Recognizing excellence and dedication across the years.
The Company implement risk management to mitigate the risk of business as follows:
1.Dependence on OEMs in Indonesia
The Company has a high dependence on OEMs in Indonesia, as a major player in the automotive industry. In running its business, the Company provides components according to the specifications requested by its customers. The Company has contracts with its customers for every transaction made. This is one of the mitigations carried out by the Company so that every product that has been produced can be sold even though product sales made by OEMs are declining. In addition, the Company also measures its inventory based on the number of orders made by customers. To minimize dependence on OEMs in Indonesia, the Company also produce innovated products that are sold directly to the public market, such as three-wheeled vehicles, bicycles and motor vehicle spare parts and accessories. The purpose is to increase the revenue owned by the Company, so the business do not only depend on OEM.
2.Damage and disruption of production facilities
The Company understands that core of the Company's production activities as a manufacturer of automotive components is highly dependent on good and adequate production facilities. To avoid the risk of damage and disruption of it, the Company strives to carry out maximum maintenance and countermeasures to minimize any damage or disruption of the production facilities, especially the main facilities such as dies, molds, jigs, fixtures and production machines. The Company maintains production equipment effectively and efficiently. In addition, the Company also mobilizes internal and external employees who have high competence for each production equipment owned by the Company, so the maintenance can run according to the expectations of the Company. If there is any damage or disruption to production facilities, the Company immediately take an action to minimize losses caused by such damage. The target of the Company is that there is no damage to the main equipment during the production process. Precise and fast maintenance are the Company's advantages in anticipating this risk. The Company also always performs measurable calculations of the finished goods of each products to anticipate delivery delays to customers.
3.Dependence on the supply of raw materials and its availability
The Company obtains the main raw materials and other supporting materials from several domestic and foreign suppliers. Around 60% of the Company's main raw materials are obtained from local suppliers and the rest obtained by import, such as from China, Taiwan, Japan, and Korea. The raw materials needed by the Company are one of the most important components in maintaining the existence of the Company as an automotive component company in Indonesia. Therefore, the Company requires a continuous supply of raw materials with the specific quantity and quality in order to produce products for customers. The Company is aware of the risks related to the dependence and availability of the main raw materials obtained from several of the Company's partners, therefore the Company always has several suppliers for each raw material needed. It is to anticipate the dependence of main raw materials on one supplier.
4.Business competition
The Company faces intense business competition in the automotive component industry in Indonesia. Therefore, the Company continue to adapt the changes in the environment and business conditions appropriately and quickly. To keep maintain the existence of the Company as a supporting company for the automotive industry in Indonesia, the Company strive to provide the best service by producing high quality products for its customers. In addition, the Company also keep the update to the world technological advances, especially in the manufacturing industry. The Company also focus on increasing human resources in the engineering field to be able to provide various product variants with efficient production time. The Company also continues to maintain the Quality Cost Delivery in its business activities.
5.Technical design failure
The Company owns and uses advanced machines such as robot welding, progressive dies, transfer dies stamping, automatic special propose machines, CNC bending, high speed forging and automatic coating lines which are placed in the production line up in its production activities. The qualifications and readiness of each machine used by the Company must meet the standards set by the Company in order to produce products with maximum quality. Therefore, the Company depends on the engineers owned by the Company. To mitigate risks related to technical design failures, the Company assigns each engineer according to their respective expertise, prepares the required technical training and requires each engineer to verify and re-examine every machine and other facilities in the Company. The Company's engineers, as well as creating a special automation division in the Subsidiary Company to support the Company's production facilities.
6.New product development
The Company continues to innovate on new and varied products. Therefore, the Company is faced with risks at the new product development stage. The stages of the new product development process starting from design, prototyping, trial and preproduction are carried out accurately and on time to ensure that the Company's production line are the best in quality before being mass-produced. Therefore, if there are inaccuracies and delays in the development of new products, it will have a negative impact on the Company's business, especially on the Company's finances and the trust given by customers. To mitigate this kind of risks, the Company ensures that all stages of new product development are controlled optimally. In addition, the Company also assign its best employees to monitor the development of new products. The Company believes that the new product development stage that has been well planned and measured will minimize the occurrence of excessive repetition, of course this will take a lot of time and cost.
7.The rising of labor costs in Indonesia may reduce the Company's profit
The Company has a large need for human resources in order to maintain the continuity of the Company's business activities which are engaged in the automotive component manufacturing industry. In addition, the government has strict regulations related to labor costs regarding the Regional Minimum Wage along with its annual increase. In order to anticipate the increase in labor costs in Indonesia that can affect the Company's financial condition, the Company mitigates these risks by maintaining the number of workers at the right and efficient level. The Company also develop the quality of these human resources so that the productivity of each employee can continue to have a positive impact on the Company's performance. In addition, the Company has launched a massive digitalization program, such as the use of robots, special propose machines, transfer dies stamping and automatic coating lines, to support the Company.
8.The Labor Law
To avoid risks related to the Manpower Act, the Company will always maintain the good relationship that the Company has so far with the labor unions as well as the government. The Company will always comply with the Manpower Law and also pay the average factory employee wages above the regional minimum wage, provide benefits, health, pension benefits and communicate with labor unions to avoid problems related to employment. As of the issued date of this Prospectus, the Company has never experienced any protests or lawsuits filed by factory employees involving the courts of the Ministry of Manpower during the Company's establishment.
9.Investments or corporate actions carried out by the Company
To mitigate the risks that arise as a result of Investments or Corporate Actions carried out by the Company, the Company will always carry out a measurable identification and calculation of all investments and conduct feasibility studies, especially for business launches and lung products. The Company will also continue to carry out these efforts based on advice from experienced parties, both internally and professionally.
10.Significant increase in interest rates and inflation that may affect the Company's sales
The Company's business is highly dependent on the automotive industry in Indonesia. Sales of motorcycle are directly proportional to the macroeconomic conditions that occur in Indonesia. Economic conditions such as rising interest rates, significantly rising inflation, weakening of the Rupiah exchange rate, and changes in taxation can affect people's buying power, which will directly have a negative impact on the Company's business. These economic factors cannot be avoided by the Company as a market player. Therefore, the Company can mitigate these risks internally by choosing reliable and experienced management who are able to follow any changes. This will help the Company to continue to exist when the Indonesian economic cycle is not supportive and can lead the Company to get out of these difficult times. In addition, the Company strives to measure its financial condition in order to remain stable during difficult times, such as controlling and measuring the debt position. When economic conditions do not support, interest payments and obligations can burden the Company to survive and get out of difficult times, but the management can still ensure the running of all payment obligations to employees, government, banks and suppliers.
11.Failure to obtain, renew or maintain material permits required to carry out business activities
The Company has always extended and renewed permits on time and the Company will continue to do so in the future. The Company also sees strong government support to promote labor-intensive companies and will make it easier to grant and extend related permits.