehensive analysis that includes all the necessary steps to improve the company’s position, in order to keep decision-makers in the establishments fully informed of all the procedures that must be followed to improve the establishment’s activity and financial figures, and thus ensure obtaining the best appropriate classification degree that reflects the correct performance of the establishment

The company develops an integrated classification plan dedicated to each case separately, so that the procedures are consistent with the company’s position to reach the best possible classification degree that reflects the company’s capabilities

High transparency in performance in addition to field experience and extensive relationships made Alpha Development Company the first choice for major companies from various sectors in the Kingdom of Saudi Arabia

You can request a free consultation by contacting the company. Request a free consultation

In Saudi Arabia, the conditions for obtaining a classification certificate vary according to the sector (such as contracting, consulting, etc.). However, in general, the legal conditions for obtaining a classification certificate in Saudi Arabia can be summarized as follows:

Legal registration:
The applicant for the classification certificate (company or individual) must be legally registered in the Kingdom according to the applicable regulations, such as the commercial register or the competent authority.

The institution must have a valid license.

Work experience:
Obtaining a classification certificate requires practical experience in the field in which it is classified, for example, companies and consulting offices must prove their experience in previous projects that have been implemented.

Required documents:
Submit all official documents, such as the commercial register, certificates of experience, and annual financial reports. In some cases, certificates showing the payment of debts or financial obligations are required.

Qualified human resources:
Companies or individuals requesting classification must prove the presence of qualified and specialized employees or human cadres. Conditions may include providing academic or training certificates for key employees in the company.

Technical and Professional Standards:
Applicants must demonstrate compliance with the technical and professional standards of the field in which they are applying, whether in contracting, consulting or any other sector.

Quality certificates or approvals from recognized bodies may be required.

Learn about the technical assessment in classification certificates

Compliance with local laws and regulations:
Applicants must comply with local laws and regulations related to the sector.

In the case of contracting, for example, companies must comply with the Saudi Labor Law, as well as occupational safety and health standards.

Financial insurance:
In some cases, companies may be required to provide financial guarantees or insurance to ensure payment of future obligations.

Financial assessment:
One of the basic conditions for applicants for a classification certificate is to obtain a good financial assessment by submitting financial reports (balance sheet, income statements) that ensure the institution’s ability to meet financial obligations.

Learn about the credit rating in the classification certificate

Compliance with labor law:
The company must be committed to all labor laws, including providing a safe work environment and providing social insurance for workers.

Submitting via the electronic platform:
To obtain a classification certificate in some fields, such as contracting, applicants must submit their applications via the Ministry of Municipal and Rural Affairs and Housing platform (Baladi platform), or the electronic platforms of the competent authority.

Issuance of the certificate:
After completing the requirements and review by the relevant authorities, a classification certificate is issued that can be used to apply for government and private tenders and projects.

The concerned authority

In some cases, classification is done by the Ministry of Municipal and Rural Affairs and Housing (for contracting).

In other cases, classification is done by the Saudi Standards, Metrology and Quality Organization, or the Saudi Council of Engineers according to the field.

These conditions may vary depending on the type of company and its field of work, for example, the following table shows the conditions according to the type of company in terms of ownership in real estate development companies

Why do we advise companies to rely on Alpha Development Company to obtain the classification certificate?

Tatweer Alpha Company is a leading company in issuing classification certificates for all economic establishments in the Kingdom of Saudi Arabia in its various specializations.

