Kimlun Corporation Berhad Annual Report 2019

Annual Report 2019 Kimlun Corporation Berhad STATEMENT ON RISK MANAGEMENT AND INTERNAL CONTROL (cont’d) 51 (ii) Evaluates the effectiveness of the risk management processes and support system to identify, assess, monitor and manage the Group’s key risks; (iii) Meets with senior management on a semi-annual basis to discuss and deliberate on the significant risks affecting the Group within the context of the business objectives and strategy; (iv) Establish Group risk management guidelines and policies and ensure implementation of the objectives outlined therein and compliance thereto; (v) Recommends for the Board’s approval, the Group risk management policies, strategies and risk tolerance levels, and any proposed changes thereto; and (vi) Reviews significant investment proposals. A risk management report is tabled for AC and Board discussion annually or at shorter intervals where necessary. The report identifies principal risks affecting or are likely to affect the Group, and the appropriate systems or actions to manage the risks. The key risks and some of the control measures for FY2019 are set out below: Risk area Control measures taken to mitigate the risks • Organisation structure outlining the lines of responsibilities and authorities for planning, executing, controlling and monitoring the business operations. • Periodic operational review meetings attended by the Executive Directors, heads of departments and key management staff to consider financial and operational risks and issues of the Group as well as any management proposal. • Monitoring of actual performance against annual budget by the Board. • Relocate loyal and experienced employees to lead branches’ operations. • Engagement of specialist to provide consultancy services for technically complicated works. • Formalised whistle blowing policy, code of conduct and written policies and procedures on major processes to ensure compliance with internal control systems and relevant laws and regulations. • Appointment of staff based on the required level of qualification, experience and competency. • Background check of prospective customers prior to accepting any engagement from such parties. • Close monitoring of collection by the finance department with weekly updates to the senior management as to collection received and incidence of delay. • Timely follow up with the customers on overdue payment and retention sum. • Avoid over concentration of sales and credit exposure to any customer to prevent over-dependence on any customer. • Actively monitor the Group’s banking facilities to ensure the facilities are sufficient to meet the Group’s working capital and capital expenditures requirement, and negotiate with bankers for credit facilities features which enable greater flexibility in the Group’s financial resources management. • Established quality control procedures and project tendering guidelines to ensure quality services and products to customers, and cost efficiency. • Nurture close relationship with customers, sub-contractors and suppliers. • Establish wide range of services and products to diversify product risks and reduce reliance on any particular services or products for revenue. • Focus in more technical demanding products and services to create a market niche or speciality. • Bid for projects jointly with parties which have complementary strength to the Group. • Diversify base of customers, sub-contractors and suppliers. Operational Risks • As in any business, the Group is subject to operational risks which are inherent in the industry which the Group is operating such as delay in progress of construction leading to Liquidated Ascertained Damages, cost overrun, etc. Credit, financial and liquidity risks • The Group faces the threat of delays in payment by customers for work done which will eventually affect the Group's cash flow, and heighten the risks of debts becoming unrecoverable. Market risks • The Group operates in a competitive environment and failure to compete effectively against its existing competitors and new market entrants will affect its performance.