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 Financial Risks include:
1. Commodity Price Risk
ANTAM and Subsidiaries trade receivables from ferronickel and nickel ore sales are directly linked to LME price index. As at December 31, 2018, if the LME nickel price had weakened/strengthened by 5% (assuming all other variables remain unchanged), the profit before income tax of ANTAM and Subsidiaries would have been lower/higher by approximately Rp29,163,980 (2017: Rp32,759,963).
2. Foreign Exchange and Interest Rate Risks
ANTAM and Subsidiaries' revenue and cash position are mostly in US Dollars while most of the ANTAM and Subsidiaries' operating expenses are in Indonesian Rupiah. In addition, ANTAM and Subsidiaries also has significant borrowings in US Dollars. Thus, ANTAM and Subsidiaries suffers from the negative effect of the Indonesian Rupiah weakening against the US Dollar. As at December 31, 2018, if the Rupiah had weakened/strengthened by 5% against US Dollar (assuming all other variables remain unchanged), the profit before income tax of ANTAM and Subsidiaries would have been lower/higher by approximately Rp293,570,533 (2017: Rp139,852,614), mainly as a result of foreign exchange losses/gains on translation of the US Dollar denominated net liabilities.
ANTAM and Subsidiaries is exposed to cash flow interest rate risks from its floating interest-bearing loan. ANTAM and Subsidiaries 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 and Subsidiaries calculates the impact on profit or loss of a defined interest rate shift. As at December 31, 2018, if the loan interest rates had increased/decreased by 0.1% (assuming all other variables remain unchanged), the profit before income tax of ANTAM and Subsidiaries would have been lower/higher by approximately Rp1,260,509 (2017: Rp407,851).
3. Credit Risk
Credit risk is the risk that ANTAM and Subsidiaries will incur a loss arising from their customers’ or third parties’ failure to fulfil their contractual obligations. There are no significant concentrations of credit risk. ANTAM and Subsidiaries manages and controls this credit risk by setting limits on the amount of risk its is willing to accept for individual customers and by monitoring exposures in relation to such limits. ANTAM and Subsidiaries is confident in their ability to continue to control and maintain minimal exposure to credit risk, since ANTAM and Subsidiaries has clear policies on the selection of customers, legally binding agreements in place for mineral commodity sales transactions and historically low levels of bad debts.
ANTAM and Subsidiaries' general policy for mineral commodity sales to new and existing customers is to select customers in a strong financial condition and with a good reputation. The maximum exposure to credit risk for ANTAM and Subsidiaries is equal to the carrying value of the financial assets as shown in the consolidated statements of financial position.
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. ANTAM and Subsidiaries ability to fund their borrowing requirements is managed by maintaining diversified funding sources with adequately committed funding lines from high-quality lenders. ANTAM and Subsidiaries is exposed to liquidity risk on account of their bonds and capital loans for their projects.
The contractual due date of financial liabilities such as trade payables, accrued liabilities, other payables and short-term bank loans are less than one year, except for financial liabilities such as bonds payable and investment loans. The amounts disclosed in the below are the contractual undiscounted cash flows.
