MANAGING RISKS IN A TECHNOLOGY BASED INDUSTRY 18 MARCH 2011

DR. RISK

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Negative Perception( common

perception)

HAZARD, CHANCE OF LOSS; UNCERTAINTIES ;

EXPOSURE TO BAD

CONSEQUENCES

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External factors :eg

new regulations,

New

Processes

New Systems

Knowledge Gap /Untrained Human Capital

New Business Model

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Run Away ?- Not a smart

move

Avoid ?- Not a smart

move

PLAN EARLY !!CONFRONT IT/ MANAGE IT

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RISIKO : LANGGAR ATAU DILANGGAR

PENGURUSAN RISIKO :i. Belajar Memanduii. Memerhati Dash Board- minyak, suhuiii.Tayar- Tekanan angin mencukupi

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WHY ??

KNOWS POTENTIAL CHALLENGES UPFRONT ;BETTER PREPARED !!!

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TYPES OF RISKS TO BE MANAGEDTYPES OF RISKS TO BE MANAGED

CAUSING SUBSTANTIAL FINANCIAL IMPACT

KESAN KEWANGAN YANG BESAR

CAUSING REPUTATION RISKMENGAKIBATKAN RISIKO NAMABAIK

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Technology Risk; Example (eg)

obsolensence :

Business Risk:Eg : Business Objectives not

achieved

People’s RiskEg Insufficient staff, incompetent staff

System RiskEg systems downFinancial Risk:

Eg: not able to meet financial obligations

Market RiskEg investment priceFalls, or interest rate

hike

Production RiskEg not able to

produce as per Required capacity

Product Distribution Risk

Eg Failure to distribute goods

effectively

REPUTATIONAL RISK !!

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BUSINESS RISK

1. RISK WHERE BUSINESS WILL NOT BE ABLE TO MEET ITS TARGET OR GOALS

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STRATEGIC RISK

1. RISK WHERE STRATEGIC DECISIONS EXECUTED FAIL TO TAKE PLACE, OR FAIL, OR ACHIEVE BELOW EXPECTATION

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TECHNOLOGY RISK

1. TECHNOLOGY BECOME OBSOLETE IE NOT RELEVANT IN BUSINESS eg SUBSTITUTED PRODUCTS

2. example : USD THUMBDRIVE REPLACING 3 ½ DISKETTE

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FINANCIAL RISK

1. FINANCIAL RESULTS BELOW EXPECTATION

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MARKET RISK

1. CHANGE IN INTEREST RATE2. CHANGE IN FOREIGN EXCHANGE3. CHANGE IN EQUITY PRICE

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PRODUCTION RISK

1. PRODUCTION CAPACITY BELOW PERFORMANCE

2. PRODUCTION NOT MEETING TARGETS

3. WASTAGES INCURRED DURING PRODUCTION

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REGULATORY RISK

1. NOT ABLE TO MEET REQUIREMENTS SET BY AUTHORITIES

2. BREACH OF REQUIREMENTS

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IT SYSTEMS RISK

1. IT SYSTEM FREQUENT SHUTDOWN

2. NOT ABLE TO MEET PRODUCTION REQUIREMENTS

3. TECHNICAL INCOMPATIBILITY

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PRODUCTION DISTRIBUTION RISK

1. NOT ABLE TO REACH CUSTOMERS

2. INSUFFICIENT NUMBER OF DISTRIBUTORS

3. INEFFECTIVE MARKETING CHANNELS

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CREDIT RISK

1. NOT ABLE TO MEET LOAN OBLIGATIONS WHEN DUE

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LIQUIDITY RISK

1. INSUFFICIENT CASH FLOW

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THE RISK OF DIRECT OR INDIRECT LOSS RESULTING FROM INADEQUATE OR FAILED :

INTERNAL PROCESSES

PEOPLE

SYSTEMS

EXTERNAL EVENTS

TRANSACTIONS

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- Potential Loss in Reputation

