Risk Management System
Risk management system is an integrated part of GCG which aims to minimize the potential risk of negative
events and to maximize the probability of positive events.
The Company manages all risks effectively and efficiently
and ensures business growth sustainability by managing
risks proactively, focusing on the most important risks,
and carrying them out in a coordinated and integrated
manner. In carrying out risk management, the Company
always innovates to find more effective and efficient ways.
The Company’s risk management framework refers to
best practices, including the following actions:
Identifying risks carried out by each part of the
Analyzing impact and risk mitigation activities to be
poured into the SOP.
Monitoring the implementation of SOPs and examine
the adequacy of SOPs.
Monitoring of the risk management system is carried out
by the Audit Committee assisted by the Internal Audit Unit,
which is responsible for ensuring that risk management
activities have been implemented effectively in
providing appropriate guarantees for the achievement of
organizational goals. The Audit Committee discusses the
risks faced by the Company and responses to these risks
in the Audit Committee’s periodic meeting.
Risk Types and Management Initiatives
In managing risk, the Company must provide up-to-date
and objective information to all management levels to
identify and mitigate risks and determine strategic steps.
The Company identified several risk profiles, but not
limited to the potential risks that might arise in the future.
Risk management policy is reviewed regularly according
to changes in the Company’s business conditions and
The Company’s main risks related to its operational
activities and mitigation are as follows:
Risk of COVID-19 Pandemic
In 2022, the risk of COVID-19 pandemic was still a risk
to be mitigated even though the COVID-19 pandemic in
Indonesia is getting under control and the government
has relaxed the policy on wearing masks for people who
are active outdoors or open areas. However, the Company
believes that there is a need for gradual transition efforts
by paying attention to the community’s immunity to
COVID-19 considering that the Corona virus continues
to mutate and give rise to new variants that need to be
watched out for.
To mitigate this risk, the Company always adheres to
the health protocols set by the government, supports,
and encourages the first, second and booster COVID-19
vaccinations for all employees and the community and
implements transmission prevention guidelines for all
To ensure that operational activities can run well, the
Company maintains the level of availability of raw
materials and carries out production and distribution
processes with health handling measures.
Risk of Raw Material Availability
The Company uses the main raw materials from natural
ingredients (herbs) obtained from farmers or suppliers.
If there is a change in weather and unfriendly natural
conditions, as well as seasonal risks, affect the availability
of these raw materials and the sustainability of the
Company’s production process.
In addition to the sustainability of the production process,
the availability of raw materials also affects production
costs. The scarcity of raw materials can increase the
price of these raw materials. In addition to the increase in
production costs due to the high price of raw materials, the
scarcity of raw materials also has the potential to increase
the Company’s operational costs because it must look for
alternative sources of raw materials supply.
To mitigate this risk, the Company implements a policy of
inventory levels and merchandise orders tailored to the
demand and lead time for each type of product and always
maintains good relations with all stakeholders, including
a number of suppliers of the Company’s raw materials. In
addition, the Company is promoting the cultivation of vital
raw material plants by utilizing modern technology and
cooperating with farmers.
Risk of Business Competition
The promising growth and prospect of the traditional
medicine industry encourage business players to continue
to innovate the best products. Business competition is
becoming increasingly competitive because competitors
are trying to create products that are similar to the
Company’s flagship products that have become market
leaders, such as Tolak Angin, Tolak Linu, and KukuBima
Ener-G! Several competitors have even demonstrated
the competitiveness of their products against the
Company’s products through the taglines displayed in
their advertisements. This shows that the competition in
the herbal medicine industry is increasingly competitive.
In the global market, the Company also has to compete
with traditional medicinal products developed by export
destination countries, such as ginseng, a traditional
medicine from Korea. In addition, the Company has to
compete with the pure pharmaceutical industry to seize
market share for medicinal products, which requires more
effort considering the public’s mindset towards traditional
medicine still needs to be fully appreciative.
To mitigate this risk, the Company continuously improves
services to consumers and maintains good relations with
each agent/distributor and consumers. Furthermore, the
Company continues to innovate in product development
and maintain consistency in the selection and use of
suitable raw materials in terms of type, quantity, and
quality, so as to produce flagship herbal medicines
and other products to be able to face the increasingly
competitive business competition.
