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In carrying out operations, management upholds the principle of prudence. The Company identifies, monitors, maps, analyzes, and makes strategic decisions on findings and even potential risks that may occur to the Company.
The Company's risk management framework aligns with best practices and includes the following measures:
The responsibility for overseeing the Company's risk management process rests with the Audit Committee supported by the Internal Audit Unit. Their role is to ensure that risk management activities are effective in providing adequate assurance of achieving the Company's goals. In addition, the Audit Committee routinely discusses the risks faced by the Company and how to respond to them in Audit Committee meetings.
The Company has identified and mitigated risks. The purpose of this identification is to manage risks effectively and remain vigilant about potential new risks that may arise in the future. In addition, the Company has a policy in the field of risk management that will always be reviewed and adjusted to the development of the business situation and other factors that influence it.
The types of risks that have been identified by the Company and their mitigation efforts are as follows:
The Company uses primary raw materials in the form of natural ingredients or concoctions (herbs) obtained from farmers or suppliers. Changes in weather and unfriendly natural conditions as well as seasonal risks affect the availability of these raw materials and affect the sustainability of the Company’s production process.
In addition to the sustainability of the production process, the availability of raw materials also affects production costs. Scarcity of raw materials can increase the price of these raw materials. In addition to increasing production costs due to high raw material prices, scarcity of raw materials also has the potential to increase the Company’s operational costs because the Company has to find sources of raw material supplies from other places.
To mitigate this risk, the Company implements a policy of inventory levels and ordering raw materials that are adjusted to the demand and lead time of each type of material and always maintains good relations with all stakeholders including good relations with various sources of suppliers of raw materials for the Company’s production. In addition, the Company is also encouraging the cultivation of vital raw material plants by utilizing modern technology and by working together with farmers.
The promising growth and prospects of the traditional medicine industry encourage business actors to always innovate to develop the best products. Business competition is becoming increasingly competitive because competitors are trying to create products that are similar to the Company’s leading products that are already market leaders, such as Tolak Angin, Tolak Linu, and KukuBima Ener-G! Several competitors have even shown the competitiveness of their products against the Company’s products through taglines displayed in their advertisements. This shows that competition in the herbal medicine industry is increasingly competitive.
In the global market, the Company must also compete with traditional medicine products developed by export destination countries, such as ginseng as a traditional medicine from Korea. In addition, the Company must also compete with the pure pharmaceutical industry to be able to capture market share for medicinal products, which requires more effort considering the public’s mindset towards traditional medicine which is not yet fully open.
To mitigate this risk, the Company always improves its service to consumers and maintains good relations with every agent/distributor and consumer. Furthermore, the Company also continuously innovates product development and maintains consistency in the selection and use of the right raw materials, both in terms of type, quantity and quality so that the Company can produce excellent herbal medicine and other products so that it is able to face the increasingly competitive business competition.
Most of the Company’s products are distributed through wholesalers, supermarkets, agents, stalls, and retailers spread across Indonesia. Disruption of the downstream distribution chain can affect the sales level of the Company’s products.
To mitigate this risk, the Company cooperates with all agents/ distributors in providing input regarding consumer preferences for product types, models, and packaging.
In conducting marketing activities, the Company routinely places advertisements in mass media, one of which is on television. If the marketing activities carried out are less successful, it can result in financial losses and have an impact on the Company’s business activities.
To mitigate this risk, the Company always carefully prepares concepts, themes, selects talent and media, and the right time to conduct marketing campaigns according to the character of the product and its target market.
Damage to factory machines used in the production process can disrupt the smooth running of the Company’s production activities, which can result in decreased production performance, thereby affecting the achievement of the Company’s production targets.
To mitigate this risk, the Company performs predictive maintenance and regular replacement of spare parts on production machines and equipment so that if damage occurs, it can be anticipated as soon as possible. In several important parts, the Company always prepares reserve capacity.
Disruption of the production system can result in finished products that do not meet the Company’s production standards. This risk can occur due to carelessness starting from the procurement of raw materials to the packaging process. Considering that the products are closely related to health problems and health treatments, to avoid the risk of damaged products, the Company must withdraw products circulating in the market if these products experience incidents including the following:
Withdrawing products from the market can result in significant losses, damage to inventory and loss of product sales opportunities due to the unavailability of products for a certain period of time.
To mitigate this risk, the Company continuously monitors and tests quality and always keeps samples from each production batch for 3 years.
Human resources (HR), both senior management and trained operational employees, are one of the factors that needs to be maintained by the Company to continue the Company’s production and operational activities. The lack of qualified HR may have an impact on the Company’s business activities, operating results, and prospects. The Company also depends on its ability to find and retain HR in order to continue the growth and success of the Company’s business activities.
The Company conducts recruitment to meet HR needs and regularly provides training / competency development programs to maintain and improve the expertise and skills of HR. The Company also carries out regeneration and promotion on an ongoing basis and implements a fair and open performance appraisal system as a basis for providing awards for employee performance.
To support its business activities and production processes, the Company requires a large number of workers. In the event of a mass labor strike, it will disrupt the production process which may result in non-fulfilment of the Company’s production targets.
To mitigate this risk, the Company always maintains good industrial relations and pays attention to employee welfare by providing employee rights in both financial and non-financial forms as stipulated in the Collective Labor Agreement (PKB).
Natural disasters and fires are unpredictable risks. If they occur, raw materials, factory machines, and production facilities may be disrupted or damaged, thus disrupting the production process and affecting the Company’s financial performance.
To mitigate this risk, the Company designs its plants and infrastructure facilities in such a way that it takes into account various aspects of disasters and emergencies. In addition, the Company also insures its factory buildings and facilities with insurance whose types and coverage values are reviewed periodically to anticipate changes that occur so that possible losses can be covered properly
The Company manages risks by emphasizing the most critical aspects and implementing them in an integrated manner. The Company has also made improvements and enhancements to the Company's risk management system with innovation. Therefore, it is expected to create effectiveness and efficiency in implementing the risk management system in the Company's environment. The Company's risk management system in 2024 was well and effective.
In 2024, the Board of Commissioners and Board of Directors assessed that the implementation of the risk management system in the Company's environment was adequate. The risk management system implemented was adequate and effective to prevent issues that may disrupt the Company's operational activities.