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The Company places risk management at a key foundation in its operations and strategic decision-making. Every potential risk is identified, analyzed, and mitigated systematically to ensure the performance sustainability and the achievement of business objectives.
Each unit is responsible for identifying risks across all operational and strategic activities. The impact of risks is analyzed, and mitigation measures are outlined in clear, measurable, and consistently implemented SOPs. The implementation of SOPs is monitored regularly, including evaluations of the adequacy and effectiveness of mitigation measures.
The Audit Committee, with the support of the Internal Audit Unit, plays a key supervisory role. The Committee confirms that risk management mechanisms are effective, provides assurance regarding the achievement of the Company’s objectives, and regularly reviews risks and determines appropriate strategic mitigation measures, enabling the Company to maintain stability and support sustainable growth.
The Company integrates risk identification and mitigation processes into all business activities to maintain operational reliability and strengthen business resilience. All potential risks, including new risks that may arise, are assessed periodically to maintain effective and relevant controls.
The Company’s risk management policy is reviewed on an ongoing basis and adjusted to market dynamics and other external factors, ensuring that the mitigation framework remains adaptive and supports the Company’s strategic objectives. The types of risks identified and their mitigation measures are as follows:
The Company uses natural ingredients or herbs as its main raw materials, which are sourced from farmers or suppliers. Changes in weather and unfavorable natural conditions, as well as seasonal risks, affect the availability of these raw materials and influence the continuity of the Company's production process.
In addition to the continuity of the production process, the availability of raw materials also affects production costs. A shortage of raw materials can lead to an increase in the price of these raw materials. In addition to increased production costs due to high raw material prices, a shortage of raw materials also has the potential to increase the Company's operating costs as it must seek sources of raw materials from other places.
To mitigate this risk, the Company implements a raw material inventory and ordering policy that is tailored to the demand and lead time for each type of material and always maintains good relationships with all stakeholders, including good relationships with various sources of raw material suppliers for the Company's production. In addition, the Company is also promoting the cultivation of vital raw material crops by utilizing modern technology and collaborating with farmers.
The promising growth and prospects of the traditional medicine industry encourage business players to continue innovating to produce the best products. Business competition is becoming increasingly fierce as competitors strive to create products similar to the Company's leading products, such as Tolak Angin, Tolak Linu, and KukuBima Ener-G! Some competitors have even demonstrated the competitiveness of their products against the Company's products through taglines featured in their advertisements. This shows that competition in the herbal medicine industry is becoming increasingly fierce.
In the global market, the Company also has to compete with traditional medicine products developed in export destinations, such as Korean ginseng. In addition, the Company also has to compete with the pure pharmaceutical industry to capture market share for medicine products, which requires more effort, given that the public's mindset towards traditional medicine is not yet fully open.
To mitigate this risk, the Company always improves its services to consumers and maintains good relationships with every agent/distributor and consumer. Furthermore, the Company also continues to develop product development innovations and maintain consistency in the selection and use of the right raw materials, in terms of type, quantity, and quality, to produce excellent herbal medicines and other products that are able to face increasingly competitive business competition.
Most of the Company's products are distributed through wholesalers, supermarkets, agents, small shops, and retailers spread across Indonesia. Disruption of the downstream distribution chain can affect the Company's product sales.
To mitigate this risk, the Company works with all agents/ distributors to provide input on consumer preferences regarding product types, models, and packaging.
In conducting marketing activities, the Company routinely places advertisements in the mass media, including television. If the marketing activities are unsuccessful, it could result in financial losses and impact the Company's business activities.
To mitigate this risk, the Company always carefully develops concepts, themes, selects talent and media, and determines the right timing for marketing campaigns in accordance with the characteristics of the product and its target market.
Damage to factory machinery used in the production process can disrupt the Company's production activities, which can result in a decline in production performance and affect the achievement of the Company's production targets.
To mitigate this risk, the Company performs predictive maintenance and routine replacement of spare parts for production machinery and equipment to anticipate damage as early as possible. The Company always prepares backup capacity in several important areas.
Disruption to the production system may result in finished products that do not meet the Company's production standards. This risk can occur due to negligence, starting from the procurement of raw materials to the packaging process. Considering that the products produced are closely related to health and medical issues, in order to avoid the risk of damaged products, the Company must recall products on the market if they experience the following incidents, among others:
Product recalls from the market can result in significant losses, damage to inventory, and lost sales opportunities due to product unavailability for a certain period of time.
To mitigate this risk, the Company continuously conducts quality monitoring and testing, as well as retain samples from each production batch for a period of 3 years.
Human resources (HR), both senior management and trained operational employees, are one of the factors that need to be maintained by the Company in order to sustain the Company's production and operational activities. A shortage of qualified human resources may affect the Company's business activities, operating results, and prospects. The Company also depends on its ability to find and retain human resources to sustain the growth and success of its business activities.
The Company conducts recruitment to meet its HR needs and regularly provides training/ competency development programs to maintain and improve the expertise and skills of its HR. The Company also conducts continuous regeneration and promotion, and implements a fair and open performance appraisal system as a basis for rewarding employee performance.
To support its business activities and production processes, the Company requires a large number of workers. In the event of a mass labor strike, it will disrupt the production process, which may result in non-fulfillment of the Company’s production targets.
To mitigate this risk, the Company always maintains good industrial relations and pays attention to employee welfare by providing employee rights in both financial and non-financial forms as stipulated in the Collective Labor Agreement (PKB/CLA).
Natural disasters and fires are unpredictable risks. If they occur, raw materials, factory machinery, and production facilities may be disrupted or damaged, thereby disrupting the production process and affecting the Company's financial performance.
To mitigate this risk, the Company designs its factories and infrastructure facilities to account for various aspects of disasters and emergencies. The Company also ensures its buildings and factory facilities, with the type and coverage amount reviewed periodically to anticipate changes that may occur, so that any losses arising can be adequately covered.
The Company adopts a risk management approach that focuses on the most significant risk areas and ensures that the management is conducted in an integrated manner throughout the organization. The risk framework is continuously improved by strengthening identification, evaluation, and monitoring processes, supported by the development of more reliable system. These measures are designed to improve the accuracy of mitigation, strengthen the effectiveness of controls, and support higher quality of decision-making. Through a structured and continuous approach, the Company is builds a more responsive risk management system that is capable of maintaining operational stability under various conditions.
The Board of Commissioners and Board of Directors assess that the implementation of the Company’s risk management system in 2025 has reached a level of adequacy that supports comprehensive risk management. The mechanisms implemented are not only effective in preventing potential disruptions, but also strengthen operational resilience and support the achievement of business objectives sustainably.