and EGMS
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Board of
with Shareholders

Risk Management

“Adaro Enterprise Risk Management (ERM) adopts a prudent and proactive approach in managing risks to achieve the company’s strategic objectives through a winning business concept, a winning system and a winning team.”

“Adaro ERM remains focused on strengthening the implementation that has been deepened down to divisional levels in all business units within the Adaro Group. This approach paves the way to the enhancement of Adaro ERM’s maturity.”

The key risk management principles set forth in the Adaro Group’s risk management policy are as follows

1. Understood
understood before making key business decisions.

2. Integrated
integrated into the management cycle of the company and embedded in planning processes, at both the operational and strategic level.

3. Being part of decision making 
used in selecting appropriate decisions by taking into account the information on the risk exposure of every option. 

4. Managed 
managed to address uncertainty, put control  mechanism, maximize opportunity and minimize  negative impact. 

5. Systematic, structured and timely 
applied in a systematic, structured and timely manner across the Adaro Group to ensure efficient and reliable results. 

6. Based on the best available information 
managed using the best available relevant information with the awareness that some key information cannot be obtained. 

7. Transparent and inclusive 
engaging internal and external stakeholders in each step of risk management process and being transparent about all mitigation actions and the progress

8. Reassessed periodically 
re-assessed periodically to identify whether there are new risks and risks that are no longer relevant. 

9. Communicated
communicated with the relevant stakeholders in order to obtain appropriate responses so that risks can be mitigated effectively. 

The Adaro Group’s ERM aims to protect and maximize organization/enterprise value. In this regard, the company focuses on the key risks that may lead to disproportionate deviation regarding target achievement.

Twice a year, Adaro Energy’s Board of Directors conducts risk assessment by analyzing all strategic business units’ risk profiles, consolidating them at the group level and determining the appropriate response actions/strategy.

The risk profile submitted by subsidiaries from 8 (eight) business pillars covers 29 risk types under 3 (three) categories: external environment, operations and organization. All key / material risks (assessed to be at high and critical levels) will be populated on the Adaro Energy’s risk profile. Risk Management Unit analyzes the risks population for aggregation and consolidation to build the risk profile of Adaro Energy for the review and assessment by its BoD. The risk assessment is performed by the BOD twice a year, including the formulation of the response action/mitigation strategy for each key risk. The key risks indicate the areas/issues that the board needs to focus on. In this regard, priority is to be given to the agreed response action/mitigation strategy. PIC and timeline are also set to monitor the progress and the effectiveness of each mitigation program in the quarterly management meeting.

At the corporate level, the summary of consolidated risk profile for the Adaro Group is as follows:

  • As at December 2020, there were 12 types of high risks treated as the main focus, four of them were new risks treated as the main focus, i.e. financial risk, land availability risk, governance risk and business process risk.
  • Compared to the previous year, the number of key risks increased by three types of risks, from nine to 12 types of risks, while the other 17 types of risks at moderate and low levels were closely monitored and treated appropriately.

The risks treated as the main focuses in 2020:

  1. Health, Safety and Environment (HSE) risk
  2. Industrial risk
  3. Macroeconomic risk
  4. Regulatory-changes risk
  5. Project risk
  6. Legal and regulatory compliance risk
  7. Business interruption risk
  8. Production cost risk
  9. Financial risk
  10. Land availability risk
  11. Governance risk
  12. Business process risk
Effectiveness of Risk Management Implementation

The implementation of risk management within the Adaro Group has been implemented effectively and consistent with the fundamental principles of risk management.

For more detail explanation on our risk management, please see in our 2020 Annual Report page 172.

Last modified on May 30, 2021, 2:58 pm | 28783