Risk of Distribution Network and Supply Chain
Most of the Company’s products are distributed
through wholesalers, supermarkets, agents, stalls, and
retail traders throughout Indonesia. Disruption of the
downstream distribution chain can affect the sales of the
To mitigate this risk, the Company cooperates with all
agents/distributors to provide input regarding consumer
preferences for types, models, and product packaging.
Risk of Marketing Campaign Failure
In carrying out marketing activities, the Company regularly
places advertisements in the mass media, one of which
is television. If the marketing activities are unsuccessful,
it can result in financial losses and impact the Company’s
To mitigate this risk, the Company always carefully
compiles concepts, themes, selects talents and media,
and the right timing to conduct marketing campaigns
according to the characteristics of the products and their
Risk of Machine and Equipment Damage
Damage to factory machines used in the production
process can disrupt the smooth running of the Company’s
production activities. This can result in a decrease in
production performance, affecting the achievement of the
Company’s production targets.
To mitigate this risk, the Company performs predictive
maintenance and routine replacement of spare parts
for machinery and production equipment so that it can
be anticipated as soon as possible in the event of a
breakdown. In several important areas, the Company
always prepares spare capacity.
Risk of Damaged Products and Product Withdrawal from the Market
The disruption of the production system allows the
occurrence of finished products that are not in accordance
with the Company’s production standards. This risk can
occur due to inaccuracies starting from the procurement
of raw materials to the packaging process. Considering
that the products are closely related to health problems
and medical health treatment, to avoid the risk of these
damaged products, the Company must withdraw the
products circulating in the market if these products
experience the following incidents:
Products that cause injury, illness, or other side
Contaminated products, damaged products, or other
There is a lawsuit if consumers feel aggrieved
and have health problems because of using the
Withdrawal of products from the market can result in
significant losses, damage to inventory, and loss of
product sales opportunities due to product unavailability
within a certain period.
To mitigate this risk, the Company continuously conducts
quality monitoring and testing and always stores samples
from each production batch for three years.
Risk of Human Resources
Human resources (HR), both senior management and welltrained operational employees, are one of the factors that
need to be maintained by the Company to continue the
Company’s production and operational activities. A lack of qualified HR may affect the Company’s business activities,
results of operations, and prospects. The Company also
relies on its ability to find and retain qualified HR in order
to continue the growth and success of the Company’s
To mitigate this risk, the Company conducts recruitment
to meet HR needs and regularly provides training/
competency development programs to maintain and
improve the skills of the existing HR. The Company also
carries out regeneration and promotion on an ongoing
basis and implements a fair and open performance
appraisal system to reward employee performance.
Risk of Strike
To support its business activities and production
processes, the Company requires a large number of
people. In the event of a mass strike, it will disrupt the
production process, which may result in the 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 rights in financial and non-financial forms as
stipulated in the Collective Labor Agreement (PKB).
Risk of Natural Disasters and Fires
Natural disasters and fires are unpredictable risks. If this
happens, raw materials, factory machinery, and production
facilities may experience disruption or damage, thereby
disrupting the production process and affecting the
Company’s financial performance.
To mitigate this risk, the Company designs factories
and infrastructure facilities in such a way as to take into
account various aspects of disasters and emergencies.
In addition, the Company also insures its buildings and
factory facilities with insurance whose types and amounts
are reviewed periodically to anticipate changes that occur
so that losses that may arise can be properly covered.
Review of the effectiveness of Risk Management System
The Internal Audit Unit evaluates the effectiveness of risk
management. The evaluation is carried out by reviewing
the implementation of SOPs/policies that regulate related
activities. SOPs/policies will continue to be developed to
minimize the impact on risk.
Statement of the Board of Commissioners on the Adequacy of Risk Management System
The evaluation results of the effectiveness of risk
management in the Company are reported and discussed
by Internal Audit Unit with Audit Committee. The discussion
results become recommendations for improvement from
the Audit Committee to the Board of Commissioners. The
Board of Commissioners will deliver the recommendation
to the Board of Directors in a joint meeting of the Board of
Commissioners and Board of Directors.
The Board of Directors has followed up on several
recommendations for improvement, and the Board of
Commissioners considers that the risk management
system implemented is adequate and effective in
preventing problems that can disrupt the Company’s
At the end of December 2022, the Company, including
the Board of Directors and the Board of Commissioners,
was not involved in any material cases, civil, criminal,
bankruptcy, tax, state administrative, or cases under
Indonesian National Arbitration Board.
In 2022, the regulators or capital market authorities
imposed no administrative sanction on the Company.