Tatweer Alpha Company is distinguished by conducting a preliminary study of the companies to be classified in order to analyze the strengths and weaknesses, while providing a comprehensive analysis that includes all the necessary steps to improve the company’s position, in order to keep decision-makers in the establishments fully informed of all the procedures that must be followed to improve the establishment’s activity and financial figures, and thus ensure obtaining the best appropriate classification degree that reflects the correct performance of the establishment

The company develops an integrated classification plan dedicated to each case separately, so that the procedures are consistent with the company’s position to reach the best possible classification degree that reflects the company’s capabilities

High transparency in performance in addition to field experience and extensive relationships made Tatweer Alpha Company the first choice for major companies from various sectors in the Kingdom of Saudi Arabia

You can request a free consultation by contacting the company. Request a free consultation

The administrative structure in companies according to the governance system consists of a group of entities that affect and are affected by each other, as any institution includes a group of main parties that determine the form of governance through the mutual relationships between them and the powers and responsibilities that each party possesses, and determines to a large extent the extent of success or failure in applying the rules of governance,

The institution can mainly be represented by three basic entities (shareholders, board of directors, executive management) and these entities affect each other as well as affect various other concerned parties

The main parties that make up the administrative structure in the governance system

1- Shareholders (owners): They are the most important ones who provide capital through their ownership of shares in exchange for appropriate profits for their investments. They have the right to choose the appropriate members of the Board of Directors to protect their rights. The company also provides comprehensive, comprehensive, accurate and timely information to enable them to exercise their rights efficiently. They also have the right to view the minutes of the General Assembly, and they exercise their role by communicating their opinions and inquiries to the Board of Directors and senior management on a regular basis.

2- Board of Directors: They represent shareholders and stakeholders. The Board of Directors appoints and selects executive employees in key positions, supervises senior management, monitors the company’s performance and compares it to the performance objectives set by the Board. Its tasks also include setting goals, formulating strategic plans and supervising their implementation, establishing the internal control system and ensuring its efficiency and effectiveness, and managing risks to assess and monitor risks on an ongoing basis. It also raises the level and standards of governance in the company and ensures compliance with relevant regulations and regulations at all times.

3- CEO: He is the entity directly responsible for the company’s various operations, and is considered the entity responsible in the company for submitting performance reports to the Board Management The executive management is also responsible for maximizing the company’s profits and increasing its value, in addition to disclosure and transparency in the information it publishes to shareholders. The management is responsible for supervising the company and carrying out all necessary work to achieve the purpose for which it was established. Therefore, the executive director plays a vital role in the company as he is primarily responsible for the company’s interests and thus the interests of investors and shareholders.

4- Stakeholders: This includes every party that has interests within the company, such as creditors, suppliers, workers and employees. The interests of these parties may conflict and differ from each other at times, and governance is greatly affected by the relationships between these parties. Therefore, the role of governance is to manage the tasks that help the company provide the goods or services it produces. Without them, neither the management nor even the board of directors nor the shareholders can achieve the goals and strategies set.

5- Audit Committee: It is one of the main factors in evaluating the levels of governance applied. It is a committee emanating from the board of directors that plays a major role in the reliability of the quality of internal and external reports and resisting management pressures and interventions in the auditing process. Moreover, the mere announcement of the company’s formation of the audit committee will have an impact on the movement of its shares in the stock market.

6- Internal Auditor: His job is to evaluate Independent within the organization by evaluating the effectiveness and efficiency of the company’s internal controls, policies, procedures, and reporting mechanism, and the extent of compliance with them and providing recommendations to improve them (this is what the Saudi Arabian Monetary Agency, Insurance Companies Governance Regulations have determined). This task is carried out by a group of employees who have special competence and have extensive study of all aspects of the company’s activity and methods of workflow.

7- External Auditor: This task is performed by a certified accountant outside the facility and independent of it to review its data, as the independence of the external auditor is the basis for performing the audit process, as he expresses his opinion and the independent auditor in the financial statements is neutral, and expresses his neutral technical opinion on the extent of the truthfulness and fairness of the financial statements prepared by the companies through the report he prepares attached to the financial statements. Therefore, the role of the external auditor has become essential in corporate governance because it prevents conflict between shareholders and the company’s management and also reduces the problem of mismatching information

Why do we advise companies to rely on Tatweer Alpha Company to develop the company’s governance system?

