Risk and Crisis Management
Challenges and Commitments
GGC foresees the current trends of global changes which create new risks and opportunities that may impact our future business operations, such as the development of technology that affects human life and behavior, climate change, and emergence of new epidemics, etc. Therefore, GGC places importance in a systematic risk management within the organization while continuously taking into account both internal and external business environment that may affect our operations in order to identify potential risks and problems. As a result, GGC is able to cope with challenges in a timely manner and drive the organization to achieve goals with maximum efficiency.
Key Stakeholders
Employee
Shareholder, Investor and Analyst
Goals
business goals and long-term corporate strategies.
to reduce impact to an acceptable and appropriate level.
Management Approach
Guidelines for Risk Management and Internal Control
GGC has appropriate risk management and internal control guidelines that are in line with international standards, namely COSO (The Committee of Sponsoring Organization of the Treadway Commission) 2017 and ISO 31000 standards in order to achieve the objectives of effective internal control in the area of operation, as well as accuracy and completeness of the report and compliance with the law and relevant rules for conducting business, which will help support the work of the Company and ensure accuracy, transparency, achieve the Company's objectives, and respond to the expectations of stakeholders who expect the organization to conduct business with transparency, ethics and social responsibility. The Company, therefore, attaches great importance to (Governance, Risk Management and Compliance (GRC) to promote business operations with stability and sustainability and meet the expectations of key stakeholders.
GGC has established a unit responsible for supervising and monitoring the internal control system to ensure its efficiency on a regular basis in order to operate efficiently. The generated reports are accurate, reliable, and the operations are in compliance with relevant laws and regulations. The Company is able to protect its assets from the misuse of authorized persons and those involved, including sufficient transactions with persons who may have conflicts of interest and connected persons. Furthermore, the internal audit department has reviewed the internal control system of the Company, according to the risk-based audit plan.
In addition, GGC emphasizes through risk assessment At least twice a year or more frequency so that risk management and internal control are in line with corporate governance principles and the good practices of the SEC, as well as the best practices of the Company Group, while increasing the efficiency of internal control according to international standards to achieve the objectives of internal control in all 3 aspects, namely Operation, Reporting, and Compliance. The Risk Management Committee Supported and suggested the risk and control self-assessment (RCSA) development process in order to increase the efficiency of internal control and create understanding of operators in carrying out activities. The committee can assess the key points of the internal control process and assess work process risks, as well as implement a risk culture promotion program for employees at all levels within the organization.
Risk Management Structure
First Line:
Corporate Risk Management and Internal Control and Risk Owner/ Risk and Internal Control Coordinator, which is considered as part of the Operational Level, are responsible for implementing risk management guidelines, identifying and assessing risks, following up on risk operations, and preparing a regular report to present to the management at least once every 2 months in accordance with the Corporate Strategy for Enterprise Risk Management.
Second Line:
The Internal Control, Corporate Risk Management, Corporate Governance, Corporate Compliance, and other support divisions constitute the second line of defense, responsible for managing and supporting other functions to meet established standards.
Third Line:
The Internal Audit Function of GGC operates independently of business lines and reports directly to the Audit Committee. Its primary role is to provide independent assurance of other functions to ensure proper and suitable implementation of internal controls and to strengthen corporate governance and risk management. Quarterly reports are then forwarded to the Board of Directors for review R isk Management Process.
GGC manages risks and improves internal controls along with strategic management for the business operations to meet the strategic objectives and key objectives of the organization within an acceptable risk level. This covers risk management in terms of quality, security, safety, occupational health and environment, Human Rights, Labor Rights, Compliance with relevant laws, rules and regulations and Anti-Corruption, while responding to stakeholders in a fair manner, by analyzing the business environment, covering both internal and external factors that may affect the Company's current business operations. In addition, GGC requires risk assessment along with strategic planning, investment, and business planning in order to conduct business in accordance with the annual corporate goals, both Short-Term and Long-Term goals. Furthermore, GGC implements measures to prevent the impact that has been defined to control the level of risk to an acceptable level, as well as conduct Root Cause Analysis in case of non-compliance with the plan.
Risk Management Process
The risk management process consists of three steps, which are the following steps:
1. Risk Identification and Assessment
GGC takes into account various types of risks, including corporate, operational, and emerging risks, in accordance with the COSO Standards (The Committee of Sponsoring Organizations of the Treadway Commission). GGC has employed various risk management tools to analyze, evaluate, and establish a comprehensive risk management framework. This involves conducting thorough analyses of the business environment based on internal and external factors, determining risk tolerance, carrying out risk assessments, and prioritizing risks using a risk map (based on likelihood and impact ratings).
2. Risk Mitigation
GGC has appointed the Corporate Risk Management and Internal Control and the Risk Coordinators (Risk Owners) responsible for risk identification and assessment. They have also established a plan to mitigate risks according to their risk appetite and have determined Key Risk Indicators (KRIs). Additionally, GGC has adopted Sensitivity Analysis, Scenario Planning, and Stress Testing to assess the impact of risks under different scenarios, covering potential financial and non-financial risks. Furthermore, GGC has laid out preparation measures and a process to continuously monitor situations and trends of six external factors based on the PESTEL Analysis Framework.
