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Risk Management
Risk management is an integral part of our business, since balancing risks against returns is a critical trade off decision we have to make every day when it comes to investment decision making. We have in place several measures to strengthen our risk management processes which are linked to our daily investment decisions. These include policies to mitigate business risks along with the upgrading of the support systems that enable easy monitoring and management risks.
We reviewed and refined our investment processes balancing rigor and consistency with responsiveness and flexibility. The aim was to lay a sound foundation to integrate our risk management activities as part and partial of our operations. The board of directors places special consideration on mitigating of those risks to possible extent.
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Objective Setting
Company sets its financial and operational objectives on a yearly basis. This process includes reviewing and setting long-term (five-year) objectives and annual objectives with related KPIs for monitoring purposes. The Corporate Management team takes the initiative in proposing objectives and they are reviewed and approved by the Board.
Risk Assessment
The measure of risk is based on likelihood and impact assessment performed as explained below. Any significant risks exceeding risk tolerance limits will require management responses.
01 02 03 04
Risks associated with objectives are identified and documented in parallel to setting of objectives. Further, the applicability of risk areas identified previously during management discussions in internal audit reports and management letters of external auditors are reviewed to prepare a comprehensive list of risks of the Group.
Risk Identification
Depending on the significance of the risk, decisions are taken to appropriately manage the risk by accepting, reducing, sharing or avoiding it. Risk responses identified in relation to set objectives are also documented and reviewed.
Risk Response
The strategies the Group adopts to manage risk depend on the type of risk and the severity of the risk, which are outlined as follows,
• Accepting the consequences of the risk and budgeting for it. • Avoiding the possibility of the risk occurring.
• Transferring the risk to another party.
Risk Management Framework
• Raigam follows COSO and Risk Management
Industry approaches as the conceptual framework of its Enterprise Risk Management.
The Framework consists of • Determining Group risk appetites,
• Accepting / transferring / eliminating and sharing risks,
• Measuring performance including the benefits of risk diversification and
• Monitoring execution of the process.
The outcome of this process will help to directs scare resources towards business opportunities that generate maximum returns, with minimum risk. Further, this method allows assessment of risk observations to priorities risk management. below chart shows Raigam's risk management framework.
Control Activities
The Corporate Management team and the Group Managers implement the risk response action plans identified, with a view to managing those risks.
Monitoring
Monitoring risks at multiple levels: During the monthly performance review meetings, all significant risks and their actions plans are reviewed by the Corporate Management Team. The Management Committee, attended by the Managing Director also reviews these risk areas on a monthly basis. The Audit Committee, which has the ultimate responsibility of monitoring the process of risk management, reviews the risks and action plans on a quarterly basis and makes recommendations to the Board.
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Documentation and reporting plays a key role in monitoring risk. The corporate plan, which includes objectives and related risks, internal audit reports and management letters of external auditors, are communicated to the management of the Company, the Audit Committee and the Board of Directors for their review and action.
Information and Communication
The Board has the preliminary responsibility for ensuring whether the risks are identified and appropriately managed via the Group. The Audit Committee has been delegated to review the effectiveness of the risk management process, including the systems set for identifying, assessing, managing and monitoring risks by, the Board of Directors. The internal audit department of the company also plays a major role in risk identification. The corporate management team plays the prime role in the total risk management process of identification of risks and eventually the enactment of mitigating plans and monitoring of identified risks.
The corporate management team also evaluates possible alternatives available to mitigate identified risks. Functional managers deliver valuable information and responses to the corporate management team for risk management with the aid of the employees.
Board of Directors
Audit Committee
Chief Executive Officer
Internal Audit Department
Identify, assess and monitor risks relating to business operations.
Risk identification
Implement, monitor and elicit feedback. COSO Framework requires any risk to be assessed based on the likelihood and the impact. COSO risk assessment framework can be presented in following matrix. According to the matrix, top right corner risks are assessed as highest risks and such risks require prompt attention.
Likelihood
High (3)
03 06 09
Moderate (2)
02 04 06
Low (1)
01 02 03
Low (1) Moderate (2)
Impact High (3)
Risk Categorization
Business & Operations
Business Risk
Project Development Risk Finance Environment Reputation
Foreign Exchange Risk Regularity and Complains Risk Quality
Interest Rate Risk Legal Risk Customer Service
Technological Risk Credit Risk - -
Human Risk -
Commodity Price Risk
Cost Overrun Risk -
Operational Risk - - -
The table below sets out the broader categories of risks, their effects, assessment of their likelihood of occurrence and impact and mitigating actions for such identified risks.
Risk Category Effect
Commodity Price Risk Impact to profitability due to fluctuation of raw material sourcing prices from time to time, especially raw crystal salt purchasing prices depending on harvest quantities and qualities from harvesting season to season.
Business Risk Obsolescent of existing technology due to innovation in the industry.
Technological Risk Introduction of new regulations affecting the business adversely.
Regulatory And Compliance Risk Introduction of new regulations affecting the business adversely.
Human Risk Adverse impact on business competitiveness due to the inability to recruit / retain required talented staff.
Project Development Risk Delays in project development due to deadlocks leading to loss of revenue E.g. Delay in granting approval by related authorities for project related matters.
Credit Risk Liquidity position being negatively affected due to delays / non-payments from debtors.
Legal Risk Non adherence to the rules and regulations set out in numerous government Acts.
Quality Risk Potential adverse impact on company's image due to low quality.
Customer Service Risk Risk arising from poor customer service pose a major threat to the reputation.
Cost Overrun Risk Returns from new projects being lower due to actual project cost overruns.
Operational Risk Losses due to fraud, human errors, inefficient processes, natural perils and loss of sensitive information.
Interest Rate Risk Adverse impact on profitability due to interest rate fluctuations.
Foreign Exchange Rate Risk Adverse impact on profitability due to exchange rate fluctuations. Likelihood Impact Mitigating Actions
High High Entering into purchasing agreement with suppliers, deploying special purchasing plans on right time by purchasing division and passing the cost increases to customers.
High High Backward integration, obtaining expert knowledge on forecasting and assumptions.
High High Foreign consultancy, training.
Moderate Moderate Monitoring of compliance with regulatory requirements. Participate in lobbying efforts against regulations that could have a negative impact on business / industry.
Low High Build strong employer brand.
Low High Building and maintaining a good rapport with the stakeholders to minimize project development delays.
Low High Protection through legally enforceable agreements.
Low High Awareness of those regulations and policy level arrangement to address those risks.
Low High Conducting internal and external audits. Holding the prestigious ISO 9001 and assessing quality management system frequently.
Low High Having customer inquiry system with a sound technical sport system.
Low Low
Low Low Conduct periodic internal audit reviews which report to the Audit Committee of the company. Working out a business continuity plan to ensure disaster preparedness. Appropriate insurance covers.
Making accurate project cost estimates using expert knowledge and adopting budgetary controls on development cost.
Low Low Use of flexible financial sources and arrangements.
Low Low Managing foreign exchange rate exposures by applying financial risk management techniques
Financial Statements
