Risk Management C. Financial Risk Currency Risk We operate internationally and therefore are exposed to foreign currency risks arising from various currency exposures. The currency market remains volatile and difficult to predict. Furthermore, some countries impose foreign exchange controls. These pose a challenge to our foreign exchange risk management. While we will continue to hedge our exposure, we recognize that there is no perfect hedge. In addition, currencies of certain countries have limited liquidity and carry high hedging cost. Thus, any adverse changes in foreign currency may have an impact on our profitability. Interest Rate Risk Our interest rate risk arises from bank borrowings at floating rates. Even though interest rates are trending downwards following interest rates cuts by central banks, they remain fairly elevated. Hence our borrowing cost will remain high. Credit Risk Our products are sold to more than 2,000 customers across many countries. Although there is no significant concentration of credit risk, the credit risks in some countries are more difficult to assess. Some customers may also face financial stress as a result of high interest rates and business cost. Any significant payment default will negatively impact our financial performance. Country Risk Our products are sourced and sold globally. Our business may be affected if any of our markets suffers significant escalation in country risk. Inventory Risk Our business involves keeping inventory of chemicals to meet customers’ requirements. In the event of an unexpected fall in customers’ demand levels, we may end up with excess inventory. This will have a negative impact on our profitability. D. OPERATIONAL RISK • IT Security Megachem adopts the following 3 key principles in its IT security management: Confidentiality – information should not be disclosed to unauthorized individuals or systems. Integrity – important data should not be modified by unauthorized individuals or systems. Availability – information should be readily available when needed even at times of any disruption. With this in mind, we have in place the following measures : – physical security is enhanced by installing security cameras at our premises which can be monitored via IP addresses; – content filtering has been enabled to prevent viewing inappropriate web sites or content and also to prevent access by known malware hosts; – disaster recovery procedures are implemented such that in the event of any system breakdown, our operation can continue with little disruption. Key applications can be run at third party disaster recovery sites located away from our premises. Overseas operations will also be able to access the disaster recovery sites via virtual private network access; – databases are backed up daily and kept in fire rated safe at disaster recovery sites; – policies are documented and our people are constantly oriented to adhere to the approved policies and procedures; and – internal and external IT security audits are conducted annually. 46 ANNUAL REPORT 2024
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