RISK OF MANAGEMENT
The following are business risks faced by the Company and risk management undertaken by the Company as mitigation efforts of such risks:
Risks of the Economic Growth Slowdown
In the slowdown or stagnancy of the economic growth, the inflow of foreign investment into the country will decrease, which may usually affect the Company if its is followed by a decline in the construction of offices, residential, hotels and apartments. If this happens, there will be a decline in demand for interior products and furniture that will affect the Company’s sales. The Company anticipates this risk by developing targeted market segments and expanding the area, not just focusing on Jakarta and greater area, but also Java, Bali, and then other major cities in Indonesia.
Risks in Interest Rates and Foreign Exchange
The risk caused by changes in interest rates and in the exchange rate of the Rupiah against foreign currencies that are significant and occuring in a short period of time and also increase the raw material prices, as well as the cost of capital or the cost of loans.
The Company manages this risk by selling goods and services at prices that are not only based on cost and profit margins, but also by incorporating the factors of competition, positioning and risk of changes in exchange rate policy through indexed price of foreign currency (USD), although still sells dollars according to prevailing regulations in Indonesia.
A more detailed discussion on the management of risks in interest rates and foreign exchange is elaborated in the Company's audited consolidated financial statements that constitute integral part in this annual report.
Credit risk relate to managing of account receivables. The Company supervises the collectibility of account receivables in a timely manner and also conducts a review of individual customer accounts on a regular basis to assess the probability of failure of collection and provide an allowance based on the results of the review.
A more detailed discussion on the management of credit risk is elaborated in the Company's audited consolidated financial statements that constitute integral part in this annual report.
Liquidity risk arises when the Company encounter difficulty in realizing its assets or otherwise raising funds to meet commitments associated with its financial liabilities.
The Company manages liquidity by making the plan revenue and expenditure in the form of periodic cash flows planning and monitoring of their realization. The Company put the excess of cash in financial instruments with low risk but provide adequate returns on financial institutions that have credibility and rating may be applied.
A more detailed discussion on the management of liquidity risk is elaborated in the Company's audited consolidated financial statements that constitute integral part in this annual report.
As one of the most competitive industries, competition in the interior and furniture industry is now getting tougher with very competitive prices. It is coupled with the emergence of new players, especially foreign challenges as a result of the implementation of the ASEAN Economic Community (AEC) 2015.
The Company answers the challenge by pursuing a strategy of "Total Solution" which can provide a complete service at competitive prices to customers.
Risk of Client Dissatisfaction
Arrangement of an Interior work is a complex process because it involves several parties ranging from the client, construction manager, designer, to the contractor and supplier. This highly involved may cause problems during the work process. If this causes client dissatisfaction, the collectibility of the bill will be affected. The Company anticipates the risk of customer dissatisfaction by implementing Total Quality Management in addition to the implementation of ISO-9001 and OHSAS. Starting from the 4th quarter of 2012, the Company has implemented ERP (Enterprise Resource Planning) System SAP which is believed will enhance customer satisfaction in terms of quality, cost or price, delivery and safety of the Company's products and services.