Identified Risk Areas

Strategic and Business Operational Risks: Reliance on Major or Limited Clients

Historically, our company’s operations have predominantly involved projects for government agencies, particularly hospitals and public buildings. While we have undertaken other construction types, such as residential buildings, office buildings, and hotels, these have been less frequent.

Impact of Risk

The increasing number of construction companies has led to intensified price competition in government project bids. This directly results in a decrease in our company’s profitability ratios and overall profit margins.

Risk Management Measures

To mitigate this risk, our company consistently participates in construction bids for both government and private sector projects. This strategy aims to increase our project backlog. Additionally, we selectively engage in construction work with reputable and financially stable leading companies.

Management and Operational Risks: Reliance on Key Personnel

Our company’s core business is construction, which inherently requires specialized and highly capable personnel. Furthermore, it’s crucial to have executives with deep knowledge, understanding, and the ability to manage complex construction projects. Therefore, we place significant emphasis on human resources. Ensuring the continuity of retaining and developing our human capital is vital for the business. This includes meticulous selection of new hires, retaining current employees, and actively preparing for the recruitment of new executives and a younger workforce to succeed current leadership and staff, all of which are essential for the company’s sustainable growth.

Impact of Risk

The current risk of personnel shortage primarily stems from our reliance on a single group of executives and the rapid growth of the construction business. This has intensified competition in sourcing and selecting knowledgeable and skilled personnel.

Risk Management Measures

The company has a clear policy to promote, develop, and train our personnel to enhance their knowledge and capabilities in performing their duties more effectively. This aims to boost efficiency and achieve organizational goals. Additionally, we maintain a policy of offering appropriate compensation and benefits to boost morale and prevent the loss of critical personnel from the company.

Identified Risk Areas

Management and Operational Risks: Shortage or Reliance on Skilled Labor

Our company provides construction services, including the procurement and installation of engineering systems. This is a labor-intensive business, and the Thai construction industry currently faces challenges concerning both the quantity and skill level of its workforce.

Impact of Risk

Labor efficiency is lower than the wages paid, which directly impacts the company’s profitability. The cost structure for a construction company typically consists of:

• Key materials: 60% of total costs
• Labor wages: 20% of total costs
• Other expenses: 20% of total costs

Risk Management Measures

However, the company has strategies in place to mitigate the risk of labor shortages. We are increasing the proportion of subcontractors hired to adequately meet the volume of existing work. We also offer various incentives to encourage personnel to work with the company long-term. This includes promoting career advancement, ensuring competitive income, prioritizing safety, and providing appropriate welfare benefits based on continuous years of service. These efforts aim to foster employee loyalty and job security. Furthermore, our investment strategy focuses on increasing investment in machinery with technology for labor substitution to reduce the risk associated with labor shortages.

Identified Risk Areas

Strategic and Business Operational Risks: Government Policies

Labor costs represent a significant primary expense for construction contractors. Consequently, government policies leading to wage increases directly and unavoidably impact our operational costs.

Impact of Risk

• Increased operational costs.

Risk Management Measures

However, the company has implemented measures to mitigate the impact of rising labor costs. These include adopting technology, innovation, tools, and machinery to replace manual labor and implementing management systems to enhance labor efficiency. Additionally, we maintain stringent control over construction expenses and regularly assess and adjust for wage increases to align with current circumstances.

Identified Risk Areas

Management and Operational Risks: Shortage or Volatility in Raw Material Prices or Production Factors

Construction materials represent a significant portion of construction costs. Fluctuations in the prices of these materials, especially key ones like cement, concrete, and steel, directly and unavoidably impact overall construction costs, with a trend towards increasing prices.

Impact of Risk

• Increased operational costs.
• Reduced profitability.

Risk Management Measures

To mitigate this risk, the company closely monitors the price movements of crucial construction materials. Should a rising trend or upward direction in material prices be identified, the company will place bulk orders from suppliers, thereby increasing its bargaining power and securing lower prices. Alternatively, the company may enter into forward purchase agreements with suppliers, setting fixed prices for materials. This strategy helps the company control material costs while avoiding the burden of storing materials not yet needed.

Identified Risk Areas

Management and Operational Risks: Damages from Counterparties’ or Contractors’ Non-Compliance with Agreements

Operating in the construction business carries the risk of not being able to collect payments from clients, or not collecting them on time, as invoicing is tied to the progress of construction work.

