Risk Management

PT NFC Indonesia TBk

The Company maintains a risk management system whose
primary purpose is to identify, anticipate, and formulate the
appropriate and effective mitigation measures for every risk
factor that the Company faces in business. This risk management
system is crucial in protecting the interests and assets of its
stakeholders, and is a firm manifestation of the good corporate
governance (GCG) practices.

The Company’s risk management practice is inherent in each
business activity that it carries out, demonstrating the risk
awareness culture of its parent company’s. Each work unit has
proper procedures and general guidelines to implement this risk
management system, to safeguard the Company’s interests and

The Company’s risk management practices will be further
improved in 2019, with the detailed agendas related to
risk management becoming one of the key sections of the
management’s work programs to be rolled out in 2019.
The details on all main risk factors that the Company faces,
along with their mitigation measures, are provided below.

Main Risk Factors and Their Mitigation

Competition Risk
In the technology sector, the players’ segments are somewhat
fragmented. Thus, the risk of competition most likely will
arise from the entry of large-scale players with global scope
and leadership in technological innovation and vast capital.
To mitigate this risk, the Company collaborates in the sharing
economy, by forging strategic alliances with big groups in
various economic sectors, to win in the Indonesian market.
Technological Risk
The rapid advance of technology is accelerating even further.
Disruptions in various sectors, such as telecommunications,
finance, retail and transportation, have threatened their
continuous business development prospect, with some even
having closed down due to this advancement. To mitigate this
risk, the Company and its subsidiaries have established the
research and business development division, to stay abreast
with the major trends for the next 3 to 5 years as regards
consumer attitude and products.

Regulatory Risk

The Company is a public entity, and therefore it is subjected
to a range of regulations, among others regulations issued
by the OJK as the Government’s agency assigned to regulate
and supervise the capital market activities, and also by the
regulations issued under the capital market laws, regulations
of Bank Indonesia (BI) and other government regulations that
may affect the Company’s business in the technology and digital
segment, such as those pertinent to digital payment systems.
The Company’s legal division, assisted by the internal audit team
and external auditors continuously forge strong relationship
with the regulators, so that every action that the Company
takes will be compliant with the prevailing laws and regulations.

Workforce Risk

As a company that is engaged in the technology sector, one
of the most valuable assets of the Company is its human
resources (HR), whose performance is to some extent affected
by employee turnover rate. There are various ways with which
the Company manages and mitigates the risk of employee
turnover, among others: formulating employee retention
programs, implementing incentives and reward mechanisms,
and providing opportunities for growth and proper career paths
for every employee.

Credit Risk

Credit risk is the risk of financial losses that may arise should
a counterparty fail to fulfill their contractual obligations,
which may then result in financial losses having to be borne
by the Company. The Company faces this credit risk from its
operations and funding activities, with exposed items ranging
from deposits in banks, foreign exchange transactions, and
other financial instruments. The main credit risk is derived
from bank and cash equivalents, accounts receivable, other
receivables, and restricted-use time deposits.
Credit risk from accounts receivable and other receivables is
managed by the management in accordance with the Company’s
policies, procedures, and control in relation to customer credit
risk management and other receivables management. Credit
limits are determined for each customer, based on internal
scoring criteria. Receivables’ balances are monitored regularly
by the management. Credit risk may also arise from cash in
banks and cash equivalents as well as other deposits in banks
and financial institutions. As a part of credit risk mitigation,
the Company deposits its cash and cash equivalents only in
reputable financial institutions.