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 Increased trade tensions, heightened geopolitical risks, sluggish China economic recovery as well as concerns over financial markets’ valuation may cast 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 If geopolitical risk intensifies, it may cause disruption to supply chain and hamper growth in our business. Trade policy shifts and tariffs may continue to complicate supply chain and inventory planning leading to uneven customers’ demand. • Energy prices Chemical prices, especially that of bulk chemicals, are closely linked to oil price. Specialty chemicals, though less susceptible to oil price fluctuations in comparison to bulk commodity chemicals, are not immune to oil price volatility which will have an impact of our purchase cost and revenue. • 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. ENTERPRISE RISK MANAGEMENT Megachem has identified 6 main risk components within its risk management framework. Strategic Economic Financial Operation Legal Climate MEGACHEM LIMITED ANNUAL REPORT 2025 48 RISK MANAGEMENT
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