Impact of Risk

This risk can impact the company’s financial liquidity and working capital.

Risk Management Measures

Recognizing this risk, the company has a strict client selection policy. We thoroughly assess the financial standing, performance, reputation, and history of potential clients before accepting work. Additionally, we strategically balance our project portfolio between government and private sector work to ensure it’s appropriate and aligns with the company’s current situation. This approach helps mitigate the risk of uncollectible or delayed payments.

Identified Risk Areas

1. Strategic and Business Operational Risks: Customer/Consumer Behavior or Needs, Reliance on Major or Limited Clients, Reliance on Major or Limited Partners/Distributors, Economic Volatility

2. Management and Operational Risks: Future Project Delays

Project delays can arise from various client-related factors, such as late site handover, slow approval processes for construction-related matters, changes in construction and installation designs, or the client’s lack of funding and liquidity.

Impact of Risk

Such delays directly impact the construction timeline and costs, including expenses for machinery rental, utilities, and labor wages. Unfortunately, the company cannot claim additional expenses from the client, as standard construction contracts typically do not cover these eventualities.

Risk Management Measures

Mitigating this type of risk is inherently challenging. Nevertheless, the company actively seeks cooperation and coordination with clients to ensure construction work is completed within the stipulated contract period. This effort is coupled with meticulous contract drafting between the company and the project owner, explicitly covering such eventualities. Our legal department is responsible for managing construction contracts, aiming to prevent and alleviate these risks.

Identified Risk Areas

1. Management and Operational Risks: Reliance on Key Personnel, Shortage or Reliance on Skilled Labor, Shortage or Volatility in Raw Material Prices or Production Factors, Employee Performance

Project delays can stem from construction management issues, such as a shortage of personnel, labor, or construction materials. Our company requires knowledgeable, capable, and experienced personnel in construction management who can adapt construction plans to changing situations and complete work within contractual deadlines.

Impact of Risk

The company will incur penalty fees for delayed work if construction is not completed within the stipulated contract period.

Risk Management Measures

The company mitigates this risk by developing the knowledge and management capabilities of its personnel, especially at the project manager level, and by allocating ready-to-work teams. We also engage subcontractors appropriate to the workload of each project and enter into advanced purchase agreements for materials. Furthermore, we hold monthly project progress meetings to report on operational performance, encountered problems, and proposed preventative solutions. These meetings involve project managers from all ongoing projects and senior executives from relevant departments, fostering shared understanding, exchange of ideas, and guidance from senior management on various issues.

Identified Risk Areas

1. Strategic and Business Operational Risks: Damage to Image and Reputation

2. Regulatory and Legal Risks: Violation of Related Laws and Regulations, Corporate Governance, Litigation Risk

The construction business involves adherence to numerous laws and regulations, as well as various professional disciplines governed by specific legislation. This includes laws pertaining to architectural and engineering professions, labor laws, environmental laws, and accounting standards. Our company must fully comply with all these stipulated laws and regulations. Failure to comply, or incomplete compliance, could result in damages to the company.

Impact of Risk

Failure to comply or incomplete compliance with these laws and regulations could result in damages to the company.

Risk Management Measures

To mitigate this risk, the company adheres to a strict policy of conducting business in full compliance with the regulations and procedures of all relevant authorities. Furthermore, a dedicated unit has been established to continuously monitor and verify all operations, ensuring ongoing compliance with any changes in regulations.

Identified Risk Areas

1. Management and Operational Risks: Environmental Impact

2. Regulatory and Legal Risks: Violation of Related Laws and Regulations, Litigation Risk

Our company recognizes its role in contributing to social and environmental well-being. This has been a continuous policy priority for us, aiming to minimize the impact of construction activities on surrounding communities and the environment.

Impact of Risk

• Community complaints.
• Damage to the company’s reputation and image.

Risk Management Measures

The company assesses risks and seeks control and prevention measures. We implement actions to reduce impacts on neighboring communities and the environment, including controlling various forms of pollution arising from construction to meet legal standards for noise, dust, and wastewater.

Beyond mitigating construction impacts, the company also has a policy of building relationships with communities adjacent to construction sites. We coordinate with community leaders to survey community areas and conduct opinion surveys regarding environmental issues, potential construction impacts, concerns about construction, and social and environmental activities the community wishes to support. The company will actively coordinate and implement these initiatives for the community to foster positive relationships.