The Company’s risk management system is a comprehensive approach to achieving strategic objectives and sustaining business operations. By implementing this system, the Company may thoroughly examine numerous categories of potential risks and take proactive measures to mitigate their impact.

The Company’s risk management program is implemented with the involvement of all levels of the Board of Directors, management, and employees at all levels of the Company and the companies in its portfolio. By incorporating risk management into the Company’s work culture, the Company can anticipate and assess numerous risk scenarios that may occur from internal or external sources, both local and global.

Upon deciding the proper approach and response, the Company’s risk management framework takes into account its objectives, strategies, organization, governance, procedures, monitoring, and reporting systems.

The following are the main components of the Company’s risk management framework:

  1. Risk identification, including awareness, measurement, monitoring, and control;
  2. Risk management infrastructure, including organizational structure, governance systems, data collection, analytical methods, policies, procedures, and reporting; as well as
  3. Corporate culture, including training, performance appraisal, value development, and rewards.

By applying this framework, the Company is able to more proactively identify and manage risks. Throughout 2022, the Company responded to a variety of hazards based on their severity.

Investment in Associated Entities

The Company’s performance as an investment company is highly dependent on the business operations and corresponding revenues of the companies in its portfolio. The Company’s capability to fund its obligations and dividends is influenced by the distribution of profits, management fees, and other payments from its subsidiaries and associate companies. Throughout 2021, the Company has maintained its ability to manage this level of dependency.

To mitigate investment risks, the Company and its business segments invest strategically in a diversified portfolio. The Company prudently balances risks and returns in order to minimize risks without sacrificing the value of its investment returns. In addition, the Company was also analyzing its investment performance in order to determine the investment’s worth and to maximize its use of investment funds.

Socio-Political

The Company’s and its business units’ activities constitute a vital element of the Indonesian financial industry. As a result, the Company is vulnerable to macroeconomic and sociopolitical conditions on a national level. A solid economic environment that stimulates investment, domestic growth, employment, and purchasing power provides profitable prospects for the Company. On the other hand, political instability has a detrimental effect on the overall financial landscape, and specifically on the Company’s performance and business.

The Company mitigated socio-political risks by anticipating economic uncertainty caused by domestic and international socio-political situations. Contingency policies, which were planned and developed as part of the risk management process, supported the continued expansion of the business in the face of unstable external conditions unfavorable to the Company’s operations. Moreover, the Company aimed to preserve optimal liquidity and avoided funding from sources that could have a higher influence on the economy as a result of changes in monetary policy, loan interest rate volatility, and foreign currency fluctuations.

Foreign Exchange Rate

The Company conducts a substantial amount of business in foreign currency, specifically in US Dollars (USD). These transactions include capital expenditures, international business units, and loan transactions that require currency conversions from the Indonesian Rupiah (IDR) in order to meet maturing obligations. Exchange rate fluctuations, notably the USD against the IDR, had a significant impact on the Company’s financial position.

To reduce the risk of currency fluctuations, the Company uses derivative financial instruments.

Interest Rate

The Company is perpetually exposed to interest rate risk, particularly with respect to loans obtained at floating rates.

Recognizing this inevitable circumstance, the Company anticipates interest rate adjustments in order to mitigate negative impacts and alleviate strain on its financial position.

Business Competition

As an investment company with investments in many sectors, business competition also poses risks.

Although hefty capital expenditures are required in order to operate, the retail sector attracts investors due to Indonesia’s sizable domestic market and consumption levels. Although government regulations have set limits on foreign investment in this sector, foreign retail companies can still penetrate the Indonesian market. Indonesia has demonstrated strong e-commerce potential due to its large consumer base, supported by increasing Internet penetration and smartphone use. The Company’s business units engaged in retail have realized this potential through their online outlets and have taken the necessary steps to excel in the competition.

Similarly, TMT confronts threats from new entrants and the rapid growth of the IT business as a result of the requirement to stay current with technological advancements on a continual and regular basis. Due to the intense competition, all industry players have been compelled to consistently improve services and innovate while keeping a high standard of quality in order to survive. TMT remains ahead of the competition by delivering comprehensive IT consulting services, comprehensive software and hardware support, and affordable costs with flexible installment payments.

The Company recognizes, anticipates, and plans for this risk scenario in order to retain the Company’s competitive strength and avoid a decline in the number of customers and revenue for the Company and its business units.

Competition risk encourages the Company and its business units to innovate and develop ground-breaking projects and new operations in order to maintain market leadership.

Human Resources

Given the critical role that human resources play in all of the Company’s business activities, a set of rigorous work standards must be maintained to ensure that experienced employees continue with the Company. As a consequence, the Company rewards employees through attractive incentives and benefits packages in order to address the most significant issues associated with retaining a highly skilled and competent workforce.

The Company and its business units maintain a balanced policy that is focused on its business and employees’ best interests. Compensation packages that include competitive salaries, bonuses and incentives, vacation and medical benefits, as well as possibilities for sustainable growth through training, seminars, and workshops, enable the Company to keep its most precious human asset.

Covid-19 Pandemic

The pandemic has become the biggest challenge and risk for business continuity in all business sectors, locally, nationally, and globally within the last two years. To that end, the Company makes all efforts to prevent and handle the Covid-19 issue and the potential spread of other dangerous virus variants, by identifying, analyzing, and evaluating or minimizing the impact of pandemic risks.

As a form of commitment, responsibility, and concern for all stakeholders, the Company has formed a special team that is on standby to handle cases of Covid-19 and its variants within the Company’s scope of work. Through the formation of this team, the Company provides facilities for employees to be able to monitor their health regularly and periodically, as well as to conduct further investigations, especially if there is close contact with people who are confirmed positive for the virus.

To ensure that operational activities continue during the pandemic, the Company has implemented a variety of preventive measures in accordance with the Government’s and World Health Organization’s recommendations (WHO). Additionally, the Company regularly employs specific policies such as Work From Home (WFH) and Work From Office (WFO) in order to anticipate the virus’s spread to the broader population. To mitigate the risk and impact of a pandemic in the workplace, the Company also provides education and socialization to all employees and related parties about the importance of maintaining physical health and vaccinations, as well as implementing strict health protocols in the work environment by facilitating a safe and healthy work environment for everyone while working in the office.