Fundamentals of Corporate Sustainability

Risk & Crisis Management

Risk and Crisis Management

Risk

Inefficient risk management can have a direct impact on the Company's finances and reputation, as well as its ability to obtain future business licenses. Additionally, it can have adverse effects on the environment, endanger the health and safety of the Company’s stakeholders and their property, and lead to negative impact on the Company's reputation. Such consequences may result in resistance to future business expansion.

Opportunity

Effective risk management is a key mechanism that helps the Company grows sustainably, promptly sense and respond to any risks arising from current uncertainties and adapt to a rapidly changing business environment. Moreover, effective risk management allows companies to identify new business opportunities through the development of risk mitigation strategies.

Risk Management Structure

The Company's risk management is under the supervision of the Board of Directors, with the Risk Management Committee being responsible for establishing an effective risk management policy and approach, as well as overseeing the Enterprise Risk Management Working Committee to ensure its operations are appropriate for the current business context and situations. The Risk Management Committee is composed of seven members, including the Company's directors and senior executives, with an independent director serving as its chairman. (For more details about the Risk Management Structure please see 56-1 One Report, “Corporate Governance Structure” and “Risk Management” Section.)

To effectively manage risks across the organization in accordance with the Company’s core policies on risk and crisis management, the Risk Management Committee has appointed an Enterprise Risk Management Working Committee. This committee consists of executives, representatives from various departments, and managing directors of subsidiary companies, totaling 24 members. The Chief Finance Officer serves as the chairperson. The roles and responsibilities of the committee are as follows:

Assessing key enterprise risks aligned with the Company's business direction and risks in the business value chain, including strategic risks, risks from investment and business development in Thailand and other countries, operational risks covering health, safety, social, and environmental aspects, financial risks, compliance risks, and other risks that may impact the Company. Providing suggestions on risk prevention and mitigation to an acceptable level.
Monitoring, evaluating, and continuously improving risk mitigation plans to reduce risks and adapt to changing business conditions. Regularly reporting the risk assessment and risk management performance to the Risk Management Committee.
Setting up a business continuity plan at the corporate level to address key risks.
Providing training and workshops, sharing information about risks and risk management with employees at all levels, and promoting a risk management culture.

As risk management is the responsibility of employees at all levels, they must be aware of the existence of risks in the business value chain and their work processes and provide appropriate and sufficient risk management measures. Therefore, all departments in the Company and its subsidiaries have appointed risk coordinators at operational levels to work together with the Enterprise Risk Management Working Committee and the Corporate Strategy and Risk Management Division in identifying and assessing risks, preparing and evaluating risk mitigation plans, and promoting risk awareness, and employee participation in their respective departments.

Management Approach

The Company has established the enterprise risk management process that aligns with international standards to effectively manage all risks. Risk management must be consistently implemented across the organization and integrated into decision-making, strategic planning, and business operations. Additionally, it must support the achievement of business objectives and goals.

The Company followed the guidelines of the Committee of Sponsoring Organizations of the Treadway Commission (COSO) for conducting Enterprise Risk Management and conducted an annual enterprise risk assessment. This assessment considered current and emerging risks, economic conditions, competition, innovation, technology development, government policies and regulations, as well as social and environmental changes that may affect its operations. After identifying and assessing these risks, the Company prepared appropriate risk mitigation plans, determined key risk indicators (KRIs), and defined a risk appetite to monitor the performance and effectiveness of its risk management measures, including potential business opportunities that may arise from these risks. The Company assigned the enterprise risk owners to develop risk management plans and determine key risk indicators.

The Company emphasizes collaborative and comprehensive risk management across its departments, thereby fostering cooperation in proactively managing each enterprise risk. This approach aims to develop multidimensional mitigation plans that consider the impacts on all stakeholders.

The Enterprise Risk Management Working Committee monitors the results of risk responses and the situations causing the risks. It reports the findings at the Strategic Management Meeting, which includes the Chairman, all Chief-level executives, and Managing Directors of subsidiary companies. The findings are then further reported to the Board of Directors.