3. Monitoring and Review
GGC has established that risk management is overseen and tracked by the Risk Management Committee and audited by the Internal Audit, with the findings reported to the Audit Committee. The company mandates regular monitoring and reporting of risk management performance at all levels, including corporate, business groups, business lines, business units, and subsidiaries.
Risk Management Process Audit
GGC has defined that risk management audits shall be conducted by internal audits as follows:
- The Internal Audit audits key risks that affect operations, provides recommendations on internal control to management, determines corrective actions according to the recommendations, and reports the audit results to the Audit Committee on a regular basis.
- Audit and monitor the efficiency of machinery/equipment monthly by fully complying with the equipment inspection standards.
- Audit operational management results of utility system service providers to assess risks and collectively seek risk management methods.
Risk Culture
Risk Management Training
In order to improve GGC's risk management corporate culture, the company provides its employees with expert guidance on enterprise risk management. This training involves the Board, Executives, and all levels of employees, making risk management a part of everyone's job description. This approach promotes better knowledge and understanding of corporate risk management, ultimately leading to increased effectiveness. As well as encourage all employees’ awareness of risk culture by conducting the following projects:
For more details about our risk and crisis management program, see the 2023 Integrated Sustainability Report at:
- Risk Training Workshop for Non-Executive Directors through IOD (Thailand Institute of Directors) Training under a Risk Management Program for Corporate Leaders Course (RML). GGC has sent Non-Executive Director namely Mrs. Kannika Ngamsopee, the Independent Directors and Chairman of Risk Management Committee, to attend the program, which is designed for Board of Directors, Risk Committee and C-Suites to understand about their roles in overseeing different types of risks which also include risks arising from opportunity management and business crises. The program reflects through the perspectives of corporate leaders who are responsible for supervising and monitoring the work of executives who directly manage the risks
- Risk Management Workshop for Top Management Project to increase efficiency and understanding of risk management at both the operational and corporate levels for top management executives.
- Risk Awareness Training Refreshment to raise awareness and increase risk management efficiency of employees at all levels, as well as internal control/ to exchange risk issues arising from each department within the Company.
- Risk and Control Self-Assessment (RCSA) Project to ensure that the involved board of directors, executives and employees effectively manage risk and internal control, build confidence and credibility in financial reports, ensure property protection, and comply with relevant laws and regulations of the Company.
- Business Continuity Plan (BCP) Project to prepare for incidents, reduce the impact on business operations, Cand enable employees at all levels in the business continuity planning (BC Team) to understand their roles and responsibilities, according to the guidelines set forth in the business continuity plan with efficiency.
Incorporation of Risk Criteria in Product Development
GGC incorporates risk criteria into its business and product development process to align with corporate strategy and business direction. This includes new projects and products (organic growth), joint investment projects (JV Organic Growth), mergers and acquisitions (M&A), and investment in product research and development. Additionally, risk assessment is an essential part of the initial business development activity. Regarding business Development involving joint ventures and organic growth, GGC conducts a comprehensive feasibility study, financial model analysis, financial investments, license agreements, and project risk assessment. As for the product development process, project risk assessment is conducted in accordance with project development guidelines. Risk Management Department is required to engage in consultations with the Business Development Department as necessary.
Incorporate Risk Management Metrics in Financial Incentives
The Corporate Key Performance Indicators (KPIs) serve to establish metrics and targets, which are subsequently integrated into risk management metrics. These metrics encompass various perspectives, including strategy, business operations, and financial targets, aiming to foster a robust risk culture across the entire organization. The Risk Management Metrics embeds in Corporate KPIs of TRIR and Process Safety Events.
Emerging Risk
GGC has focused on analyzing potential emerging risks that may affect business operations in the next three to five years, as well as establishing measures to prevent various impacts in order to control the risk level to an acceptable level.
