INTEGRITY QUALITY SERVICE - Saha-Union Co., Ltd

SAHA-UNION
59
RISK FACTORS
The Company has a sub-committee for risk management
who are responsible for assessing risks, setting up
risk management policies for the Company and its
affiliated companies and evaluate the results to the
Board of Directors of each company as well as inform
those companies as schedule. Since the economic,
political and social situations are changing, there must
be a revision of risk factors, an evaluation of intensity
of the possible effect, and a revision of management
procedure so as to control the risks within the level
accepted by the organization or to eleminate those
risks. In consideration of risk factors, both internal
and external, they are categorized into the business
risk, the administrative risk, the financial risk, and
risk from external factors that significantly affect the
Company. Also, the measures and policies on the risk
management have been transmitted to the Executive
and implemented levels of the company as well as the
companies in the Group to let them know the clear
objectives and work towards the same direction to
achieve policy’s goals.
Incidents posting risks that significantly affect the
Company are:
1. BUSINESS RISK is the risk concerning the returns
on investment that does not meet the target.
Nature of the Company’s core business is investment,
including domestic investment and foreign investment.
Returns on investment come in terms of dividends, which
can cause a risk of returns of investment missing the
target, reducing the profit. The Company evaluated that
the likelihood of this risk to happen is moderate, due to the
diversification of investment. The measures to manage this
risk are a closely follow-up the performance figures and
returns of investment and assess status in the future of
the investment business for finding solutions in advance.
The happening in 2011 was that the investment in energy
business in Yunnan Energy Qujing-Union Power Co., Ltd.
in China had a continuous deficit operating result recently,
which could not be improved. Therefore, the Company’s
Board of Directors had a resolution to cease the operation
in order to reduce loss from the investment. It is currently
under proceed of related matters.
Moreover, business risk in terms of dissatisfactory returns
of investment may happen again in the future by another
reason, a change in accounting standards generally
accepted in Thailand to use the international standard to
of IFRIC4 concerning the lease agreement evaluation and
the standard interpretation of financial report No. 12 (IFRIC
12) on service concession agreement. If the interpretation
results conclude that the power plant business is deemed
as a property lease agreement or service concession
agreement, it will affect the operating performance of
Ratchaburi Power Company Limited, under the company’s
investment, causing it to change the accounting practice,
resulting in a decrease in the early years’ net profit, which
may cause the Company to receive less dividends.
2. OPERATIONAL RISK has the matters as follows:
2.1 Risks of damage and mismanagement of investment
The Company’s main business is in the form of
investment, meaning that if the corporate in which the
Company invested face difficulty in their administration,
the Company can be affected directly. The Company
evaluated that the likelihood that this risk could happen
is moderate because the Company has diversified
its investment to many businesses. It also has the
supporting measure by evaluating the risk of the
investing companies, setting up personal internal
control for those companies, giving knowledge in the
matters concerned. The Company also has a follow-up
system for policy implementation and an internal control
system for each type of investing business.
2.2 Risks from relying on production orders from few major
customers
Some of the Company’s subsidiaries are joint
ventures, whose co-investors are foreigners operating
their business and producing almost all products
overseas. The effect of relying on production orders
from few major customers is massive when the
customers change or reduce their orders, or move
their production base to a different country. However,
the likelihood is quite slim since those joint venture
investors are accounted to only half of the investment,
and the benefits must be compromised among these
investors for a return of investment. The Company
has a measure to maintain the good relationship with
these joint venture and to produce the products up to
the requirements of the customers.