Tatweer Alpha Company is a leading company in the field of issuing classification certificates and developing the governance system for all economic establishments in the Kingdom of Saudi Arabia in its various specializations.

Tatweer Alpha Company is distinguished by conducting a preliminary study of companies whose governance system is to be built or developed in order to analyze the strengths and weaknesses, while providing a comprehensive analysis that contains all the necessary steps to build an effective and robust governance system, in order to keep decision-makers in the establishments fully informed of all the procedures that must be followed to improve the establishment’s activity and financial figures, and thus ensure that the governance system is consistent with the company’s activities and administrative structure.

The company develops a plan to establish an administrative structure for each case separately, so that the procedures are consistent with the company’s situation and administrative activities.

High transparency in performance in addition to field experience and extensive relationships has made Tatweer Alpha Company the first choice for major companies from various sectors in the Kingdom of Saudi Arabia

You can request a free consultation by contacting the company. Request a free consultation

IT Governance is the regulatory framework that defines how information technology is used within organizations in a way that supports strategic objectives and achieves the desired value. Governance ensures that information systems and technology services are compliant with laws and regulations, and are managed in a cost-effective manner and minimizes potential risks.

IT Governance focuses on defining responsibilities, improving technology-related decision-making, and ensuring compliance with international standards such as COBIT, ITIL, and ISO/IEC 38500, which helps improve organizational performance and achieve a competitive advantage.

The Importance of IT Governance

IT governance is a vital element in the success of organizations, as it provides many benefits, including:

Achieving alignment between technology and strategy: Ensures that investment in information technology is consistent with the organization’s goals and achieves added value that can be utilized
Improving operational efficiency: It enhances the optimal use of technical, human, and financial resources.
Effective risk management: IT governance helps identify and manage risks related to cybersecurity, system failure, and legal compliance.
Enhancing transparency and accountability: It helps to clearly define responsibilities, which leads to improved technical decision-making.
Improving customer and user satisfaction: It contributes to providing reliable and secure technical services that enhance the user experience and ensure their satisfaction.

IT Governance Implementation Mechanism

IT governance requires the application of an integrated approach that includes a set of steps to ensure its success, including:

Developing frameworks and standards: Choosing and adopting an appropriate framework such as COBIT or ITIL to control IT operations according to global best practices.
Defining roles and responsibilities: Establishing a clear organizational structure that defines responsibilities between different administrative and technical levels.
Developing policies and procedures: Developing technical policies that include cybersecurity, data management, risk management, and ensuring compliance with regulatory regulations in the company.
Risk management and business continuity: Developing strategies and contingency plans to ensure business continuity in the event of any technical failure.
Measuring performance and continuous improvement: Using key performance indicators (KPIs) to monitor the effectiveness of IT and make the necessary improvements.

IT Governance Frameworks and Systems

Organizations rely on several global frameworks to implement governance, the most prominent of which are:

COBIT: Provides a comprehensive approach to IT management with a focus on control and compliance with laws.
ITIL: Focuses on providing IT services in a way that ensures quality and continuity.
ISO/IEC 38500: An international standard that sets out guidelines for IT governance.

Challenges facing the implementation of IT governance

Despite its significant benefits, organizations face challenges when implementing governance, including:

Resistance to change: Employees may have difficulty adapting to new policies and procedures.
Cost and investment: Governance may require additional investments in tools and training.
Balancing security and flexibility: Organizations need to strike a balance between securing systems and giving users the flexibility they need to perform their work.

Conclusion

IT governance is an essential element in ensuring the effective and secure use of information technology within organizations. By implementing appropriate frameworks and developing effective policies, organizations can maximize the benefits of information technology while reducing risks and ensuring compliance with regulations. To be successful, there must be strong commitment from senior management and an organizational culture that supports continuous improvement in IT processes.

Do you have questions about how to implement governance in your organization? Contact Tatweer Alpha Company for guidance. Request a free consultation