Page 106 - ar2011

NATURAL COOL HOLDINGS LIMITED
Annual Report 2011 104
Risk Management Policies and Processes
Business Risk
In our Aircon Division, we install and service air-conditioning systems for our customers. We also
manufacture and sell switchgear to our customers. These activities have minimum barriers to entry. In
order to differentiate ourselves and diversify our business risk for our air-conditioning business units,
we operate in both the retail and commercial markets. Our Switchgear Manufacturing unit is ready to
capitalise on Asia’s construction boom, with a vision of becoming a preferred choice in building solutions.
With the integrated operations, we are able to tap on the combined network, strengths and resources from
our various business segments. Our business segments share the same pool of customers who are mainly
property consultants, M&E consultants and contractors, and electrical contractors, as well as potential
referrals from property developers, contractors, project managers and building owners. Our customers
enjoy convenience, only needing to go through us as one party, for solutions to a wide range of their
needs. Management and logistics issues in relation to the engagement of multiple suppliers and services
providers are therefore substantially reduced.
In addition, with our combined expertise, resources and track record, we are able to pitch for bigger
projects at more competitive bids, and to provide a better range of products and services from design and
planning, air-conditioning systems installation, electrical wirings, mechanical and electrical switchgears and
switchboxes for residential and commercial properties, to after sales services.
Operational Risk
Operational risk refers to the loss incurred by our Group due to operational failures arising from a
breakdown in internal process, defciencies in people and management. The Group engages external
consultants to review our internal processes and controls on a yearly basis to ensure that our operations
processes and controls are working effectively. The quality management systems which encompass the
entire manufacturing process for our air-conditioning and switchgear business units are also subject to
annual audit by an ISO 9000:2000 accreditation body. In addition, our Switchgear business unit is also
subject to additional annual audit by SPRING Singapore for our Singapore Quality Class awarded which
recognises organisations for their commitment to achieve business excellence. We have engaged
professionals to assist our human resource personnel to improve on our annual performance appraisal
system as well as establishing a training roadmap for all our staff. Remuneration for our staff is also
reviewed periodically to ensure that the remuneration package offered by the Group remains competitive.
Project Risk
Delays in the completion of our Commercial business projects may occur due to unforeseen
circumstances. If such delay in the completion of our projects is attributable to us, we will be liable for
liquidated damages which will materially and adversely affect our fnancial position and performance. To
mitigate this risk, project meetings are held periodically to update management on the progress of all
on-going projects. Work-in-progress is monitored closely by the management to avoid the situation of
cost overrun. In the event that management perceives a potential delay in a project, we immediately alert
the main contractor. A revised project completion date will be negotiated subsequently. Quarterly Group
performance reports are also presented to the Board of Directors for their review and comments.
Investment Risk
The businesses of our Group may be expanded through organic growth of our activities and through
acquisitions of operating business entities. Investment activities are evaluated through performance of due
diligence exercises and are supported by advice from external professionals. All business proposals are
reviewed by the Company’s Executive Directors and senior management before obtaining fnal approval
from the Board.