GHL System Berhad Annual Report 2020

A N N U A L R E P O R T 2 0 2 0 17 MANAGEMENT DISCUSSION AND ANALYSIS CONT’D 3. PERFORMANCE BY BUSINESS SEGMENT AND GEOGRAPHY (Cont’d) 3.2 Performance by Geography (Cont’d) Thailand recorded the largest percentage decline in revenue of -22.9% to RM21.9 million from RM28.4 million on the back of lower TPA transaction revenue due to closure of the tourism sector throughout 2020. Shared services revenue in 2020 showed yoy declined and although Solutions services grew in the second half of 2020, it was insufficient to compensate for the overall decline recorded in 2020. TPA segment saw a strong revenue contraction due to the border closures which impacted tourist arrivals and hence the group’s cross border e-wallet segment. The Thai operations remain EBITDA positive in 2020. Other countries remain the smallest contributor to group operations at RM1.6 million or 0.5% of group turnover compared RM1.2 million in 2019. The EBITDA contribution in 2020 improve due to cost cutting efforts in Indonesia and Cambodia. 0 50 100 150 200 250 300 350 Malaysia 272.5 266.2 45.6 44.8 2019 2020 28.4 21.9 1.2 1.6 347.7 334.5 Philippines Thailand Others Group 4. KNOWN RISKS In the ordinary course of its operations, the Group is exposed the following risks : a) Merchant Performance Risk – The Group currently contracts directly with merchants on two business models namely as a Payment Facilitator (PF) with Financial and Non-Financial Institutions as well as a Direct Acquirer with the schemes for the provision of electronic payment services. In the event a risk arises in that the merchant default in his obligations to the cardholder or e-wallet holders for any particular sale, then, that sale would be reversed (“or charged-back”) and the sale amount refunded to the cardholder or e-wallet holder. The acquiring institution would execute its rights to then recover the charged-back transaction from the Group which would then seek to recover it from the merchant. The Group could potentially incur a loss if the merchant was no longer in business or otherwise unable to reimburse the Group for the charge-back. The Group has, over the last six (6) years, invested significantly to develop and put in place risk management policies, procedures, systems, and risk managers with the requisite experience to monitor merchant performance risk. The Group also implemented specific rules and other forms of controls to the merchants to manage performance risks. These strict controls and Standard Operating Procedures (SOP) have effectively mitigated merchant performance risk, and as of the date of this report, there was negligible exposure arising from this risk. The Group had recorded RM11k nett chargeback losses attributable to merchant performance risk in 2020 recorded for Malaysia, Thailand, and Philippines.