Annual Report 2022 27 ABOUT US LEADERSHIP PERSPECTIVE SUSTAINABILITY GOVERNANCE FINANCIAL STATEMENTS Other Information Management Discussion & Analysis ANTICIPATED OR KNOWN RISKS Competition Risk and Ability to Secure New Projects Although Datasonic has a leading position in the ICT solution and e-government services industry, competition remains prevalent for us. With Datasonic’s revenue being primarily derived on a contractual basis, competition occurs as Datasonic is required to undergo tedious bidding processes via open tender with other market players to secure or extend a contract from our clients. In mitigation, core competencies are developed with the goal to provide world class integrated solutions and excellent services at competitive rate. In turn, this enables us to consistently maximise the value for our customers and attain greater market share as well as expand our products and solutions portfolio that bolsters our standing in the industry. Datasonic also continues to prioritise our human capital development and R&D in order to foster greater innovations. Customer Concentration Risk As Datasonic’s revenue sources are notably reliant on the contracts secured from Government agencies, the loss of one or more of our major customers/ contracts without securing any new customers to replenish the loss of business will impose material and adverse effects upon us. As a leader in the industry, we possess a robust track record in timely delivery of products and services along with extensive technical knowledge in providing effective ICT solutions. Pairing them with our prioritisation on customer satisfaction, they allow us to gain strong competitive edge against our peers and help retain our customers. Meanwhile, to further enhance our revenue stream, we are constantly exploring new business prospects and opportunities, especially in digital transformation, which are in line with our business strategies and core competencies. Operational Disruptions Our performance is predominantly dependent on the efficiency and functionality of the operations in which any disruptions or unplanned shutdowns may cause adverse impact to Datasonic. This can be observed over the past year or so with the imposition of movement restrictions to curtail the COVID-19 cases in Malaysia where our business operations were temporarily halted or forced to operate at reduced capacity. We have been in compliance with stringent SOPs and mitigation measures outlined by the authorities. Other external business risks such as natural disasters, pandemics, riots, and general strikes are beyond our control and may impose material and negative effect upon our operations. PROSPECTS FOR FY2023 As we move into the new financial year FY2022/2023, the demanding business operating conditions are expected to persist on the back of market uncertainties, supply chain disruptions, rising raw materials and commodity prices, and labour shortage. On a much brighter note, the global broad-based economic recovery is gaining further traction as the COVID-19 pandemic transitions towards endemicity. On the home front, the economic activities have been picking up pace too as our country progress towards endemicity with regards to the COVID-19. The Ministry of Finance (“MoF”) has forecasted a GDP growth of 5.3% to 6.3% for 2022 supported by stronger domestic and external demand, increased economic activity and continued labour market recovery. Reopening of Borders Augurs Well for Datasonic As mentioned earlier, the restrictions on Malaysia’s international borders affected our performance at the start of FY2022. With the borders reopened, Malaysians are resuming their business and leisure travel activities, which would highly spur the demand for passports. Plus, passports are time-dated document with a 5-year validity period, thus many passports have expired and yet to be renewed as a result of the pandemic. Therefore, we are seeing pent-up demand for passports, which is expected to come from renewal and the application for new passports. Since the reopening of our borders, we are experiencing a strong uptick in demand for passports, which is expected to continue in the coming months. We have been readying ourselves in anticipation of the surge in orders to ensure continuous and smooth delivery of passports to cater to this spike. As the total solution provider of Malaysian passports, we strive to provide exceptional and timely delivery
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