The first category addresses an entity’s basic business objectives, including performance and
profitability goals and safeguarding of assets. The second category relates to the preparation
of reliable published financial statements, including quarterly and full year financial reports
and financial information derived from such statements, reported publicly. The third category
deals with complying with those laws and regulations to which the entity is subjected to.
The Group’s approach to risk management with a brief description of the nature and extent of
its risk exposures are set out on page 58 of this Annual Report.
Key Operational Risks
The Board is aware of the operational risks that may adversely affect the Group’s operating
results if any of these risk factors and uncertainties develops into actual events. The Board
believes that the Group’s key operational risks are as follows:
Macro Economic Risk
The Group’s business is sensitive to global economic conditions. The global economic
slowdown has resulted in weak charter rates for certain categories of vessels. This in turn
affects the demand for new ship building, conversions and to a lesser extent repairs.
Change in Customers’ Ordering Pattern
As a result of recent market uncertainties, the Group’s clients may place fewer orders or may
downsize the ships they wish to be built or converted or delay their order or act in some other
manner which adversely affects our revenues or timing of the revenue recognition.
Cancellation Risk
When market conditions are weak, there is possibility that clients may cancel signed orders.
Any cancellation may affect our cash flow position, revenue or profit.
Increasing Credit Risk
Whilst the Group’s current bad debts experience is minimal, the risk associated with credit is
rising as a result of recent market uncertainties. The Group recorded a provision for doubtful
debts of $0.6 million in FY2015.
Working Capital
The Group enjoys good relations with its bankers. To date, the Group has not experienced any
contraction in its banking facilities or lines. However, and in the event the Group does suffer a
reduction in its banking lines and/or facilities, it may have to reduce the amount of business it
undertakes as ship building, conversion and ship owning are capital and/or cash flow intensive
activities.
Supply Disruption Risk
The Group is very reliant on its suppliers including specialist engineering suppliers, labor
suppliers and other suppliers. If there is a disruption in supply, such as a delay in the arrival of
design plans or specialist equipment or a labor strike, the Group’s business will be affected.
Operational Health & Safety Risk
The Group has a good operational health and safety track record. But like all businesses, if
there is a major accident, the Group’s business could be adversely affected.
CORPORATE GOVERNANCE
REPORT
ASL Marine Holdings Ltd. /Annual Report 2015
41
