Financial Risk Management |
1. Liquidity and Cash Management |
- To ensure faster response to market opportunities by ensuring instant funding ability.
- To maintain a ‘sufficient’ liquidity position at all times.
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- Funding of long term assets through Equity and Long Term Loans.
- Availability of short term borrowing facilities to the Group at all times.
- Funding of inventory by short term creditors.
- The Group owns land and buildings with market values
significantly in excess of its book values that can be offered as collateral for future funding requirements.
- Sourcing of funding requirements through many financial institutions.
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- To minimise adverse effects of
interest rate volatility.
- To ensure cost of borrowing is at minimum level.
- To optimise the return on the Shareholder’s Fund and Life Policy Fund of Insurance Company
- Optimize the interest spread through matching the maturities of assets and liabilities of the Finance Company.
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- Structuring the loan portfolio to combine foreign currency and local currency denominated borrowings. Continuous monitoring is being done to match the mix of foreign and local denominated borrowings to the mix of export and local revenue of the Group.
- Using fixed and variable rate borrowings to strike a balance.
- Centralised Treasury that coordinates Group funding requirements thus ensuring more effective borrowing terms.
- Practicing effective hedging techniques whenever deemed necessary.
- Centralised Treasury function to get the advantage of the total pooling of funds.
- Matching the Assets and Liabilities of maturities.
- Duration Management.
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- To minimise risk associated with the fluctuation in foreign currency rates in relation to export proceeds, import payments and foreign currency debt transactions
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- Export proceeds exceeding the import payments and foreign currency debt payments act as a natural hedge.
- Ensuring effective Treasury operations through various hedging techniques such as forward bookings, forward sales, swaps and options contracts etc.
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- To minimise risks associated with debtor defaults.
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- Obtaining insurance cover for export debtors.
- Developing and implementing Credit Policies
- Obtaining bank guarantees, deposits and collateral for all major local customers.
- Following stringent assessment procedures to ensure credit worthiness of the customers prior to the granting of credit.
- Demarcating the local areas and appointing new distributors thus increasing the number of customers with the objective of reducing credit exposure due to the reliance of a few customers.
- Closely monitoring the debtor balances, laying action plans, and determining the same are under control.
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- To minimise risk from fire, theft and machinery and equipment breakdown.
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- Obtaining comprehensive insurance covers for all tangible assets.
- Adoption of stringent procedures with regards to the moving of assets from one location to another.
- Carrying out mandatory preventive maintenance programs.
- Carrying out frequent employee training programs in areas such as fire prevention.
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- To maintain a sound system of internal control to safeguard shareholders’ wealth and Group assets.
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- Carrying out of system audits and other control mechanisms such as inventory and cash counts throughout the Group by our central Internal Audit Department.
- Having in place a budgetary process and a budgetary control mechanism on a monthly basis to ensure that the Group’s performance is in line with its targets.
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- To prevent the causes that damage our reputation.
- To minimise the impact if, despite our best endeavours, a reputation crisis should occur.
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- Adopting stringent quality assurance policies with regard to goods bought out from third parties as well as the inputs, processes and outputs of own brand and in-house manufactured products.
- Ensuring effective communication with various stakeholders including employees, bankers, media, regulators, customers, suppliers, shareholders and the community at large.
- Providing the front line managers and the sales staff with adequate training in order to improve service standards as well as to educate staff on the importance of customer service.
- Ensuring Public Liability Cover to make certain safety of the customers and public at all times.
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5. Human Capital and Labour Risk |
- To ensure a smooth flow of operations without any undue disruptions.
- To project ourselves as a human employer, successful in motivating, developing, retaining and attracting the best of human capital.
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- Maintaining healthy relationships with trade unions through regular dialogue
- Entering into agreements with trade unions.
- Improving employee benefits by way of incentives and welfare activities.
- Improving the Human Resource function of the Group with regards to employee recruitment, performance appraisals and inhouse as well as external training programs.
- Promoting Performance driven culture.
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- To keep pace with the current technological developments and safeguard against obsolescence.
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- Continuous investment in new technologies and automation.
- Investing in Research and Development activities throughout the year.
- Investing in hardware and developing software in-house.
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- To minimise risk associated with price and availability.
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- Introduction of total Supply Chain framework including correct procurement process system.
- Establishing relationships with many global and local suppliers for raw materials and commodities in order to reduce overdependency on a single supplier/brand.
- Ensuring effective category management to reduce the risk of non-availability of goods at our retail outlets.
- Adoption of backward integration strategies.
- Centralised purchasing division which has enabled us to create a reliable network of global suppliers.
- Entering into forward contracts for raw material purchases.
- Ensure Goods in Transit are insured.
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- To reduce stock obsolescence and manage stock holding costs.
- Reducing the risk associated with theft and shrinkage.
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- Adopting a monthly declaration policy.
- Identifying slow moving stocks and effectively laying out a channel for these to be sold off.
- Adopting security systems at the Retail outlets such as security tags with alarm systems, surveillance cameras and deployment of security to manage theft.
- Ensure Raw Material and Finished Goods stocks are insured.
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- To maximise our market share and maintain market leadership in the respective industries.
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- Ensuring high standards of quality.
- Increasing productivity and efficiency in order to ensure our prices remain competitive despite increasing wage, energy and transportation costs.
- Carrying out Research and Development activities to identify needs.
- Further strengthening our Arpico brand through aggressive advertising campaigns and target marketing.
- Introducing pioneering products.
- The introduction of a CRM program in our retail chain.
- The provision of various value added services at our key retailing outlets.
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10. Intellectual
Capital Risk |
- To protect ourselves against possible violations, fraudulent usage and infringements on the Group’s copyrights.
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- Registering our brands and trademarks.
- Successfully obtaining patents for manufactured radial tyres.
- Furthering our Arpico brand image through promotions and advertising whilst ensuring value of the brand image is resolute.
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11. Capital Investments Risk |
- To minimise risk of not meeting profit expectations.
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- Adopting a stringent approval procedure for Capital expenditure based on the level of investment and the expected pay back.
- Carrying out extensive feasibility studies for large scale investments. External expertise is obtained wherever required.
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12. Information Systems Risk |
- To minimise risk associated with Data Security, Hardware and Communication and Software.
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- Maintaining of spare servers.
- Mirroring of hard disks with critical data.
- Data back-ups stored in off-site locations.
- Vendor agreements for support service and maintenance.
- Regular upgrading of Virus Scanners, Fire walls etc.
- Compliance with statutory requirements for environmental preservations.
- Carrying out Application Control Audits.
- Having a Disaster Recovery Site.
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13. Environmental, Political and Regulatory Risk |
- To minimise the negative impact from the changes in the external environment which are beyond our control
- To Comply with the Regulatory Requirements.
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- Compliance with statutory requirements for all tax and other payments.
- Prioritise the IT requirements for reporting
- Set up internal deadlines for each criterion
- Meet the deadline for Statutory Returns and review all returns by Group Finance before the submission.
- Continuous dialogue with statutory bodies to get the updated reporting requirements.
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- To Minimise the Claims and to ensure proper pricing.
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- Assessing the risk exposed by accepting the policy and carrying out proper ratings and loadings before underwriting any policy.
- Adhering to the guidelines provided by re-insurer
- Referring any complicated matters to the re-insurer before accepting the risk.
- Checking validity and accuracy of all the proofs given by the client before accepting the risk.
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