Publicity

Customers BaseRevenue

Costly Litigation

KeyEmployees

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• PROACTIVE PROCESS / DISCIPLINE OF MANAGEMENT TO MANAGE UNCERTAINTIES TOWARDS ACHIEVING BUSINESS GOALS

• MINIMIZE THE ADVERSE EFFECTS OF ACCIDENTAL LOSSES UPON AN ORGANIZATION

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RISK APPROACH IN TECHNOLOGY BASED INDUSTRY

ENTERPRISE RISKMANAGEMENT

1. Process to Manage Effect of Uncertainties between An Organisation and its Business Objectives

2. Effect ; Either Positive or Negative3. Approach: Either Top Down or Vice Versa

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RISK MANAGEMENT STANDARDS

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ISO 31000NEW GUIDE FOR PRINCIPLES AND

IMPLEMENTATIONOF RISK MANAGEMENT

PRINCIPLES FOR MANAGING RISKS

FRAMEWORK FOR MANAGING RISKS

PROCESSES FOR MANAGING RISKS

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PRINCIPLES FOR MANAGING RISKS

1. Creates Value2. Part of

Organizational Process

3. Part of Decision Making

4. Explicitly Address Uncertainties

5. Systematic, Structured , Timely

6. Based Available Information

7.Tailored8.Human and Cultural

Factors into Account9.Transparent and Inclusive10.Dynamic, Interactive, Responsive to Change11. Facilitates Continual

Improvement and Enhancement of the Organization

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FRAMEWORK FOR MANAGING RISKS

MANDATES/ COMMITMENT

IMPLEMENTFRAMEWORK

DESIGNFRAMEWORK

MONITOR / REVIEW FRAMEWORK

CONTINUAL IMPROVEMENT

PR

OC

ES

ST

O M

AN

AG

ER

ISK

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DESIGN FRAMEWORK

1. UNDERSTAND ORGANIZATON AND ITS CONTENTS

2. CONSIDER RISK MANAGEMENT POLICY

3. INTEGRATE INTO ORGANIZATIONAL PROCESSES

4. ACCOUNTABILITY5. RESOURCES6. ESTABLISH INTERNAL

COMMUNICATION AND REPORTING MECHANISM

7. ESTABLISH EXTERNAL COMMUNICATION AND REPORTING MECHANISM

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RISK MANAGEMENT at

TABUNG HAJI & SUBSIDIARIES

STRATEGY• Enterprise –Wide (Top Down)

•Alignment with Business Strategies

RISK IDENTIFICATION AND MEASUREMENT

• Facts Finding • Self Assessment•Investment risk, •Operational Risk

DEFINED KEY DELIVERABLES • Risk Awareness

• Key Risk Indicators • Risk Measurements

OPERATION & SYSTEMS• Risk Standards

•Risk Facts Finding• Risk Checklist•System-Manual

RISK REPORTING• Quarterly Risk Profiling

• Integrated Heat Map

ORGANISATION• Dedicated Business Risk Officer •Risk Management Committee

• Roles & Responsibilities

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PROCESSES FOR MANAGING RISKS

ESTABLISHCONTEXT

IDENTIFY RISKS *

ANALYZE RISKS *

EVALUATE RISKS *

TREATRISKS

CO

MM

UN

ICA

TE

AN

D C

ON

SU

LT

MO

NIT

OR

AN

D R

EV

IEW

*RISK ASSESSMENT

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RISK OWNERSHIP WHO OWNS THE RISK IN EACH FUNCTION ?SIAPA TUANPUNYA RISIKO ???

BASIS OF OWNERSHIP : RESPONSIBLE / ACCOUNTABLE FOR

THAT FUNCTION

RESPECTIVE BUSINESS/ FUNCTION OWNER !

