Good Corporate Governance


Risk Management

Application of risk management becomes an absolute necessity to reduce and prevent losses that disrupt the continuity of business, due to many uncertainties and rapidly changing business environment, both internal and external.

Risk management is implemented through systematic, integrated, optimum, and sustainable management procedures. Risk management implementation procedures start from risk identification process that aims to identify various risk factors that may arise and hinder the Company’s operational and managerial processes. The next step is risk control which is reflected in the implementation of risk management.

Identification of Business Risks

To properly manage business risk, The Risk Management Policy should be implemented in each unit with the following activities:

  1. Detect/identify risks as early as possible on each activity.
  2. Measure the level/amount of each risk, by considering the magnitude of the impact and likelihood of risk opportunities.
  3. Conduct an evaluation of the risk sources and causes of risk, as the basis for mapping and controlling significant risks.
  4. Develop a strategic plan for risk control for high priority risks/ significant risks.
  5. Implement risk control activities to risks that may jeopardize the Company’s viability.
  6. Perform continuous monitoring of risk, particularly risks that have significant impact on the Company’s condition.

Type and Management of Business Risks Business risks and risk mitigation that can be implemented are always discussed in the meetings of the Board of Directors and Board of Commissioners, and meetings of the Internal Audit Division and Audit Committee. These risks are business risks that are material and may affect the Company’s performance. In an effort to mitigate the risk, the Company regularly reviews the applicable hedge and control policies for each type of risk.

Some of the risks identified in 2013 are as follows:

  • Interest Rate Risk on Fair Value and Cash Flow

    The Company’s exposure to the interest rate risk arises from bank loans. Bank loans at variable rates expose the Company to cash flow interest rate risk, which is partially offset by cash held at variable rates. To minimize interest rate risk, the Company evaluates market rate trends and review interest rates offered by various banks and other financial institutions to obtain the most favorable interest rate.

  • Currency Risk

    Currency risk due to fluctuations in foreign currency exchange rates does not have significant impact on the Company, since most of the income and expenses of the Company and its subsidiaries are in Rupiah, therefore, the Company has not implemented a policy on currency risk management.

  • Credit Risk

    Credit risk is the risk where one of the parties on a financial instrument will fail to meet its liabilities, causing the other parties to suffer a financial loss.

  • Liquidity Risk

    The Company may face difficulties in meeting its financial liabilities due to shortage of short-term funds. This risk arises mainly from differences in the maturity of financial assets and liabilities. The Company mitigates this risk by strictly monitoring the liquidity requirement. Moreover, we also continuously review the financial market condition to provide opportunities for optimization of financing costs.