Risk Management

As a multifinancing company with dynamic business, Risk Management is indeed essential to its business. Therefore, the Company has developed and applied a comprehensive risk management policy as part of effort to anticipate business risk potentially hampering the efforts to achieve the strategic goals of the company, and at the end, slow down the business growth of the Company.

Below are the risks that could be identified and the mitigation steps:

  1. Risk of Financing & Mitigation Steps

Financing activities were exposed to high risk, particularly risk of debtor's failure to fulfill the obligations. Therefore, the Company mitigated the risk emerging from its main business by channeling the credit based on prudence principle as well as applying tight financing scheme, from field survey to adequate credit analysis. Besides, the Company applied collection mechanism of various methods and levels, from sending reminder SMS ahead of the payment due of the installment, then collecting by phone and making direct visit to the consumers that fail to fulfill the payment obligation within certain period of time.If those steps were completed, the next procedure would be to take over the vehicle that becomes the collateral. The Company could help the sales of the vehicle that was taken over in order to minimize the loss and to protect the rights of the consumers whose vehicle was taken over.

  1. Risk of Funding & Mitigation Steps

Funding activity of the Company was also exposed to the risk of the difficulty of finding adequate, affordable and trustworthy sources of fund. To anticipate the risk potential, the Company has applied some steps including diversification of fund using the instruments from local and foreign banking institutions, in the forms of bilateral loan, syndicated loan, joint financing, or loan extension, as well as through capital market, such as the issuance of bonds.

  1. Risk of Operation & Mitigation Steps

The Company's business was exposed to risk of operation which was affected by various risk factors. The Company anticipated the risk by conducting review over the existing operational system and procedures to be further adjusted to the business development of the Company. Department of Business Process in that case was responsible for formulating the Standard Operational Procedure (SOP) and drafting the revision over the procedure on periodical basis.The Internal Audit Division meanwhile was responsible for reviewing the implementation of SOP to ensure the effectiveness of the implementation.

  1. Risk of Competition & Mitigation Steps

The Company in 2016 dealt with challenging situation that led to tight business competition. The Company therefore improved cooperation with the distributors and dealers in order to make breakthroughs, such as innovative financing package and aggressive expansion to widen the sales and service network to many regions in Indonesia.

  1. Risk of Macroeconomy & Mitigation Steps

Macroeconomic uncertainty has generated a risk that could hamper the sustainable business growth. Although the macroeconomic condition was beyond the Company's control, the Company anticipated the risk by consistently monitoring the economic indicators, among which were the inflation rate and interest rate, while diversifying the sources of fund and applying the hedging strategy as anticipatory measures against the fluctuating interest rate and exchange rate.

  1. Risk of Monetary Policy & Mitigation Steps

The macroeconomic situation strongly related with the implementation of monetary policy. The Company in that case has consistently monitored the issued monetary policies and reviews the impact on the business sustainability of the Company. This effort was also accompanied by the strategy of diversifying sources of fund to ensure the Company's competitiveness.

  1. Risk of Exchange Rate Volatility & Mitigation Steps

As the macroeconomic condition, the exchange rate volatility was another risk factor that was beyond the Company's control. To anticipate the risk, the Company applied hedging policy through the implementation of cross currency swap and interest rate swap transactions from floating interest rate to fixed rate to mitigate the impact of risk of exchange rate volatility to profitability of the company.