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RISK REGISTER

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Integrated Heat Map : The Profile of One Risk

Likelihood

The Nature Of the Risk

PROBABILITY OF OCCURANCE

IMP

AC

T O

FO

CC

UR

AN

CE

GREEN :LOW RISK

YELLOW :MEDIUMRISK

RED :HIGH RISK

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CORPORATE GOVERNANCE IN RISK MANAGEMENT

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BUSINESS STRATEGIES

RISKSTRATEGIES

CEO BUSINESS DEPTS

RISK MANAGEMENT

INTERNALAUDIT

BOARD OF DIRECTORS

INDEPENDENT ASSURANCE

BOARD RISK

BOARDAUDIT

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CASE STUDY

• MANAGING RISKS IN A TECHNOLOGY• BASED BUSINESS • CASE : VENTURING INTO A GREEN • TECHNOLOGY BUSINESS

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GREEN TECHNOLOGY• PRODUCTS, EQUIPMENT OR SYSTEMS

WITH :

1. Minimises Degradation of Environment

2. Zero or Low Green House Gas (GHS) emission

3. Safe for Use and Promotes Healthy and Improved Environment for all forms of life

4. Conserves use of energy and natural resources

5. Promotes use of renewable resources

•

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CASE STUDY; FACTS OF THE CASE• NAME OF COMPANY : LIVERMORE SDN BHD• PROJECT NAME : SOLID WASTE

MANAGEMENT • OBJECTIVES: RECYCLE 35 TONS OF WASTE

TYRES USING PYROLYSIS TECHNOLOGY INTO FUEL OIL, GAS, CARBON BLACK , STEEL WIRE

• PROJECT OUTCOME: REDUCE 40% ELECTRICIY CONSUMPION, REDUCTION OF CO2 THROUGH FUEL SAVING FOR TRANSPORTATION OF WASTE

• FIRST TIME BUSINESS VENTURE 12Mac11

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CASE STUDY; FACTS OF THE CASE• PAID-UP CAPITAL : RM200.0 MILLION• TOTAL PROJECT COST : RM300.0 MILLION• SEEKS GOVERNMENT ASSISTANCE

THROUGH GREEN TECHNOLOGY GRANT . TOTAL GRANTED : RM100.0 MILLION

• ALSO BORROWS MONEY FROM LOCAL BANK ; RM50.0 MILLION ON BLR + 2% ( BLR=6.3%)

• BORROWS FROM ABROAD : SGD40.0 MILLION

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CASE STUDY; FACTS OF THE CASE• BUSINESS OBJECTIVES AMONG THOSE : TO CAPTURE AT LEAST 5% OF MARKET SHARE TO DEVELOP NEW TECHNOLOGY IN THE SAME

BUSINESS SEGMENT TO DEVELOP AND ESTABLISH DISTRIBUTION

CENTRES OF AT LEAST 50 THROUGHOUT THE COUNTRY

TO REGISTER PROFIT BEFORE TAX OF RM20.0 MIO DURING YEAR 1

TO CONTAIN OPERATIONAL COST AT THE COST INCOME RATIO OF 40%

TO INCREASE OPERATING EFFICIENCY BY 20% AFTER YEAR 1

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LikelihoodPROBABILITY OF OCCURANCE

IMP

AC

T O

FO

CC

UR

AN

CE

GREEN :LOW RISK

YELLOW :MEDIUMRISK

RED :HIGH RISK

INTEGRATED HEAT MAP

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WHAT IS NEXT ??

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MONITOR EVERY QUARTER AS AND WHEN NEEDED

DISCUSS AT THE MANAGEMENT LEVEL , AND MAKE DECISION

PAY SPECIAL ATTENTION ON HIGH RISK AREAS

PAY SPECIAL ATTENTION ON NEW RISKS THAT MAY SURFACE

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RISK IS PART OF BUSINESSRISK SHOULD NEVER HINDER BUSINESS GROWTHRISK MGT= NOT A THEORYRISK MGT= COMMON SENSE RISK MGT= NO GUARANTEE OF EFFECTIVENESS EXCEPT CONTINOUS PROACTIVE AND DISCIPLINE PROCESS .

