Risk Management System
The Company always applies the precautionary principle in carrying out its business by regularly monitoring the risks in its business activities. The monitoring is carried out with the aim of identifying factors that can hamper the Company’s performance. The Company also maps out possible risks that have not been identified to ensure business activities and business growth can be done in accordance with the Company’s vision and mission.
The Company always anticipates the possibility of the occurrence of risks and possible consequences through a periodic review of management systems and policies. Risks are carefully identified to avoid potential losses for the Company.
The Company implements integrated risk management system to ensure the achievement of the Company’s objectives. The Company also encourage all employees to do risk management so that all employees can contribute in managing risks and provide useful input for achieving the Company’s goals.
The Company’ Business Risks
Risk management efforts are carried out by the Company by initially identifying the risks so that the Company can determine proper and effective risk management. The followings are risks and risk management efforts done by the Company:
Risk of Business Competition
Currently, the business competition in the retail sector is very tight. This can be seen from business competition which does not only occur between traditional market and modern market, but also between players in the modern market. This risk is anticipated by offering a variety of products that are not sold by competitors. The Company also improve its service to loyal customers, does attractive promotional activities in collaboration with suppliers, banks and other parties.
Risk of Changes In Government Regulation or Policy
Changes in Government policies in taxation and restrictions on imports can have an impact on the Company’s performance. The Company regularly coordinates with members of associations in the modern retail industry, such as Indonesian Retail Entrepreneurs Association (APRINDO) to monitor and anticipate changes in policies or regulations related to import restrictions, import quota restrictions, import duty regulations and changes in import tariff.
Risk of Failure in Store Expansion
Risk of failure in store expansion is if the store does not succeed in meeting the targets. The Company performs various strategies, including periodic reviews related to store performance, store conditions and the products assortment. All of these activities were carried out to improve financial performance and store operations.
Risk of Lease Term Expiration
The risk of lease term expiration is because the Company uses rental scheme for all stores. The Company anticipates this risk by periodically reviewing existing lease agreements in order to identify earlier if the lease period is not extended. The Company also continues to maintain good relations with property developers to get new locations.
Risk of Delays in Products Distribution by Suppliers
Supply and demand are important factors in the Company’ business activities. The Company’s business activities are relied on the products distribution done by suppliers and the possibility of dependency on certain suppliers. The Company takes the initiative to increase the inventory and set policies to appoint several suppliers in order to anticipate the risk of delay in products distribution by suppliers. The Company also continues to maintain good relationship with suppliers.
Risk of Dependency with Information Technology
The Company always ensures to keep updating its information technology system. The Company uses SAP, an international standard system in carrying out its business activities. This SAP system has also been widely used in the modern retail industry.
Risk of Human Resources
The Company conducts business activities that require qualified human resources. High employee turnover and delays in recruitment will affect the Company’s operational activities. The Company anticipates the risk of human resources by promoting the Management Development Program (MDP) program. The candidates for the MDP program are the Company’s collaboration with several quality universities. The number of participants in the MDP program continues to increase from time to time and is expected to provide the need for qualified human resources.
Financial risk is strongly influenced by economic, political, foreign exchange and other financial instruments. Financial risk management is carried out by the Company by optimizing the operational performance and working capital owned by the Company. Overcoming these risks, the Company routinely reviews pricing strategies and marketing plans and continues to carry out cost efficiency in carrying out its business activities. Financial risks from credit risk (interest rate risk) and market risk (foreign exchange risk and commodity price risk) are analyzed and anticipated by strict budgeting monitoring system.
Risk of Natural Disaster
In anticipating the risk of natural disasters that may occur, the Company has insurance policies that covers all its assets with sufficient coverage amount and covers the risks that may occur.
Risk Management Report
The Company continues the process of reviewing risks that might affect the Company’s operations and finances. The risk identification process is carried out together with the Company’s annual and long-term planning processes. Various efforts to improve risk management continue to be carried out, through communication and training forums. The implementation of risk management has been running effectively and systematically as well as anticipatively against the risks that occur. There was no risk that has significant impact on the Company’s business activities.
Evaluation of the Effectiveness of Risk Management Systems
The risk management system has been able to have a positive impact on the Company’s activities, especially in implementing good corporate governance principles. The implementation of risk management system allows the Company to early identified factors that can hinder the Company’s performance. Using proper risk management system, the Company carries out more careful planning.