ANNUAL REPORT 2025 OUR PERSPECTIVE 39 ANTICIPATED OR KNOWN RISKS As NexG Berhad continues to evolve from a traditional secure document provider into a broader enabler of digital identity, financial inclusion and national infrastructure solutions, the nature and complexity of the risks it faces have also changed. The Group operates in a landscape shaped by evolving regulatory frameworks, rapid technological advancement, geopolitical sensitivities and rising public expectations around data protection and national security. A robust risk management approach is therefore essential to preserving the integrity of the business and safeguarding long-term value for stakeholders. Management Discussion And Analysis (Cont’d) Customer Concentration Risk Historically, the Group’s revenue has been significantly dependent on a few key government contracts, particularly from the Ministry of Home Affairs. This concentration poses a risk of revenue volatility in the event of non-renewals, delays in tender processes, or shifts in government procurement policy. While we continue to enjoy longstanding relationships and contract renewals from public sector clients, this risk remains structurally inherent to the business model. To mitigate this, we have taken active steps to diversify our revenue base through entry into private sector markets, including financial institutions and telecommunications companies, which now form a significant client base for our e-KYC solutions. Additionally, new overseas contracts such as those secured in Indonesia and West Africa, have further expanded the Group’s geographical footprint and customer mix. These developments have helped reduce reliance on any single client or contract and will continue to form part of the Group’s strategic risk mitigation approach. Contract and Regulatory Risk As a supplier to the Government and other regulated sectors, the Group is subject to tender-driven procurement cycles, pricing pressures and shifting technical requirements. Delays in tender awards or changes in compliance guidelines can disrupt project timelines or impact profitability. To address these challenges, early engagement with client agencies, advisory roles in tender consultations and strong delivery track records further strengthen the Group’s position in securing repeat contracts and navigating procurement cycles effectively. Supply Chain and Operational Risk The Group’s ability to deliver physical identity documents, smart cards and secure chips relies on a dependable supply chain and seamless operational execution. Global shortages of semiconductors, shipping delays or material sourcing disruptions may impact project timelines or increase procurement costs. To mitigate this, we maintain long-term relationships with Tier 1 suppliers and have built buyer inventory capacity for critical components such as chips and polycarbonate sheets. Importantly, the Group’s in-house capabilities, particularly our ownership of a certified Regional Personalisation Centre (“RPS”) and secure polycarbonate data page production line, give us greater control over key elements of the production and delivery cycle. These capabilities reduce reliance on external vendors and improve the Group’s agility in responding to supply chain shocks. Reputation and Public Trust Risk As a provider of national identity infrastructure and digital verification tools, NexG is in a unique position of public trust. Any failure in the delivery of secure services whether due to technical error, mismanagement, or third-party breach, can result in reputational damage far beyond financial implications. Trust is the cornerstone of digital adoption, especially in sensitive areas such as identity, data sharing and credit analytics. To manage this risk, the Group applies strict quality assurance and service continuity protocols across all mission-critical operations. Dedicated escalation pathways, audit trails and business continuity plans are in place to manage unexpected disruptions. Furthermore, by aligning closely with national cybersecurity frameworks and maintaining transparency with government stakeholders, NexG continues to uphold its reputation as a reliable and forward-thinking national solutions provider. Investment Risk The Group is exposed to market risk arising from its investments in quoted securities. These investments are subject to fluctuations in market prices that are influenced by factors such as economic conditions, interest rates, political developments, investor sentiment, and other external variables. Adverse movements in market prices may negatively impact the fair value of these investments, potentially resulting in unrealised or realised losses that could affect the Group’s financial performance and net asset value. The Group manages this risk by conducting regular reviews of its investment portfolio, setting prudent exposure limits. Nonetheless, there can be no assurance that market conditions will not adversely affect the value of the Group’s quoted securities.
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