strategies for reaching higher
PROACTIVE AND FLEXIBLE ADAPTATION
RISK MANAGEMENT
As a pioneering brand in the fertilizer manufacturing and trading industry with a distribution network spread across many regions within and outside the country, PVCFC is well aware of the risks that businesses face in a market that is always subject to many fluctuations and challenges. As a result, the company has reasonable risk control measures to effectively carry out its Company Governance work, support business development, and contribute to the company’s success and sustainable development.
Stepping into 2022 with many concerns about multi-domain crises in the economy, politics, security, society, etc., PVCFC’s robust internal control and risk management system has played a crucial role in leading the company to proactively address challenges, capitalize on opportunities , and implement flexible and creative adaptive strategies, helping the company achieve outstanding objectives.
Stepping into 2022 with many concerns about multi-domain crises in the economy, politics, security, society, etc., PVCFC’s robust internal control and risk management system has played a crucial role in leading the company to proactively address challenges, capitalize on opportunities , and implement flexible and creative adaptive strategies, helping the company achieve outstanding objectives.
Risk management activities
PVCFC always pays attention to monitoring and inspection in parallel with safe and effective operation. This activity is regularly carried out by quarter to help the Company proactively review and assess potential risks, and promptly establish accurate handling plans
The Company’s control is specifically implemented by opening and applying the KRI warning index set. Based on this, risk measurement, monitoring, and warning can achieve high accuracy and effectiveness.
In addition, PVCFC has successfully developed the QTRR software for the Company’s system, contributing to improving the efficiency of management at PVCFC
Identification and management of major risks
In 2022, the Company analyzed, assessed, monitored and managed risks that greatly affected the strategy and business operations, including:
Production risks
- The energy crisis in 2022 led to a shortage of supply and pushed prices to record highs. Close monitoring of the situation, analysis of opportunities, and risk prediction helped PVCFC quickly adapt and respond in a timely manner.
- Furthermore, by leveraging innovation, creativity, and technical improvement initiatives, PVCFC optimized its operational processes to increase capacity and efficiency, helping to save operating costs and losses. As a result, high-quality products continue to be produced regularly, meeting market demand well.
Risks from the suppliers (distribution channel system)
- The business distribution system includes the Company’s products and those of other units, as well as a diverse range of imported products, making market competition and control more fierce.
- In the past year, PVCFC has done well in expanding its distribution system, increasing brand recognition and leaving a mark as a leading fertilizer brand in the domestic and international markets.
Risks from direct competitors
- Most fertilizer products do not differ in quality, coupled with the copying of policies and product classifications from other competitors, making it difficult for the brand to create uniqueness, penetrate the market, and reduce business efficiency.
- Therefore, PVCFC is implementing many innovative and effective business solutions, promoting research and development, applying scientific and technological advances to production and business activities to improve product quality and production capacity, contributing to increasing the Company’s competitiveness in the market.
- In addition, the company also implements programs to accompany farmers in local areas, sharing the burdens and difficulties of farmers while helping to increase credibility and build trust with customers.
Risks from replacement products
- Currently, due to the larger supply than demand in the market and the ability to trade conveniently, the advantage of urea, other products for the Mekong Delta region is no longer significant because similar imported products have good quality and competitive prices, making it difficult to maintain a position in the market.
- With the stuff and experience of a pioneering brand in the production and business of fertilizers, along with the advantage of innovation and technical improvement, PVCFC is committed to submitting the market with superior quality fertilizer products, continuously improving the nutrition solutions for crops, thus practically contributing to the development of sustainable green agriculture.
Financial risks
- Interest rate risk arises from the loans of the company (if any). High interest rates increase the financial costs, negatively impacting the company’s profit. The company has analyzed and built a reasonable and safe capital structure that is suitable for the company’s production activities.
- Exchange rate risk is the risk of fluctuations in the foreign exchange market, the risk of the USD/VND exchange rate may affect the company’s business results. Currently, the State Bank of Vietnam operates the central exchange rate according to the central exchange rate mechanism, and the foreign exchange market has stabilized. However, PVCFC still focuses on risk prevention, closely monitoring and forecasting macroeconomic developments inside and outside the country to ensure business efficiency while maximizing benefits for customers and partners of the company
- Credit risk: Credit risk arises from the obligation of counterparties to make payments, and the main cause is that counterparties do not fulfill their payment obligations or fulfill them later than the prescribed deadline. To prevent this risk, the company conducts financial health assessment procedures for customers, classifies customers by specific industries to evaluate and compare before signing contracts, and promptly resolves any arising issues.
- Liquidity risk: Liquidity risk occurs when the company faces difficulties in converting assets into cash or lacks assets to fulfill payment obligations to customers or suppliers. At PVCFC, cash flow management is well taken care of, thus minimizing the possibility of liquidity risk
Legal risks
- During the company’s operations, PVCFC not only has to comply with business law, tax law, plant variety law, but also is managed by securities law and related laws.
- The company always respects and strictly adheres to the regulations of Vietnamese law, does not participate in any political or social activities or any other activities prohibited by Vietnamese law.
- In addition, the company always proactively updates quickly and promptly changes in the legal system to make appropriate adjustments.
Other risks
- In addition to the above risks, the operation of PVCFC may be affected by weather, natural disasters such as epidemics, earthquakes, floods, etc., which can affect business activities and cause significant asset damage to the company. To minimize the risks from these factors, PVCFC continuously improve its adaptability, is ready to deploy flexible, timely and creative coping solutions, to minimize negative impacts and stabilize its business production activities.
Summary and direction
The risk system has become an essential part of every operation of PVCFC.
In the coming years, PVCFC will continue to deploy and build a comprehensive QTRR system according to the COSO-ERM framework, combined with the company’s self-built and practical QTRR system, to ensure effective control, management and monitoring of the company’s risk portfolio, to help the company excellently achieve its goals, and contribute to the sustainable development of PVCFC.
PETROVIETNAM CA MAU FERTILIZER JOINT STOCK COMPANY
Lot D, Ward 1 Industrial Park, Ngo Quyen Street, Ward 1, Ca Mau City, Ca Mau Province
2022 PBCM. ALL RIGHTS RESERVED.