SUCCESS WITH INTEGRITY
all hotel properties of the company are covered under all-risk, business interruption, and terrorism insurances to cover the aforementioned damages should they have direct impact to any of the properties. 4. External Risk Factors Affecting Hotel Business Performance External risk factors affecting hotel business performance, such as natural disaster, political unrest or epidemic, are beyond company’s control and prevention. Such external factors could cause sudden drop in number of international tourist arrival, which will have a direct impact on hotel revenue and net income. Nevertheless, precedent events have shown a pattern that these adverse impacts are short-lived, around 3 - 9 months, depending on severity. The company’s risk management strategies to handle these external factors are to have a flexibility and responsiveness in our systems. Sales and marketing activities are flexible for fast reaction to market condition, while proactive cost management policies allow the company to be resilient in difficult periods. 5. Interest rate risk Interest rate risk, which is a result of changes of market rates in the future, will affect our operating results and cash flow. For the purpose of financial risk mitigation in light of interest uptrend, the Company converted a portion of long term loan from floating rates into fixed rates. As of 31st December 2011, approximately 34 percent of our long term loans were subject to a fixed rate and 66 percent were subject to a floating interest rate. Our floating-rate term loans apply a Minimum Lending Rate (MLR), a 6-month Fixed Deposit Rate and 12-month Fixed Deposit Rate as a benchmark. 6. Human Resources Risk Loss of executive management or key personnel of the company is also considered a risk for the company. However, human resources development and management is one of the key priorities of the company. Over the past years, the company has recruited employees and managements in rapid growth departments and provides continuous training and development to existing employees. More importantly, the company has implemented a 3-layer succession plan from President and Chief Executive Officer down to Vice president level which supervised by the Management Development and Compensation Committee (“MDC”) and Executive Vice President of each department respectively. In addition, with a professionally run structure, the company operates under an efficient system and do not rely on sole capability or decision-making of a single individual. Authority has been decentralized to various level employees under the supervision of the Board of Directors. These structures of management will help reduce risk from loss of key personnel. In addition, key corporate cultures including “Team spirit” and “With integrity”, will also attract capable professionals with integrity to join the company. Lastly, competitive compensation and benefits, bonus scheme which links to corporate strategy map as well as long term stock option plan for executive management and employees also creates commitment and loyalty to employees which will help them to work more efficiently. This compensation structure will also help to retain quality employees with the company.
Risk Factors
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