Corporate activities are influenced by certain kinds of financial risks: market risk (including foreign exchange risk, commodity price risk, and interest rate risk), credit risk, liquidity risk and capital risk. Generally, financial risk management program of the corporate focuses on the uncertainties of the financial markets and attempts to minimize improper effects towards corporate financial performance.
Corporate board of directors operates risk management which includes identification, evaluation, and value driven maintenance towards financial risk if necessary. Board of director provides the principles of risk management, including market risks, credit risks, liquidity risk and capital risk.
Risks as listed below is ordered based on their impact towards corporate financial performance, operational activities, business prospects, and stock investment.
1. Risk of rapid growth of digital technology.
Cellphone is one of electronic devices that experiences rapid growth. The corporate’s products should have sophisticated technology in line with the world technology in order to compete with similar products. The appearance of a technology that is more advanced and significantly different from the products sold by the company can cause material and negative impact, as well as directly affecting the sales of the company's products and resulting in non-sellable inventories. This risk may negatively affect financial performance, operational activities, and business prospects.
2. Risk of incapability to market product innovation and new services.
One of the factors that may impact company’s sales achievement is the company’s capability to develop and market trending products and new services. If the company is incapable to provide those products, it may cause risks of losing market share and competitiveness, which will impact the growth rate and cause material and negative effects towards income and business prospects.
3. Risk of decreasing the quality of the company's products.
The company doesn’t produce its own cellphone products, so there is a possibility of degradation of product quality. This may cause a reduction in market share and competitiveness which will in turn impact the growth rate and cause material and negative effects towards financial performance, operational activities, and business prospects.
4. Risk of continuity of product supply marketed by the company.
Company has no agreement that tied suppliers; suppliers are able to distribute their products to other companies since the purchase mechanism used is purchase order. There is also no guarantee that suppliers will continuously distribute their products to the company in the coming years, which may impact financial performance, operational activities, and business prospects materially and negatively.
5. Risk of dependency to retailers.
As a cellphone distributor, company is highly dependent to retailer’s enthusiasm and revenue when it comes to selling company’s products. Degradation in company product sales to retailers will cause material and negative effects towards financial performance, operational activities, and business prospects.
6. Risk of business competition in cellphone, pad and prepaid vouchers industry.
Business competition in cellphone, tab, and prepaid voucher industry is very intense. Various brands are being sold in the market including brands partnering with the company. As more brands are freely marketed in public, it can affect the company's market share. These risks may materially and negatively affect the financial performance, operational activities and business prospects.
7. Foreign exchange fluctuation risk
The company is facing foreign exchange fluctuation risk, in which products purchased from the distributor are paid with a significant amount in foreign currency, while the company revenue is obtained in Rupiah. The weakening of Rupiah exchange rate may materially and negatively affect the financial performance, operational activities, and business prospects.
8. Risk of consumer choice possibility changes.
The existence of a wide range of new brands with increasing content and applications can affect the consumer's preference. Consumers may choose other brands if the company does not actively update its products. These risks may materially and negatively affect the financial performance, operational activities, and business prospects
9. Governance risk of regulatory change in telecommunication and cellular phone market.
The field of telecommunication is one of many fields regulated by government regulations such as regulations of the Ministry of Industry and Ministry of Trade, especially for smartphone importers. Currently, the company’s main activities are sales of cell phones, gadgets, and prepaid vouchers. If there is a change in telecommunication regulations, which is related with cell phones, it may materially and negatively affect the financial performance, operational activities, and business prospects.
10. Risk of consumer buying decision on special occasion.
Demand for cell phones often increase on special occasions such religious and public holidays if there is a new product equipped with more advanced technology and special price. The increase of purchase frequency only on such occasions may materially and negatively affect company’s cash flow.
11. Risk of economic growth in Indonesia
Economic situation in Indonesia may impact the company’s business continuity. If Indonesia’s economic situation weakens and the country faces financial issues, it will also affect consumer buying power. This risk may materially and negatively affect the financial performance, operational activities and business prospects.
12. Risk of natural disasters
Natural disasters are an uncontrollable factor by the company. If natural disasters such floods, earthquakes etc. occurs, it would have an impact on sales activities of the company or retailers. This risk may materially and negatively affect the financial performance, operational activities and business prospects.