The Company aims to enhance employee involvement in risk management, as it is an integral part of operations at all levels. To this end, the Company boosts awareness and fosters a culture of risk management among all employees by providing knowledge through activities such as training.

Performance

In 2023, the Company expanded its investment in industrial estates both domestically in Thailand and internationally, including in Vietnam and Laos. Despite this growth, the global situation remains volatile, marked by significant interconnected crises with ongoing ripple effects. These include extreme weather events and regional conflicts, leading to geopolitical instabilities and economic fluctuations such as rising inflation rates and increased living costs driven by energy prices. This situation has consequently slowed down international trade and investment. In response, the Company prioritizes closely monitoring various risks, regularly reviewing and evaluating external factors and environmental changes, and developing comprehensive enterprise risk management plans across all subsidiaries. By integrating sustainability risk management principles (ESG Risk), the Company assesses risks considering the alignment with its medium and long-term organizational strategy, as well as the potential impact of future economic, social, and environmental changes influenced by global climate change. This includes analyzing future shifts and new developments in policies and regulations that may impact business operations. These analyses inform the formulation of risk management plans for both the medium and long term, aligned with organizational strategic planning, to ensure the Company's operations meet set objectives and mitigate potential impacts on the organization and stakeholders.

The Company conducted a reassessment of enterprise risks, including ESG-related and emerging risks, which are related to its strategic priorities. The Enterprise Risk Management Working Team categorized these risks into five categories: Strategic, Operational, Compliance, Financial, and Emerging Risks. Additionally, the team reassessed and reviewed the risk management plans and key risk indicators (KRIs) to monitor these risks effectively. The Company aims to expand its risk management practices to the business unit level across the organization.

Emerging Risk

Through the Company's risk assessment, a significant emerging risk identified is the risk of customer demand shifting in a disrupted environment, which could affect the Company's business operations over the next 3-5 years. While this issue has not yet directly impacted the Company, it is recognized that future changes from these risks are likely to affect operations. Consequently, this risk has been elevated to an enterprise level to ensure close monitoring and ongoing assessment. In 2023, the Company conducted a customer insight survey, including interviews with customers from various industry groups, to gain insights for analysis. This information has been utilized to enhance the organization's strategic plan and continuously adjust the action plan accordingly.

Risk of Customer Demand Shifting in Disrupted Environment

The Company has conducted a comprehensive study to analyze the evolving needs of customers, aiming to assess the risks and potential impacts that may affect operations over the next 3-5 years, particularly due to climate change. With a global emphasis on reducing greenhouse gas emissions, stricter regulations to control carbon dioxide emissions have been implemented. This regulatory shift has increased pressure on both social and business sectors, prompting changes in lifestyle and business practices. A widespread trend across industries is the adoption of circular economy principles, focusing on resource conservation through practices such as waste separation, recycling, using recycled water, and increasing the use of renewable energy to decrease reliance on fossil fuels such as low-carbon public transportation, concerning the carbon footprint of infrastructure products, and utilizing utilities sourced from renewable energy.

In this regard, the Company has observed strong initiatives from existing customers to reduce and eliminate their carbon footprints in the supply chain. This commitment has led to changing preferences, needs, and behaviors regarding the selection of factory locations and utilities from renewable sources. Such evolving trends present both opportunities and risks for the Company. In response, the Risk Management Department and the Risk Management Committee have closely monitored the impacts of these changes and developed appropriate risk management plans. These plans focus on promoting innovation in the development of utility products, services, and industrial solutions to effectively meet evolving customer demands. By doing so, the Company aims to minimize the likelihood and impact of failing to meet customer requirements, thereby maintaining customer confidence and enhancing future business competitiveness.

