FGV HOLDINGS BERHAD | ANNUAL INTEGRATED REPORT 2023 149 STATEMENT ON RISK MANAGEMENT AND INTERNAL CONTROL KEY RISKS AND UNCERTAINTIES The Group faces various macroeconomic and industry-specific risks, offering a detailed overview of key risks and associated indicators while assessing potential threats and opportunities. It recognises the transformation of unknown risks into material threats, impacting performance, assets, liquidity, capital, and reputation. To address challenges and align with goals, it systematically reviews key risks through GRMD, RMC, and BGRMC. The Group adopts a forward-looking approach to identify emerging risks through horizon scanning, internal surveys, and market analysis. RMC, BGRMC, and Board collectively assess emerging risks, which are closely monitored and integrated into ongoing risk management processes. Current emerging risks include El Nino, cyber threats, militant resurgence, and geopolitical tensions like the Russia-Ukraine conflict. Reputation risks are managed through monitoring of mainstream and social media. New Growth Areas Product & Market Penetration Financial & Capability Building Operational Improvement Links to FGV’s Strategic Thrusts Description Rising energy and raw material costs, driven by global geopolitical tensions like the Russia-Ukraine conflict, present significant challenges. Fluctuating prices of key raw materials and disruptions in the natural gas supply chain directly impact production costs. Key Mitigations FGV implements a range of strategies including optimising bulk shipment arrangements, sourcing from alternative suppliers, raw material positioning, pre-tender participation purchases for captive market and close monitoring of global prices. FGV implements rooftop solar projects at various sites as a source of renewable energy and also a means of cost saving. MARKET: Rising Energy and Raw Material Prices Description FGV’s estate operation is heavily dependent on manual labour, mainly from migrant workers. FGV’s commitment to ethical recruitment principles & standards which require stringent assessment on both the recruitment agents and migrant workers, and laborious recruitment process delaying recruitment to close the shortfall of migrant workers, hindering estate productivity. Key Mitigations FGV tackles operational challenges through a multifaceted approach. FGV is increasing mechanisation to reduce reliance on manual labour and enhancing harvesting efficiency with structured block crop recovery arrangements. FGV also places a paramount focus on creating a favourable work environment as evident through corporate social responsibility programmes and the establishment of a centralised initiation center. Additionally, FGV implements salary incentives, regularises foreign workers in Sabah, and subsidises passport renewal costs to enhance workforce welfare and retention. FGV is undertaking an empanelment of recruitment agents in Indonesia through its strengthened recruitment and due diligence procedures to identify and appoint only agents that comply with ethical recruitment principles and standards. LABOUR: Labour Shortages Description FGV’s profitability faces significant risk due to uncertainty in Crude Palm Oil (CPO) trading. Factors such as global demand fluctuations, supply chain disruptions, government policy changes, environmental concerns, commodity price and currency exchange rate volatility contribute to this uncertainty. Given FGV’s heavy reliance on CPO as a primary revenue stream, its exposure to this risk is substantial. Key Mitigations FGV has implemented a comprehensive risk mitigation strategy, including hedging mechanisms for forward sales of oils and arbitrage. It regularly evaluates sales to committed and uncommitted buyers, closely monitors market developments, especially concerning soybean and soybean oil prices, and analyses agricultural market reports and industry insights. The Group remains vigilant by staying updated with information from relevant international organisations and agricultural authorities. TRADING: Volatility of CPO Prices
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