As part of ANTAM's commitment to effectively implement GCG, ANTAM has formed the Risk Management Division which is responsible to the President Director The monitoring and management of material business risk is conducted based on Risk Management Policy No. 373.K/01/DAT/2015 which the latest was signed by the President Director on 10 December 2015. The policy guides ANTAM's employees to effectively conduct risk management process and activities in accordance to existing regulations an to ensure the equal perception and understanding on risk management as well as the realization of continual risk management process to ensure a coordinated and integrated risk management and to ensure the strategic initiatives are inline with corporate strategy..
ANTAM's risks include:
1. Commodity Price Risk
There was a significant volatility in 2015 in commodity prices for nickel, gold and coal. The volatility was caused by weak demand due to the global economic crisis and the increasing level of world commodity reserves. Although ANTAM has diversified customers and does not depend on a specific market or country, due to the dominance of nickel and gold product portfolio on other products, ANTAM’s revenue can still be significantly affected by the volatility in commodity prices.
Other than natural hedging through the increase of non-nickel and non-gold portfolio portions (bauxite and coal), it is also possible for ANTAM to mitigate commodity price risks through hedging transactions with the main goal of protecting their budgeted income. Yet some hedging positions may cause ANTAM to lose the chance to obtain even higher profits when prices rise.
As at December 31, 2015, ANTAM’s trade receivables from ferronickel sales are directly linked to LME price index. If the LME nickel price weakens or strengthens by 5% compared to the price as of December 31, 2015 (assuming all other variables remain unchanged), the post-tax loss of ANTAM for the year ended December 31, 2015 will increase or decrease by approximately Rp11,020,324 (2014: Rp24,258,947).
2. Foreign Exchange and Interest Rate Risks
ANTAM’s revenue and cash position are mostly in United States Dollar (“USD”) while most of ANTAM’s operating expenses are in Indonesian Rupiah. In addition, ANTAM also has significant borrowings in USD original currency. Thus, ANTAM suffers from the negative effect of the Indonesian Rupiah weakening against the United States Dollar. If the Rupiah weakens or strengthens by 5% compared to United States Dollar on December 31, 2015 (assuming all other variables remain unchanged), the profit before tax of ANTAM for the year ended December 31, 2015 will decrease or increase approximately by Rp245,006,244 (2014: Rp139,232,848), mainly as a result of foreign exchange gains or losses on translation of the United States Dollar denominated net assets (liabilities) as at the reporting date. ANTAM is exposed to interest rate risks through the impact of rate changes on interest bearing liabilities. ANTAM analyses its interest rate exposure on a dynamic basis. Various scenarios are simulated taking into consideration refinancing, renewal of existing positions, alternative financing and hedging. Based on these scenarios, ANTAM calculates the impact on profit or loss of a defined interest rate shift.
3. Credit Risk
Credit risk is the risk that ANTAM will incur a loss arising from their customer's or third parties failure to fulfill their contractual obligations. There are no significant concentrations of credit risk. ANTAM manages and controls this credit risk by setting limits on the amount of risk they are willing to accept for individual customers and by monitoring exposures in relation to such limits.
4. Liquidity Risk
Prudent liquidity risk management includes managing the profile of borrowing maturities and funding sources, maintaining sufficient cash and marketable securities and the ability to close out market positions. The Group’s ability to fund their borrowing requirements is managed by maintaining diversified funding sources with adequately committed funding lines from high quality lenders. ANTAM is exposed to liquidity risk on account of their bonds and capital loans for their projects.