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" The Company utilizes the area of land it owns and continues to increase its productivity, supported by reliable and competent human resources. This strategy is able to improve efficiency in all business processes, as well as maximize the Company’s profitability in the midst of an unfavourable business climate in 2020."

RISK MANAGEMENT


Good corporate governance (GCG) is a structure and mechanism to manage the company so as to produce sustainable longterm economic value for Shareholders and stakeholders. One element of achieving GCG is the application of risk management. Risk Management implementation is expected to protect the Company from significant risks that may hinder the achievement of corporate objectives.

Risk management is conducted by seeking up-to-date andcomprehensive information for Board of Directors and the management to anticipate potential risks and mitigate emerging risks. With reliable risk management supported by resources and information technology, it is expected that the Company can map risks that can hinder the achievement of corporate targets, minimize potential losses, increase stakeholder confidence, and improve work efficiency and effectiveness that will ultimately lead to performance excellence and product competitiveness.

The Company's business can not be separated from the various business risks which are affected by both internal and external factors. The Company has identified several risks that could affect the Company's business operations, namely:

Commodity Price Risk

Indication : Fluctuations in the sales of crude palm oil (CPO) and palm kernel (PK) are controlled by the international market.
Mitigation : Analyzes and provides added value in every business process to produce quality crude palm oil (CPO) and palm kernel (PK) at an efficient cost.

Legal Risk

Indication : The occurence of certainty over land ownership and control is an important factor in the plantation industry; and the failure to obtain an extension of the Right to Cultivate (HGU) period, loss of land management permit in the location permit, as well as demands for location permit and the Right to Cultivate (HGU).
Mitigation : Studies and complies with applicable legal provisions in administration and completing the latest requirements for licensing and land documents; and provides dissemination to the surrounding community by involving the regional government and related parties regarding licenses obtained by the Company.

Market and Financial Risk

Indication : Interest rate risk is caused by changes in interest rates on interest bearing loans. Interest rates on short-term and long-term loans can fluctuate throughout the loan period. Financial policy provides guidance that interest rate exposures must be identified and minimized/neutralized in a timely manner.
Mitigation : Analyzes margin and interest rate movements.

Operational Risk

Indication : A risk of loss that occurs due to inadequacy or failure of internal processes, human factors and systems, or external events. This risk is inherent in all Company business processes, operational activities, systems and products.
Mitigation : Through supervisory function attaches to the operational activities and via management system, The Company conducts periodic and tiered reviews of operational activities to reduce the likelihood or frequency of operational risks and minimize the impact of events that may becme operational risks.

Climate and Weather Change Risk

Indication : Shifts in rainfall patterns, long drought or high rainfall intensity, and tides, as well as other extreme climate events can cause a decrease in plant conditions and productivity which can ultimately affect the price and sales volume.
Mitigation : Fertilizing and other agronomic treatments are adjusted to climate conditions tio achieve optimal productivity. Infrastructure development has become one of the solutions made by the Company, among others by building and strengthening a cluster system embankment to cope with flooding.