Promotion of Risk Management Culture

The Company places importance on the participation of executives and employees in its risk management efforts, particularly in managing risks related to their respective duties and responsibilities. The Company requires that the risk management system be integrated into daily operations and eventually become part of its corporate culture. In addition to the department and subsidiary executives, risk coordinators also play a critical role in driving the risk management efforts. They attend meetings with the Enterprise Risk Management Working Committee and transmit the message to other employees at the operational level.

The Company conducted four approaches to promote a corporate risk management culture across all staff levels, which are: 1) EDUCATE: Promotion of knowledge and understanding, 2) PARTICIPATE: Promotion of participation, 3) MANAGE: Systematic risk management, and 4) ENCOURAGE: Integration of risk management into daily work.

1. EDUCATE: Promotion of knowledge and understanding on Enterprise Risk Management

The Company recognizes that the knowledge and understanding of all staff are key factors in achieving efficient corporate risk management and meeting risk management objectives. Therefore, the Company has organized workshops and special lectures on topics relevant to enterprise risks and plans to hold these workshop and training sessions annually. The 2023 performance is as follows:

Training for the Board of Directors and top executives on 'Environmental, Social, and Governance Risk (ESG) Management' by Khun Warunee Pridanonda, an expert in corporate governance and enterprise risk management. The training objectives are to address significant sustainability-related risks arising from global changes, including environmental and social factors that may impact business operations, and to provide recommendations on the roles and responsibilities for effectively governing and managing enterprise risks in the current situation.
Training on ‘Cyber Security Awareness’ by the Cyber Crime Investigation Bureau. The objectives are to educate employees on imminent online threats and various techniques to understand cybercrime situation, crimes associated with technology, cyber vaccines for safeguarding against cyber threats, and online crime reporting procedures.

2. PARTICIPATE: Promotion of participation.

The Company conducted 14 virtual workshops for the Enterprise Risk Management Working Committee throughout the year. This committee is comprised of senior executives, department heads, and operational staff. The workshops aimed to monitor the performance of enterprise risk management, identify and monitor key risk indicators and risk appetite, assess the residual risk level after implementing risk control measures, and develop additional risk mitigation plans. Additionally, the workshops included goal setting, risk indicator identification, and ongoing progress monitoring.

3. MANAGE: Systematic Risk Management

The Company has adopted "The Committee of Sponsoring Organizations" (COSO) for its Enterprise Risk Management approach and has established a systematic internal control framework in accordance with the "Three Lines of Defense" concept. This concept includes the 1^st Line of Defense, which is the risk owner responsible for risk management, the 2^nd Line of Defense, which is the Corporate Strategy and Risk Management Department responsible for setting guidelines and standards for risk management and monitoring operations, and the 3^rd Line of Defense, which is the Internal Audit Division responsible for independently auditing the effectiveness of the enterprise risk management system. Risk management performance is reported at least twice per quarter to senior executives and the Risk Management Committee.
In 2023, the Company reported on the performance and results of its enterprise risk management efforts to senior executives during 8 meetings, to the Risk Management Committee in 4 meetings, and to the Board of Directors in 4 meetings.

4. ENCURAGE: Integration of risk management into daily work

The Company has established Corporate Key Performance Indicators (KPIs) and those for senior management to align with enterprise risks or Key Risk Indicators (KRIs) which are assessed every six months and linked to the departmental KPIs of the risk owners. This alignment aims to continuously monitor and assess the effectiveness of risk control measures and risk management plans in accordance with corporate strategies. The responsible units have set performance indicator targets that align with these risk indicators. For example, to manage the risk associated with drought, the Company has specified that the total remaining raw water supply at the AMATA City Chonburi Industrial Estate should be available for use at least 14 months and six months at the AMATA City Rayong Industrial Estate. In response to these indicators, AMATA Water Company Limited, responsible for water management, has established their own key performance indicators (KPIs) to ensure an adequate raw water supply to meet customer demand in the industrial estates. For instance, the AMATA City Chonburi Industrial Estate has reserved raw water for 24 months of utilization, and the AMATA City Rayong Industrial Estate must maintain its raw water supply at 80% of reservoir capacity throughout the year.

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