Business Risk Exposure
The business of PT Duta Intidaya Tbk (the “Company”) has certain operational risks, which are beyond the Company’s control. The Company strives to continuously keep these risks under control by, among others:
- operating in guidance with the standard operating procedures that have been net and across the Company’s operations;
- ensuring and effective internal control system to safeguard the Company’s operations and assets; and
- requiring all employees to sign and adhere to an integrity pact.
Financial Risk Exposure
The Company’s activities expose it to a variety of internal financial risks, such as foreign exchange risk, interest rate risk, credit risk and liquidity risk. Therefore, Company’s overal risk management program is designed to mitipate the impact of the unpredictability of financial market and the potential adverse effects on the Company’s financial performance.
a. Foreign exchange risk
The Company is exposed to foreign exchange risk which is mainly from the purchase of merchandise. The Company monitors foreign exchange fluctuations and may hedge the exposure on the foreign currency fluctuation for known and committed transactions.
b. Interest rate risk
The Company is exposed to interest rate risk from the possible fluctuations of rates for interest-bearing liabilities. Interest rates for borrowings can fluctuate over the borrowing period. The treasury policy sets the guideline that the interest rate exposure shall be identified and minimised/neutralised promptly.
c. Credit risk
The Company is exposed to credit risk primarily from cash in bank and the credit exposures given to vendors in connection with claimable sales discount and incentive and revenue from promotional activities. The Company manages the credit risk by placing its deposit in highly reputable banks and by monitoring the receivable aging and entering into transactions with reputable vendors.
Also, there is no concentration of credit risk as the company has a large number of vendors without any individually significant vendor. The Company believes the credit risk from credit cards receivables is not significant as they represent receivables from reputable banks and are generally settled within 2 (two) or 3 (three) days from the transaction date.
The maximum exposure to credit risk at the reporting date is the carrying value of each financial asset.
d. Liquidity risk
The Company manages its liquidity risk through regular monitoring of the projected and actual cash flows. The Company believes that the cash collection cycle enables it to meet its obligations when it falls due.
Capital Risk Exposure
The maintenance of sound capital structure is vital to the Company sustainability, the company’s capital management policy is desputed primarily to ensure. The Company’s ability to continue as a going concern in order to generate returns for the shareholders and benefits for other stakeholders.
To ensure a sound capital structure, the Company always takes into consideration in financial condition in paying dividends to the shareholders and issuing new shares for additional capital.
The Company periodically reviews and manages its capital structure to ensure an optimal capital structure and shareholder returns, taking into consideration future capital requirements and the capital efficiency of the Company, current and projected profitability, projected operating cash flows, projected capital expenditures, and projected strategic investment opportunities.