| The Movement of Chinese Capital in Upstream Oil Plantation | |
|---|---|
| Category of Risk | Economic |
| Sources of Risks | Macroeconomics Factor |
| Risk Description |
Palm oil is a key raw material for the production of goods and services in many industries around the world. One of the main markets with demands for important oil palm raw materials is China. In 2022, China's oil purchasing volume was worth 5,542.21 billion USD, which was ranked second place globally after India. However, because China is unable to grow palm oil in the country, the Country invested in the opportunity to expand investment to palm oil plantations in Indonesia. which is the upstream business of the oil palm industry. Furthermore, there is a tendency to expand its investment and businesses to midstream and downstream businesses, such as crude palm oil processing plants, palm oil processing plants, as well as oleochemical production plants. As a result, China has a supply chain that is more reliant on palm oil production in its network and has increased its ability to negotiate from being a major investor in the palm oil upstream industry. This brings about China’s control of the palm oil market, which can be considered as a Concentration of Strategic Resources. Because of this, China can control and negotiate business operations upstream of the palm oil industry, increase trade barriers, and increase its control of trading volume, as well as trading price. China is also entering the market for products that use palm oil as a raw material. As a result, this brings new risks for GGC because GGC uses more than 0.4 million tons of raw materials and processed raw materials from oil palm per year to produce its main products, namely Fatty Alcohol, Methyl Ester, and Pure Glycerin, which represents at least 95 percent of the total revenue. |
| Possible Effects |
China's investment in the upstream business of the oil palm supply chain and trends in business expansion throughout the oil palm supply chain of Chinese companies may cause Chinese companies to have a greater desire to trade with other companies in China's palm oil industry due to various benefits, such as lower costs and other trading benefits, etc., possibly resulting in GGC losing the customer base from China, since China is one of the two main countries GGC exports to. The main products include Fatty Alcohol and Pure Glycerin. In addition, China's increasing investment in the upstream business of the palm oil industry and in industries related to palm oil processing, including the oleochemical industry, may result in China becoming more competitive. China may also invest in Thailand, which may result in GGC losing the domestic market share, which is its main source of income. |
| Mitigation and Opportunities |
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| Biodiversity Loss from Palm Oil Plantation | |
|---|---|
| Category of Risk | Environmental |
| Sources of Risks | Macroeconomics Factor |
| Risk Description |
Currently, biodiversity issues are receiving the attention of many organizations around the world. In 2022, the United Nations organized the 15th meeting of the Conference of the Contracting Parties (COP15) on the topic of Biodiversity, causing the world to increasingly focus on biodiversity issues, especially in agricultural crops such as oil palm, which is considered a key driver of deforestation in Southeast Asia. The expansion of oil palm plantations has led to the conversion of natural forest areas into monocultures, resulting in the loss of forest area. This affects the environment’s biodiversity and local communities, as well as other agricultural operations of surrounding communities. In Thailand, the government has driven conservation efforts to restore biodiversity, according to the Sufficiency Economy Philosophy, through the 20-year National Strategy, related policies, plans, and laws, especially the implementation of the BCG model policy and the goal of restoring important ecosystems. For this reason, such risks that arise from irresponsible palm oil cultivation may bring financial risks, production costs, and reputation costs to GGC from upstream supply chain activities because oil palm is considered the main raw material for producing GGC’s products. In 2023, GGC used more than 0.4 million tons of raw materials and raw materials processed from oil palm. |
| Possible Effects |
Currently, many countries around the world, including Thailand, tend to enact various regulations to prevent and mitigate the effects of biodiversity loss. This may affect GGC, for example, in terms of reduced income from a shortage of raw materials, decreased profit from higher palm oil raw material costs and/or increased business expenses, etc. In addition, GGC’s reputation may be negatively affected due to risks in involvement in the supply chain related to the unsustainable palm oil production process, such as deforestation to increase the area of palm oil cultivation, etc. |
| Mitigation and Opportunities |
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| Risk Resulting from Cost and Access to Insurance | |
|---|---|
| Category of Risk | Economic |
| Sources of Risks | Natural Factor |
| Scenario Analysis |
Climate change, a global phenomenon with far-reaching implications, is responsible for many natural disasters and extreme weather events. These events can include forest fires, storms, floods, droughts, and others, all of which have devastating damage to ecosystems and also pose a significant threat to human life and property. The failure to adapt to climate change and mitigate its effects has led to more frequent and severe disasters worldwide. This has had a profound impact on the world economy, particularly in areas that are at a higher risk of experiencing severe disasters. One of the most significant impacts of climate change on the economy is the increase in business insurance fees, particularly in areas that are at the highest risk of experiencing severe disasters. This increase in insurance fees can often lead to protection limitations, which can significantly impact businesses and industries in these high-risk areas. As a result, businesses and industries are often forced to pay significantly higher insurance fees, which can lead to a reduction in profits or even insolvency in some cases. Thailand has been ranked among the top 10 countries in the world that are most affected by extreme weather events. In recent years, the country has faced a major flood crisis and a prolonged drought. As a result, GGC is at risk of experiencing increased insurance costs and limited access due to the severity and frequency of these weather events. This is particularly concerning as GGC’s methyl ester factories are in regions of Thailand that are prone to flooding and drought, such as Rayong Province and Chonburi Province in the eastern region of the country. |
| Possible Effects |
GGC may face limited access to business insurance options, for instance, fire insurance, building/factory insurance and transportation insurance, due to the increasing risk of floods and droughts in the country. Insurance costs tend to rise in such situations, making it challenging for GGC to provide adequate coverage in unexpected disasters. Additionally, stringent conditions for applying for insurance may further complicate the situation, leading to increased budget allocation for business insurance premiums. This, in turn, can cause a loss of operating profits for GGC. |
| Mitigation and Opportunities |
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