Integrated Annual Report 2023 2 3 4 5 6 7 8 9 1 65 RISKS AND MITIGATION OPERATIONAL RISK FINANCIAL RISK Context • Manual and labour-demanding aspects of our operations. • Our focus lies on vigilant cost management and enhancing service efficiency to safeguard our margins and optimise cash flow. • Instilling a culture of prioritising safety and maintaining constant vigilance over our work environment to uphold compliance with Health, Safety, Security and Environment (“HSSE”) standards is paramount. • We recognise the inevitability of unanticipated circumstances impacting UEM Edgenta’s operations, stemming from external factors such as inflationary pressures, fluctuations in minimum wages, geopolitical tensions, disruptions in the supply chain, and fluctuations in interest rates. These challenges necessitate agility and resilience in our operational strategies. Mitigation • We are dedicated to continuously refining our operational procedures, leveraging technology and digitisation to enhance efficiency and productivity across the board. • We have established proactive measures to manage costs effectively, ensuring the maintenance of robust fundamentals and safeguarding margins amidst the dynamic shifts in market conditions. • Our commitment extends to the implementation of comprehensive HSSE programs aimed at fostering a safety-centric culture within UEM Edgenta, promoting the well-being of our employees and the environment. • We closely monitor unforeseen developments and their potential impacts, continuously evaluating and adjusting our business strategies to maintain operational resilience and adaptability in an ever-evolving landscape. • In anticipation of potential disruptions, we have meticulously developed Business Continuity Plans to ensure a swift and effective response, enabling us to sustain operations and deliver critical services without interruption. Context • Profitability is dwindling as competition intensifies and operating expenses soar. • The delay in receiving payments from customers for trade and other receivables is impeding efficient cash flow management and liquidity. • Increasing interest rates, a response by central banks to tackle various economic challenges, are putting pressure on finances. • The Company faces foreign exchange risks, with potential fluctuations in exchange rates against local currencies affecting liabilities and expenses denominated in foreign currencies as well as the value and future cash flows of financial instruments. Mitigation • We prioritise the optimisation of costs and the preservation of margins by implementing robust cost management strategies, harnessing technology and promoting operational excellence to drive improved work efficiencies and cost-effectiveness. • We implement Enterprise Resource Planning (“ERP”) systems to seamlessly integrate financial processes across our organisation, facilitating enhanced analysis of spending, strategic sourcing and cost controls, while also increasing transparency into expenditure. • We rigorously mitigate credit risk by conducting thorough credit evaluations and maintaining vigilant oversight of customer recovery processes and accounts receivable. • We maintain proactive management of interest rates, employing a strategic blend of fixed and floating rate debts to effectively control costs and minimise financial risk. • We utilise a natural hedge approach by securing borrowing in the same currency as anticipated revenue streams from international operations, mitigating currency exchange risks. Operational risk involves the potential for financial loss arising from deficiencies in internal controls, malfunctioning internal processes, human error, system failures or other external factors. These elements introduce uncertainties and hazards that a Company encounters while conducting its routine operational activities within its industry. Financial risks are dangers that directly impact our Group’s financial performance and the stability of our cash flow, potentially affecting its overall fiscal well-being and liquidity status.
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