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Thank You

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CASE STUDY

• MANAGING RISKS IN A TECHNOLOGY• BASED BUSINESS • CASE : VENTURING INTO A GREEN • TECHNOLOGY BUSINESS

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GREEN TECHNOLOGY• PRODUCTS, EQUIPMENT OR SYSTEMS

WITH :

1. Minimises Degradation of Environment

2. Zero or Low Green House Gas (GHS) emission

3. Safe for Use and Promotes Healthy and Improved Environment for all forms of life

4. Conserves use of energy and natural resources

5. Promotes use of renewable resources

•

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CASE STUDY; FACTS OF THE CASE• NAME OF COMPANY : MAN U SDN BHD• PROJECT NAME : ZERO LIQUID WASTE

DISCHARGED• OBJECTIVES: DIVERT CONSUMPTION OF

PETROLEUM BASED RESION IN LOCAL PLASTIC BAGS MANUFACTURING

• REDUCTION OF GHG EMISSION • NEW ENTRANT IN UPCOMING MARKET

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CASE STUDY; FACTS OF THE CASE• PAID-UP CAPITAL : RM200.0 MILLION• TOTAL PROJECT COST : RM300.0 MILLION• SEEKS GOVERNMENT ASSISTANCE

THROUGH GREEN TECHNOLOGY GRANT . TOTAL GRANTED : RM100.0 MILLION

• ALSO BORROWS MONEY FROM LOCAL BANK ; RM50.0 MILLION ON BLR + 2% ( BLR=6.3%)

• BORROWS FROM ABROAD : SGD40.0 MILLION

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CASE STUDY; FACTS OF THE CASE• BUSINESS OBJECTIVES AMONG THOSE : TO CAPTURE AT LEAST 5% OF MARKET SHARE TO DEVELOP NEW TECHNOLOGY IN THE SAME

BUSINESS SEGMENT TO DEVELOP AND ESTABLISH DISTRIBUTION

CENTRES OF AT LEAST 50 THROUGHOUT THE COUNTRY

TO REGISTER PROFIT BEFORE TAX OF RM20.0 MIO DURING YEAR 1

TO CONTAIN OPERATIONAL COST AT THE COST INCOME RATIO OF 40%

TO INCREASE OPERATING EFFICIENCY BY 20% AFTER YEAR 1

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Bank Simpanan Nasional(National Savings Bank)

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About Bank Simpanan Nasional (“BSN”)

BSN or the National Savings Bank was established in 1974 to take over the functions and responsibilities of the Post Office Savings Bank.

Governed by: BSN Act 1974; and Development Financial Institutions Act 2002.

Background

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About BSN

BSN’s mandated roles are initiated by the Malaysian government.

BSN has dual obligations i.e. to remain sustainable and profitable whilst carrying out its mandated social roles to ensure financial inclusion and accessibility to banking services at reasonable costs to all segments of society.

To ensure the “non-bankable” communities are not deprived of having access to banking facilities and service, with emphasis on the rural areas.

To provide micro financing for micro enterprises through Micro Financing loans.

Mandated Roles

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About BSN

Elevating the underserved who do not necessarily have access to banking services.

To ensure “financial inclusion” of all Malaysians.

Financial inclusion is the corner stone towards elevating the standards of living and eradicating poverty.

Socio-economic impact

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About BSN

By providing Micro Financing loans, it enables opportunities and support for micro-enterprises to participate in business activities and contribute to a balanced economic growth.

This will, in turn, elevate the standards of living of low-income households due to higher incomes generated.

Closes the financing gap of the underserved segment of micro-enterprises and reduces their reliance on illegal moneylenders.

Socio-economic impact

THANK YOUBank Komuniti Anda

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