Risk Management System
Therefore, risk management system is necessary to detect the possibility of risk occurrence so that necessary measures can be done to avoid or minimize the impact if the risk occurs.
Under the coordination of the Board of Directors, the Company's managers categorize possible risks that may be faced by the Company. With the information and input based on experience, estimation and observation, the Company has planned appropriate plan and measures to avoid or minimize impact of the risks.
Risk management implementation is part of the Company's management system and becomes a consideration in the management decision making process, thus creating continuous improvement that becomes part of the Company's strategy.
Types of risks and management of the risks
The consumer goods industry has attracted many companies to enter the market offering products of the same type with the Company's products. The Company's management has responded to this stringent competition cautiously and carefully in managing its liquidity. Similarly, raw material supply management, production capacity availability, and enforcement of regulations related to the Company's performance are the objects of the Company's risk management.
The risks that adversely affect the Company's business activities include:
Business competition with competitors engaging in the same business is unavoidable. The risk may cause uncertainty for sales target that at the end can affect the Company's performance.
Therefore, the Company manages the risk by dealing with the business competition risk as a challenge that requires us to be more creative in making innovation and more critical in evaluating the Company's strengths and weaknesses.
While continuing to maintain the quality of products, the Company must always be able to create new products that are different from the products that have been existed in the market, so as to attract consumers to choose the Company's products.In addition, the Company must continue to expand its product market share with no limit.
Fluctuation of foreign currencies' exchange rates to Rupiah may provide uncertainty on production cost and selling price of the Company's products.
This is due to the fact that although most of raw materials are sourced locally, fluctuation in the foreign currency exchange rate, most notably US dollar, against Rupiah could affect the cost of imported raw materials or locally sourced raw materials whose prices are based on international benchmark prices. Accordingly, if there is significant fluctuation in the foreign exchange rate, the Company's production cost may also be affected.
The Company manages the fluctuation risk that may occur by cash inflows from the Company's export sales.
Natural disasters, harvest failures, disruption of transport and the occurrence of an event causing disturbance of raw materials supply could result in a failure to utilize production capacity to gain maximum efficiency, which can decrease the Company's operational and financial performance.
To anticipate the disruption of raw materials supply, the Company has a supply chain division led by the Company's Director. The Company also has a sufficient inventory level to minimize possible impacts resulted from the shortage of raw materials.
As a company with across-continent product sales, political and economic conditions as well as regulations applied in a country can affect the Company's performance, such as: imposition of import duty by export destination country. This can inhibit the Company's export growth because the amount of tax to be paid can make the product selling price in the export destination country become more expensive.
Policies in the form of government regulations affecting the people's purchasing power and production and transportation costs as well as the Company's liabilities may have an impact on the absorption of the Company's production and affect the Company's profit. A change in economic, social, political, and security conditions in Indonesia causing economic, social, political, and security instability can have an impact on the Company's activities and financial performance.
To overcome this risk, the Company sells its products to various countries around the world, thus, the negative impact of this risk can be reduced.