MSM Malaysia Holdings Berhad Annual Report 2019

Risk Category Description & Impact Mitigation Measures Financial Risk: Poor cash reserve Description Total cash reserve to remain positive as it will impact the cash flow of the business. i. Enter into new business venture. ii. Increase production volume and reduce refining cost. iii. Increase sales price. Strategic Risk: Issues of Approved Permit (AP) & market liberalisation Description AP is an export and import license issued by the Permit Issuing Agencies (PIAs) under the Malaysian Customs Act 1967. Impact MSM business is disrupted by the significant increase in the number of APs issued to industrial users. This scenario is further compounded with increased smuggling of sugar into Malaysia, resulting in reduced prices in the domestic market. i. Provide assurance that there is optimum capacity of sugar stock for domestic market. ii. Management has discussed with Ministry of Domestic Trade & Consumer Affairs (KPDNHEP) on the effect of market liberalisation. iii. Management to continuously create good rapport with local authorities. Market Risk: Volatility in foreign exchange (FOREX) Description Volatility in FOREX refers to currency fluctuations in the global foreign exchange. Impact Volatility in FOREX may result in losses or loss of opportunity gain. i. Continuous monitoring on the strength of USD against Ringgit. ii. Tenure to hedge is on quarterly basis with mandate obtained from Management. Operational Risk: Manpower turnover Description High manpower turnover. Impact The efficiency and effectiveness of business operations could suffer due to high staff turnover. i. To create a more conducive working environment. ii. Offer better packages based on performance and productivity of refinery. iii. Creating opportunity for knowledge and experience development. Operational Risk: Excess refinery capacity Description Excess capacity available can contribute to over supply/ production of refined sugar such that it is more than the quantity demanded by the market. Impact Higher cost of production and stock overload can lead to increase of warehouse rental cost. i. Management to revise and improve marketing plan and strategy. ii. Increase sales activities. iii. Aggressively seek to penetrate new markets / segmentation / product. KEY RISKS & MITIGATIONS Various risk mitigation strategies are employed depending on type of risks identified as below: MSM Malaysia Holdings Berhad | Annual Report 2019 26