risk management

The Company implements a risk management system that aims to identify, anticipate, and formulate correct measures for risk mitigation, covering every type of risk that the Company may face in the course of doing business. This risk management system is of utmost importance in protecting the interests and assets of the stakeholders, and is a manifestation of GCG implementation within the Company. The Company’s risk management practices have been implemented in each of the Company’s business conduct codicils. Each work unit in the Company has the proper procedures and general guidelines for the implementation of the risk management system, to be carried out in order to safeguard Company interests and assets. The Company’s risk management practices will be further enhanced in 2021. The detailed agendas related to risk management are a key part of the management’s work programs. The following section discusses each type of major risk faced by the Company, along with appropriate mitigation measures. Main Risk Profile and Mitigation Measures :

Competition Risk
Players in technology sectors tend to be quite fragmented. Main competitive risks will come from the entrance of global-scale players with leadership in technology innovation and with huge capital backup. To mitigate this risk, the Company enacts a “sharing economy” concept, concluding strategic alliances with major groups in various sectors to defend Indonesian markets.


Technology Risk
Technology development is progressing at a blinding pace. Disruptions in many sectors, namely in telecommunication, finance, retail and transportation, all threaten the very existence of incumbent players, causing some to even close down their 
business. To mitigate this risk, the Company and its subsidiaries establish research as well as business development divisions to enlighten management as to key product and consumer behavior trends in the next 3-5 years. Hence, the Company will ideally always be ahead of the curve in technology development in the market.

Government Regulatory Risks
As a public company, the Company is guided by the regulations, such as regulations issued by OJK, the government body appointed to regulate and supervise capital market activities, as well as relevant regulations related to or derived from the Capital Market Law; also regulations issued by Bank Indonesia (BI) and others government regulation which may affecting the Company’s business in technology and digital, such as regulations on digital payment. Meanwhile, the Company’s legal division, assisted by both internal and external audit teams, continuously maintains its close relationship with regulators, making sure that every initiative that the Company takes faithfully complies with prevailing laws and regulations.


Risk of Workforce
As a technology company, its employees comprise the most valuable assets of a company, and likewise, overall Company performance is highly influenced by the turnover rate of employees. For this reason, the Company manages the risk of workforce turnover, among others through its employee retention program, application of an incentive and reward system, and provision of opportunities to all employees to follow a clearly defined career path.


Credit Risk
Credit risk is the risk that a third party failed to discharge its obligation based on financial instrument or customer contract, which will incur a financial loss. The Company is exposed to credit risk arising from its operating activities and from its financing activities, include deposits with banks, foreign exchange transactions, and other financial instruments. Credit risk arises mainly from banks and cash equivalents, trade receivables, other receivables and restricted time deposits. 
Credit risk arise from trade receivables and other receivables managed by the management of the Company in accordance with the policies, procedures, and control of the Company relating to customer credit risk management and other receivables. Credit limits are determined for all customers based on internal assessment criteria. The receivables is monitored regularly by the management of the Company. Credit risk also arises from banks and deposits with banks and financial institutions. To mitigate the credit risk, the Company places its banks and cash equivalents with reputable financial institutions. The Company conducts business relationships only with recognized and credible parties. In addition, the amounts of receivables are monitored continuously to reduce the risk for impairment.

Evaluation on Risk Management System Efficacy
The Company’s Risk Management System is regularly evaluated by the Board of Directors and the Board of Commissioners. Based on an evaluation conducted at the end of 2020, it was concluded that the currently-running risk management system of the Company proved effective throughout 2020. This was reflected in the low level of risks of all varieties faced by the Company and the lack of significant adverse impacts from these risks on the Company’s financial performance.


*Source : PT M Cash Integrasi Tbk. Annual Report 2020