Sustainability

Risk Factors

Due to the instability of business conditions in these current times, risk management continues to be an inevitable tool for any business especially operating its business through an unexpected situation, including preparation for future competition to ensure that business operations are able to meet their goals while create and maintain creditability for shareholders and other stakeholders.

The Company is aware of the impact of risk factors and therefore has set measures to mitigate and maintain such risks to an acceptable level. The Company has also regularly reviewed and evaluated the risk factors and obstacles that may affect the Company and its stakeholders. In addition, the Company has also established the Project Risk Committee to be responsible for assessing risks for any project and reducing the negative factors affecting the success of the project, since the Company’s sales are mostly in the form of projects.

Risk factors that may affect the business operations of the Company can be classified as follows:

Risk Relating to Change of Technology

Due to the rapid change in the information and communication technology sector, the Company must always be on top of technological advances and trends in order to avoid any potential opportunity loss, or loss of its competitiveness. In the near future, the trend will be to even more Cloud Technology and in the near future will come the Internet of Thing (IoT).

The Company encourages its engineers and sales and marketing people, to regularly monitor technological developments and to attend seminars to stay at the top of their game. Apart from publicly available information, AIT works closely with its partners to clearly understand all aspects of developments in the target markets and key technology areas.

Risk Relating to Change in Government Policy

The Information Technology business is considered to be a business in a good growing direction, due to the government policies and the laws, which continuously supports the investment in developing the Information Technology system such as the government policy of Digital Economy that its initial operational plan is to promote the access to a high-speed internet (Broadband) at the villages, create an internet connection to be ASEAN regional hub and Government cloud development (G-Cloud). These policies are beneficial to the entrepreneurs in the industry to have an opportunity to participate in the auction. Therefore, if there are changes in these government policies, they may affect both positively and negatively on the business opportunities of the Company. However, the Company is monitoring and assessing the situation closely and will continued keep the investors up to date.

Risk Relating to Dependency on Major Customers

The majority of the Company’s revenue comes from sales and network installation services for government agencies and state enterprises, which accounts for approximately 60% of the Company’s total revenue. Although this may pose a risk, however, as the infrastructures in Thailand needs constant development, the investments are often coming from almost all of these agencies in order to support the national agenda in IT according to the policy framework of the Ministry of Digital Economy and Society. However, the Company has also expanded the long-term support and maintenance services (MA) for the project’s customers and plans to expand its customer base to include new ones in order to maintain balance with the revenue from projects.

The Company has been striving to minimize the risk of dependency on a few major customers and is constantly seeking opportunities to diversify its customer base in the future. The additional revenue from expanding the customer base in the maintenance services (MA) will increase the proportion of revenue, while the Company can still maintain its existing customer base.

Risk Relating to Dependency on Key Employees

The information and communication technology business highly depend on qualified human resources in terms of marketing, engineering and project operation. These valuable human resources utilize their expertise in advising, designing and implementing the products and services provided by AIT. At present, the Company has 354 permanent employees, most of them are engineers, each with approximately 5 - 7 years of work experience. In 2019, our employee’s turnover rate was only 4.71%. In order to retain its employees, the Company provides attractive compensation packages and good working environment that enhances quality of life at work. The Company has also establised an internal audit system to prevent the risk of losing any key employee which may affect its business operations.

AIT has developed a multilevel organizational structure with minimized single points of impact, which even allows the Company to replace key employees in any situation or case in which they should become unavailable. There are weekly internal meetings among the senior executives to acknowledge and discuss any potential problems and to determine immediate actions to mitigate any problem that might occur.

Risk Relating to Dependency on Major Supplier

Normally, the Company purchases its products directly from the manufacturers or indirectly via the manufacturers distributors with representative offices in Thailand. Notably the Company is the key distributor and strategic partner of Cisco Systems, the world’s leading manufacturer of information and communication technology in the IP (internet Protocol) segment. In 2019, the Company’s purchase of network equipment from Cisco Systems accounted for approximately 22% of the total cost of sales. The reason behind such high purchase amounts, each year, from Cisco Systems is based on the fact that Cisco’s products have wide acceptance with customers in both local and international markets.

