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 55 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 $4.0 million in FY2016.
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.
Governance
Disclosure Guide
ASL Marine Holdings Ltd.
Annual Report 2016
45
