Risk Management A. STRATEGIC RISK The Executive Committee and Board members collectively formulates the strategy and charts the directions for the Group. The progress of implementation of the strategy is monitored and reviewed annually. In the process of strategy formulation and review, we evaluate the external environmental factors such as the risk profile of the industry, competitive forces within the industry, opportunities and threats, as well as the internal factors such as our key competitive strengths and weaknesses, our market position and growth strategy. The Company views the current strategy of building our growth around our distribution and contract manufacturing activities as the 2 pillars of growth and the business model of diversification in terms of markets, customers, products and suppliers as being robust and sustainable. B. ECONOMIC RISK Economic Risk Economic growth in FY 2024 had been resilient but the geopolitical conflicts in Ukraine and the Middle East region remain unresolved. Any major shift in US economic policies after President Donald Trump took office could significantly alter outlook of global trade flows and economic growth. China’s economic recovery has also been sluggish. The trade tariffs imposed by US on China may hinder its recovery. These factors are casting a gloom over the global economy. As the chemical industry is inextricably intertwined with the global economy, the impact will be felt in our business and performance. Supply Chain Risk Although a ceasefire to the Israel-Hamas conflict has been agreed, it remains to be seen if a complete end to the IsraelHamas war can be achieved. If the situation persists, it may hamper further growth in our business. Energy Prices Any escalation in oil prices will push freight rates higher which may in turn dampen demand for chemicals. Specialty chemicals, though not immune, are less susceptible to oil price fluctuations, in comparison to bulk commodity chemicals due to the fact that they are more downstream product whose usage in the finished product is smaller. Supply Risk One of Megachem’s strength is the ability to secure supply of quality products. Even though our sources of supply are fairly diversified, any supply disruption or loss of product distributorship of our core products may have an impact on business. Megachem has identified 6 main risk components within its risk management framework. ENTERPRISE RISK MANAGEMENT Strategic Economic Financial Operation Legal Climate 45 ANNUAL REPORT 2024
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