However, The Company is aware that major supplier dependency can lead to high level of risk. The Company therefore has become a partner with other well-known suppliers, which are as reputable as Cisco. These suppliers are the leading manufacturers in their own fields of business. In addition, the Company has also received awards for guaranteeing success from that partner.

Risk Relating to New Customers

Bidding with a new customer inevitably comes with risk, from the background of customer, presentation of technologies to meet the needs of customer, including delivery and financial competence. The Company has therefore established a screening process before entering a bidding process, in which the Project Risk Committee is responsible for risk analysis before allowing any department to participate in a major bidding.

Risk Relating to Project Delivery

ICT projects normally last between 2 - 4 months but this is dependent upon the particular project size. If the Company fails to deliver the project on time as stated in the contract, the Company may incur a financial penalty. To its credit, in the last 5 years, such occurrences have been minimal and the Company has been penalized around 1% of the project sales revenue, which by comparison with other project suppliers is considered extremely low.

The main causes of project delays are often due to external factors beyond our control, such as delays in the delivery from suppliers and changes in installed equipment, etc. Upon the project implementation, the Company will constantly monitor and examine the project delivery period. However, in some cases where our customers urgently need to use their ordered system, the Company will be able to install a standby system for their temporary usage. In order to prevent the Company from the penalty, clear and effective project management method is necessary. The said process requires close monitoring of project and seamlessly coordination between the Company, customers, and suppliers, which allow us to identify problems, minimize potential impacts in advance and determine prevention methods.

Risk Relating to Sales and service contract conditions

In entering into a commercial contract, it is possible for the parties to disagree with the conditions of the contract. Therefore, amendments to the terms and conditions of the contract are needed to be satisfactory to both parties, which may cause delays in delivery and payment of products and services. Especially with medium to large organizations, which are the main customers of the Company, tend to have inconsistent contract conditions. In order to minimize the risk, the management of the Company has appointed legal consultants to provide legal advice, as well as studying and reviewing the conditions of the contract to be in line with the needs of both buyers and sellers to meet international standards. This in order to make the contract standardized, referable and acceptable. In addition, the Company regularly reviews the contract terms in order to monitor and manage risks to prevent potential contractual problems.

Risk Relating to Foreign Exchange Rate Risk

Generally, at a point approximately 1-2 months prior to the start of a project, the Company must estimate the project cost to use in the bidding or proposal process. If imported equipment is needed, this means that the project cost may be affected by fluctuations in foreign exchange rates. As of 31 December 2019, the Company had outstanding balance of trade receivables and trade payable denominated in foreign currency of USD 5.5 million and USD 2.8 million, respectively, the Company has applied the following strategies for mitigation of any adverse effects:

  1. Determine the value of foreign exchange rate risk in the calculation of the total project cost, and
  2. Enter into a FX forward contract to cover the whole amount

In 2019, the Company prepared to utilize various financial tools to enhance efficiency in managing risks and keep these at a minimum and therefore to maximize benefits to the Company.

Risk Relating to Changes in financial reporting standards and related practices and laws

The Federation of Accounting Professions will issue a number of revised and new financial reporting standards. These financial reporting standards are aimed at alignment with the corresponding International Financial Reporting Standards. For example, the Financial Reporting Standards No.9 “Financial Instruments”, the Financial Reporting Standards No.15 “Revenue from Contracts with Customers” and the Financial Reporting Standards No.16 “Lease Agreement, including the regulations or laws such as the Labor Protection Act (No.7) B.E. 2562 (2019), the Land and Buildings Tax Act B.E. 2562 (2019), etc. These requirements or standards may affect the working procedures and systems within the Company, which must be revised or changed to meet the standards and to be in accordance with relevant regulations. In this regard, the finance and accounting department of the Company has closely controlled, monitored and understood the changes in the standards and regulations. There is also a coordination to acquire knowledge and create understanding with external auditors on a regular basis, including all departments related to changes in order to be prepared and make the working procedures and systems work correctly and appropriately.

Risk relating to uncontrollable / unpredictable situations

There were effects from various natural conditions such as storms, landslides, and earthquakes, which these situations affected the Company’s project to be uncontrollable. However, the Company has a risk management plan, according to the potential risks, to manage and perform properly in such situations.