Recognising the importance of risk management in providing sustainability to our business and in preserving our shareholders' value, Megachem is committed to incorporate effective risk management practices into our organizational processes to mitigate and manage each of these risks.
Megachem has identified 4 main risk components within the framework of its risk management.
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 strength 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.
Megachem's activities expose it to a variety of risks and unpredictability of the financial markets such as changes in foreign currency exchange rates and interest rates. The following sections outline Megachem's practices with respect to our financial risk management.
We operate internationally and is exposed to foreign currency risks arising from various currency exposures primarily with respect to United States Dollar, Euro Dollar, Sterling Pound, Japanese Yen and Malaysia Ringgit.
Forward currency contracts are entered into to hedge certain of its exposures to foreign currency risk. General guidelines are set with regard to the level of hedging and the type of hedging instruments that Megachem undertakes. Authority matrix is also in place that sets the authorized personnel and his/her authorization limits for hedging.
The Executive Committee monitors the foreign currency exposure on a monthly basis through monthly executive committee reports.
Interest rate risk arises mainly from our borrowings which are mainly at floating interest rates. Megachem manages its interest rate risk by keeping borrowings to the minimum required to sustain our operations.
We sell our products globally which thus increases the risk of payment default by our customers. We manage our credit risk by diversifying credit risk exposure and dealing with high credit quality counterparties. As such, Megachem has no significant concentration of credit risk. Policies are in place to ensure that the sale of products and services are made to customers with an appropriate credit history and obtaining sufficient security and/or credit insurance where appropriate to mitigate credit risk.
We manage liquidity risk by maintaining sufficient cash balances and availability of funding through an adequate amount of credit facilities at all times.
Our objectives when managing capital are to safeguard Megachem's ability to continue its business operations as a going concern and to maintain an optimal capital structure so as to maximise shareholders' value.
In order to maintain or achieve an optimal capital structure, we seek to strike a balance between debt and equity and capping our financial gearing at a comfortable level.
Megachem adopts the following 3 key principles in its IT security management :-
Confidentiality – this prevents the disclosure of information to unauthorized individuals or systems.
Integrity – this prevents important data from being modified
Availability – this ensures that information is readily available when needed even at times of any disruption
With this in mind, Megachem has in place the following measures :
Megachem understands the need to be resilient in its operation in face of any unforeseen disruptions in order to fulfill our obligations. In this regard, Megachem has implemented a Business Continuity Management ("BCM") program which defines our efforts to ensure continuity of its functions and systems, in part and/or in whole, limits financial losses resulting from disruptions and to protect our reputation and branding.
The BCM program involves the integration of management, people, technology, facilities and business processes. The framework covers :
Megachem is proud to be awarded SS540 Singapore Standards for Business Continuity Management for our BCM program.
Failure in operational and business processes can jeopardise the Company's competitiveness. In order to minimize process risk, we seek to standardize our processes throughout its entire organization by adopting international Quality Management standards within the framework of ISO9001. Guided by this Quality Management System, we are able to consistently deliver quality in our products with an impeccable level of service.
Compliance with rules and regulation is set as a fundamental principle with which we conduct our business. Through staff induction program and continuous education, the principle is being reinforced to ensure that we continue to comply with all relevant rules and regulations.
Anti-graft laws are increasingly being enacted globally such as the US Foreign Corrupt Practices Act and UK Anti-Bribery Act. Recognising the adverse impact of non-compliance on our Company's reputation and the potential loss of business, Megachem puts Integrity at the core of our corporate value system. The business conducts of all employees of the Group are guided by a Business Ethics Guide which provides guidance on areas such as anti-bribery, corruption, conflict of interest, Intellectual Property protection, insider trading, fraud. These Codes of Ethics are strictly binding for all employees in the respective countries in which we operate. Trainings are provided during staff induction program and refresher trainings are also provided. This Code demonstrates our commitment to integrity in the workplace and in the way we conduct our business.
Various government agencies also imposed industry-specific regulations. In this area we collaborate closely with these agencies in educational programs and exercises to keep ourselves up to speed with their rules and regulations. (For more information, please refer to Sustainability : Health, Safety and Environment section.)
Guided by our Catalist Sponsor, listing rules are constantly being observed and followed. All announcements are perused by our Catalist Sponsor before they are released. Our Catalist Sponsor is also frequently being engaged in board discussion on matters relating to listing rules compliance.
For Megachem, sustainability means aligning economic success with environmental and social responsibility. We recognize that the environmental and social interaction with our community affect our long term organizational success and thus the need to manage not only corporate and financial performance but also the environmental and social impact of our business.
We take pride in our commitment to maintain high level of health, safety and environmental protection ("HSE") standards. They are the foundations of trust that our people, customers and vendors place in us. We therefore aim to achieve uncompromised level of HSE standards in our plants, products and processes.
Our plants are built to meet stringent regulatory requirements in relation to HSE and our processes are designed with features to reduce HSE risk.
We work continually to ensure that our products pose no risk to people or the environment when they are used responsibly and in the manner intended.
Material Safety and Data Sheets detailing HSE measures are available for all products that we handle. Another way in which Megachem contributes to international chemical safety is through our support of the United Nations' initiative to implement a Globally Harmonized System (GHS) of Classification and Labeling of Chemicals. It is now being gradually implemented across all the Group.
The framework for our HSE management is modeled after international standards. We have attained international certification such as the ISO 14001:2004 and OHSAS 18001:2007 certification and are now a member of the Responsible Care Program. We have also received several Responsible Care Awards for attaining excellence in meeting international HSE standards from the Singapore Chemical Industry Councils. Internal and external audits are being conducted annually to ensure that our HSE programs consistently meet international standards.
We are committed to energy efficiency and conservation of resources. Our efforts in this area includes reducing paper consumption, paper recycling, reducing electricity and water consumption and adopting proper chemical waste treatment methods.
Megachem is influenced by the effects of demographic changes worldwide. The rising life expectancy, shrinking and aging population represent special challenges for companies' human resources management. We at Megachem have an important role to play in mastering the demographic challenges of the future. By the way in which we address these challenges, we can shape the social environment in which we operate while at the same time securing competitive advantages. Sustaining our human capital therefore becomes critical for us to achieve our long term goals.
With a view to maintaining the employability of our workforce, increased focus is placed on preventive health care. Regular health screening examinations and a wide range of sporting activities are examples of what we do to positively influence employees' health.
Competition for talent will become more intensified as well with the changing demographics. Megachem's human resource management adopts a holistic approach that not only provides tangible rewards but also intangibles such as work-life balance practices, education sponsorship, continuous training and upgrading as well as flexible work schedule. These initiatives are also aimed at prolonging the employability of our employees.
As Work Life Achiever Award recipient, Megachem commits to create and sustain a working environment supportive of work life balance for all employees where they are respected partners of the business.
Our Higher Learning Education program provides financial assistance to eligible employees who choose to further their professional education and training (PET) that will enhance their knowledge and skills.
Megachem welcomes interns/attachment students to embark on an exciting learning journey with challenging assignments and projects. Upon graduation, these interns are encouraged to apply and join the Company as Management Trainees in their first step towards building a promising career.
At Megachem, we recognize that businesses have a part to play in nation-building especially in providing assistance to people who are less fortunate than others. As such we work closely with charitable organizations in finding ways for us to contribute to society. These come not just in the form of monetary contribution but also in committing time and efforts in these organization's activities. Annually, Megachem visits several charitable homes during which we make monetary contribution as well as providing basic necessities to them. We also participate annually in several fund-raising events and in blood donations.
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