Risk Factors

Due to the instability of business conditions in these current times, risk management continues to be an inevitable tool for any company - especially in order to continue running its business when an unexpected event occurs. Thus, it is necessary for AIT to have a tool to manage its business in current conditions as well as prepare itself to be ready for future competition. The Company has realized the impact of risk factors and therefore, has set measures to mitigate and maintain such risks to be within acceptable levels. The Company also regularly reviews and evaluates risk factors and new threats that could affect the Company and its stakeholders.

However, The Audit Committee confirms that the Company in established a Risk Sub-Committee, which reports to the Executive Board Committee, in order to manage and mitigate all project risks before implementing any projects. Project risk management is considered most crucial to ensuring the Company’s financial performance

The main objective of managing risks is to ensure that the Company is able to achieve its goals and strategies, while continuing to create and maintain confidence with the Company’s shareholders and stakeholders.

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 Dependency on Major Customers

The Company predominantly earns revenues from sales and provided services of network system installation to TOT Corporation Plc. (TOT) and CAT Telecom Plc. (CAT), which accounts for approximately 37% of the Company’s total revenue. The Company realized the aforementioned risk factors from two key customers. As the national infrastructures in Thailand has not yet fully developed, Major infrastructure investments and developments are often coming from the Government sector in order to support national directions of Digital Economy, National Broadband, and other projects, which related to ICT infrastructure investments.

Our customers consist of State Enterprise and Private Company, which can be classified as follows:

Customer Type Customer Revenue/Total revenue
Telecom I : Mobile & Wireless Group CAT Public Limited Company 11%
Telecom II : Fixed line and Network Group TOT Public Limited Company 26%
Enterprise : Fixed line and Network Group State Enterprise, Private Company, Educational Institution 63%

Core Networking is one of the key and core competencies of AIT and the Company’s level of expertise is likewise difficult to match in Thailand. It is therefore only natural that AIT proudly plays a role in that development both now and into the future.

The Company plans to continue to drive long term service contracts with the existing key accounts to further balance the project revenues.

Clearly, the Company has been striving to minimize the risk relating to the dependency on a few major customers and is constantly seeking opportunities to diversify its customer base.

It is likely that going forward revenues from an expanded customer base will be comparable to those from major customers. While of course the Company will continue to maintain its existing customer base to be as strong, or stronger, than it has always been.

Risk Relating to Dependency on Key Employees

The information and communication technology business highly depends on qualified human resources in terms of marketing, engineering and operation. These valuable human resources utilize their expertise in advising, designing and implementing the products and services that AIT provides. At present, the Company has 322 employees which are divided into the following segments:

  • Marketing & Sales
  • Customer Service (Engineering)
  • Software
  • Project Management, and
  • Finance & Administration

Most of our employees are engineers, each with approximately 4-6 years of work experience; and in the previous year, our employee’s turnover rate was only an approximate 8.52%, - which is considered very low. In order to retain its employees, the Company provides attractive compensation packages and provides a good working environment. The Company has also put in place an internal control system to prevent the risk of losing any single 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 a Single Supplier more than 20%

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 2017, the Company’s purchase of network equipment from Cisco Systems accounted for approximately 27% 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.

AIT has invested considerably in training its engineers and sales people to become Cisco certified. AIT has for many years now been a Cisco Gold Partner, which is the highest level of strategic partnership that a business may hold with Cisco Systems

The long term Gold Partnership means that the Company receives better support and discount structure from Cisco Systems, which is far better than other lower ranked business partners have available. Nonetheless, in order to mitigate the risk of being overly dependent on any single supplier, the Company also partners with other well-known manufacturers, which are as reputable as Cisco Systems, just that these other manufacturers are the leading suppliers in their own fields of business.

Risk Relating to Project Delivery

ICT projects normally last between 3-12 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 reasons for the delay in project delivery are due mostly to delays which have been outside our control, such as time delays in the delivery of the equipment from the manufacturer and due to changes of installed equipment types. To protect the Company from the penalty, the project management method has to clearly defined. This method requires closely monitor to all processes of a project and seamlessly coordinate with AIT’s resources, customers, and manufacturers. Therefore, potential problems can be identified earlier and their effect can be minimized or prevent in advance.

After the Company is selected for a project, we will constantly monitor and examine the timing of product delivery. 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.

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 2017, the Company had outstanding balance of trade receivables and trade payable denominated in foreign currency of USD 7.3 million and USD 6.4 million, respectively. In addition, there was the balance of FX forward contracts bought totaling USD 5.1 million at the agreed rate of Baht 32.56-33.17 per USD and the balance of FX forward contracts sold totaling USD 5.5 million at the agreed rate of Baht 32.88-33.03 per USD. Given that foreign exchange rates are nowadays often a potential risk, 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 2017, 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 Change in Government Policy

ICT is considered to be the highest growth industry in Thailand - most especially as the government fully promotes the industry by continuously investing in ICT systems and infrastructure. Major projects and policies are: the Digital Economy, which establishes the early stage of an action plan to promote accessing broadband Internet in village such as Netpracharat ; to establish a connection to the Internet as a Regional Hub of ASEAN; the 3G and 4G license auctions.

The implementation of these projects and policies is expected to bring more business opportunities to everyone. However, any change in the government policy might also impact on the Company’s business opportunities; therefore, the Company monitors such policies closely and shall inform investors as soon as a major policy change is to occur.

Risk relating to uncontrollable / unpredictable situations

Due to the uncontrollable and unpredictable natural effects, the business sectors faced a slowdown in 2017. The natural impacts such as a heavy rainfall to flooding in many areas, especially in the Northern, the Northeastern, and the Southern, may affect the Company’s projects directly and are out of control.

Risk relating to effect of AEC

The Asean Economic Community was found in late 2015, created many business partnerships to enhance the competency with a diverse competition. Therefore, the Company must be prepared to deal with any further business competitions.