Risk Management

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Risk Management

The risk management team has presented new risk factors that may occur in the future to the Risk Management Committee. This could be risky for sustainable development and requires guidelines for limiting or reduce the risk. Also, the Company has revealed new possible risks that may occur in the future along with the risk management process in the report 56-1 and the annual report 2019 as follows:

New risk factors that may occur in the future Risk management process

Cyber Security Risk

With technology that has developed dramatically, as a result, cyber threats could affect all sectors both for the economy and national security. The threats could impact on the financial industry, financial institutions and various financial service providers. This risk creates a more severe impact in terms of probability which may come in a variation that is becoming increasingly difficult to prevent or detect. Although the operation and business model are focusing on the branches, concrete collateral and most transactions are conducted in cash, however, the main operating system used for recording important customer information, the management and administration are in the digital format. Still, the Company is having digital risks or cyber threats.

  1. The company has established measures to prevent and detect threats by opening up channels for reporting clues and communication channels with customers both online and offline. As a result, the Company can detect cyber threats and find ways to prevent and solve problems promptly.
  2. The company has initiated an organisational culture of continuous awareness of cyber threats for the employees and customers This also includes conducting a phishing scam for instant risk, SMS messages through the Company’s communication channels both to internal stakeholders and external stakeholders.

In 2019, the Company reported that none IT infrastructure indident found.

Non-conventional Competitor Risk

Ever since the Bank of Thailand has enacted laws to oversee the car loan business and a provincial retail loan license under the supervision of the Ministry of Finance, it results in an interest in the microfinance business from a small financial service provider such as Fintech technology developers, financial institutions both domestically and internationally. The competition in the industry including competition with technology, branch expansion, as well as expanding new microfinance loan products or even price competition has become intense. The Company is well aware of the changes. Thus, there is preparation and strategy adjustment and action plans to be able to handle and compete in the industry stably.

  1. The Company has created a Service Excellence standard, including strict compliance with the regulations related to providing fair services to the customers (Market Conduct) as a guideline for the company to operate which is part of the employee performance index. The company’s service excellence policy has completely changed the competition in the microfinance industry. It helped reduce conflicts and unequal customer service. Besides, the emphasis on the company’s excellent service has resulted in former customers coming back to use the service again. They also tell to new customers (Snowball Effect) which is considered an important marketing strategy of the company.
  2. Due to the main target customers are a motorcycle title loan who tend to use credit services near their home and most convenient to travel, the Company, therefore, emphasises the strategy of reaching customers first by expanding branches to provinces, districts, sub-districts and villages. However, the Company currently has more than 4,107 branches, which are considered microfinance service providers that have most branches in the country. They have been extended out in 74 provinces and have more than 1,791,000 customers and still see the potential for business growth through the expansion.
  3. In response to customer needs and reach more customers, the Company continuously extends credit products for retail customers. Previously before listing on the stock market, the company only had motorcycle registration loans. After entering the stock market, the Company increased car title loans, agricultural vehicle registration loans, title deed loans,personal loans without collateral and retail loans for occupations which are under supervision respectively. In this year, the Company has expanded the motorcycle hire-purchase products to existing customers with good payment history. The Company believes that new products will help accelerate the growth of the remaining loan portfolios and the interest rate of the company in the future. At the same time, the Company can enhance customer loyalty that customers have with the company
  4. Fair and transparent interest rate and fee under the Personal Loan Act under supervision that sets the maximum interest rate of not more than 28 per cent, it is a factor driving the interest rate of new industries to fall from the past that is higher than 30 per cent on average. However, the Company has an average of around 22-23 per cent for many years. In this year, the said interest rate has remained at the same level which is much lower than the maximum interest rate to be fair, which can maintain credit status and debt quality as well and to attract new customers from informal loan service providers including other service providers.

In 2019, the Company reported that none IT infrastructure indident found.

Climate Change Risk

Climate change has been occurring around the world and has a direct negative impact on the economy, society and environment. The impact is becoming more severe in Thailand. Climate is a major factor affecting agricultural products, which is considered the main source of income that drives the country’s economy. From the assessment of climate change in Thailand, it shows that the average temperature is likely to rise 1.5 - 2.0 degrees Celsius within the next 40 years, therefore it is very challenging for the agricultural sector and the Company, which has a group of customers who mainly engaged in agriculture. Climate emergency, therefore, may result in reduced incomes of farmers which will increase the demand for credit, on the other hand, the quality of the debt decreased.

  1. The Company is well aware of therisk, therefore has implemented environmental policies since 2018 intending to reduce greenhouse gas emissions from direct and indirect business operations, such as the construction of a new headquarters building which is a green building (LEED Certified).
  2. The Company has expanded branches to various areas to reach a wider group of customers, such as the expansion of branches in Bangkok to balance the customer base for customers who are not directly involved in the agricultural sector, or not being at risk from climate change as much as farmers’ groups.