In managing its business, the Company faces a number of risks in business and operations. It is the policy of the Company to implement a risk management strategy in a careful manner. The following risks not arranged in any order may have an impact on the Company’s performance, either directly or indirectly.
Risk Management System
The Company realizes that the good implementation of risk management can support the performance of the Company. Hence, risk management serves as one of the key factors in managing its business activities. The primary objective of risk management implementation is to protect the Company against various risks that may arise in order to maintain the business activities of the Company to run in line with its strategies and policies.
In its daily activities as a mining company, the Company is obliged to thoroughly implement risk management in order to provide added values for both the Company and the stakeholders. In its application, the Company refers to the prevailing regulations related to the management of post-mine environment.
The Effectiveness of Risk Management System
In conducting the supervisory function and management of material business risk, the Company has a policy in place related to the management of post-mining environment. The policy aims to give guidelines in the risk management process and activity so as to be in line with the regulations in force.
Moreover, the Risk Management policy also aims to ensure that the management and all employees have the same perception and understanding on the concept of risk management, and to cultivate the awareness on the significance of a continuous risk management implementation in the Company.
Other function of risk management is to protect the Company against risks that may have negative impact on the achievement of the Company’s objectives and to explore the opportunities to increase benefit for the Company. Risk Management policy offers a recommendation on the analysis of risks based on the best information that can be obtained in order to support the strategic decision making by the management. Risk analysis is conducted based on the demand from the management and the initiatives of risk management division in order to provide opinion for the related internal stakeholders so as to create added values. Risk analysis associated with strategic projects is performed to complement the selection process as well as the priority and balancing initiative for the Company strategic portfolios. The risk management division also handles the uncertainty factor in the Company's Long-Term Plan and risk factors, either long-term or short-term, in all risk management policies.
Risks Faced by the Company and Their Management
In conducting its business activities and operations, PT Mitrabara Adiperdana Tbk faces various risks that pose either negative or positive impacts. Thus, a policy to control and manage these risks thoroughly has been established by the Company. The followings are several risks that can affect the Company’s performance, both directly and indirectly.
- Commodity Price Risk
The Company can be exposed to commodity price risk due to certain factors, such as government regulations, demand and supply level in the market, and the global economic environment.
- Operational Risk
The Company has described and assessed various activities that generate added value for the Company. Risks that may occur due to the activities are among others:
- Health, Safety, Environment (HSE): Accident at workplace, improper waste disposal, fuel contamination
- Production disruption: Flood in mining area, landslide in mining area, and slippery road
- Quality product: Bad quality of coal, contamination on product received by the consumers
- Contractor: Bad performance from the main contractor, the dismissal of the main contractor
- Operation Plan: Wrong assumption, inaccurate planning
- Land availability: Failure in acquiring and utilizing the land, overlapping land ownership
- Project Management: Poor project management, delayed project, project cost exceeding the budget.
Routine monitoring and control are carried out to ensure that the risks will not significantly affect the Company when it does happen. Prevention and development actions become the Company's main focus in order to properly manage all risks.
- Financial Risk
Financial risk covers the fluctuations of exchange rate and risk of availability of loan facilities, considering that several transactions are conducted in Rupiah while the Company’s income is denominated in US Dollar. Hence, the financial position of the Company may be affected by the movement of exchange rates of US Dollar against Rupiah.
In addition, the Company depends on the availability of loan facilities to finance the Company’s working capital and operations sustainably. The negative sentiments from banking industry on the mining industry in general may may affect the Company’s ability to obtain adequate loan facilities.
- Regulatory Risk
The coal industry is regulated by the government. Each change in the government policies, such as royalties, Domestic Market Obligation (DMO), etc. will affect the Company’s performance.
Constantly, the Company evaluates the probability of the abovementioned risks from arising and has prepared various steps and strategies in order to mitigate these risks.