PT Adaro Minerals Indonesia Tbk's ("the Company") business consists of various risky aspects. The risks must be managed a well-structured and consistent manner by involving and getting the support from all levels of the company to ensure effective risk management, for protecting the Company’s sustainability and creating value for shareholders’ interest. Value creation is achieved through clear management decisions in all areas of an entity’s activities, from strategy setting to operations.
Board of Directors (BoD) of the Company believe that the Company must have risk management systems and procedures in place to mitigate key business risks and help achieve strategic objectives. Good risk management will enhance the Company’s ability to:
- Deal effectively with potential future events that may create uncertainty.
- Be responsive to reduce possible losses and increase profits.
- Communicate value creation, program sustainability and goals to stakeholders, and execute them, with little surprise.
The Company implements risk management to mitigate the following risk factors:
- To deal with the risk of reporting resource and reserve estimates that are not in accordance with actual conditions, the Company conducts a sustainable exploration program to improve understanding of geological conditions and confidence levels, conducts more detailed studies of mining technical and economic aspects so as to be able to provide more accurate estimates of resource and reserve calculations accurate.
- To deal with geological risks to mining activities, the Company collects geological information on an ongoing basis both before and during mining activities for updating geological models by taking samples/quality analysis, surveying data collection and infill drilling activities.
- To deal with logistical risks, the Company uses an intermediate stockpile so that coal can be shipped as soon as possible from the upper cycle which has limited water depth, then the coal will be transported using a barge larger than the intermediate stockpile.
- To deal with social risks, the Company takes an intensive constructive approach and communication with stakeholders by creating sustainable community development and empowerment programs in accordance with community needs and implementing integrated security patterns in the company's operational areas.
- To deal with the risks that arise in coal loading, operational activities are carried out in accordance with predetermined rules to reduce the presence of contaminants and other factors that can interfere with operations, availability of experts in facility maintenance, support for spare parts availability, facility security guarantees with restrictions on access from unauthorized parties including parties outside the Company, coordination of Subsidiaries with other river users in traffic management and work safety in the coal terminal area.
- To deal with the risk of CHPP performance, the Company collects information to get to know the characteristics of the coal mined, the application of good mining practices and the selection of competent contractors in the mining process as well as studies to determine the CHPP design that is in accordance with the characteristics of the coal, as well as support from experts in operating and tool maintenance.
- To deal with the risks of natural disasters, climate and accidents on operational activities, the Company has created a system and carried out supervision to create safe working conditions and safe actions when doing work. The Company also has an Emergency Response Team (EMT) in handling hazardous conditions in the form of natural disasters and climate change.
- To deal with the risk of pandemics and disease outbreaks that have the potential to endanger life and have a negative impact, the Company implements supervision and implementation of protocols considering health standards in the process of entering and leaving employees to work areas of subsidiary companies, supporting health and accommodation facilities and other supporting facilities for effective pandemic handling.
- To deal with human resource risks, the Company has a training and workforce development program to meet the required quality standards achievement, a retention program to avoid losing qualified experts. A good retention program and competitive compensation package are believed to be able to maintain good relationships and support the Company's success with the support of quality human resources.
- In dealing with decarbonization related to climate change, the Company makes a sustainability roadmap to achieve an environmentally friendly and sustainable business. In the medium term, the Company also allows for business development and carbon sequestration. The Company's management will continue to monitor technological developments, environmental and community policies to identify and implement efficient and accurate measures in response to climate change.
- In obtaining, maintaining and renewing and renewing all permits and approvals regulated in the applicable laws and regulations, the Company will follow each stage and fulfill all applicable provisions for licensing renewal in accordance with the specified deadline to ensure that there are no disruptions in the continuity of operations. The Company also monitors any changes to the legislation on a regular basis.
- In dealing with the risk of dependence on subsidiaries, the Company monitors the performance of all subsidiaries by holding regular meetings to discuss the problems, developments and plans of the subsidiaries concerned in order to improve the subsidiary's financial performance.
- To deal with the risk of dependency on contractors, the Company uses big and reputable mining and barging contractors and maintains close relationships with contractors.
- In dealing with investment risk, the company conducts an in-depth and comprehensive assessment. In addition, the Company ensures that the investments made are in accordance with the Company's capacity and the Company's business growth in the long term.
- In facing the risk of contract termination due to changes in importing country policies, the Company implements a marketing strategy by strengthening the portfolio of export destination countries. The Company does not have dependence on one customer, instead the Company's sales are well distributed to blue-chip buying companies.
- In terms of operational reliability with locations in remote areas, the Company anticipates by holding intermediate stockpiles and developing other logistics strategies, such as barge-to-barge transfers which will be carried out on the upstream section of the Barito River. The Company also continues to consider other supply chain options to improve reliability and improve logistics efficiency.
The Company has effectively implemented risk management and consistently refers to the fundamental principles of risk management.
As part of PT Adaro Energy Indonesia Tbk’s Group (the “Adaro Group”), the Company adheres to the Adaro Group’s Risk Management Policy which shows the Adaro Group’s commitment to integrated risk management. The Adaro Group’s Risk Management Policy can be accessed through the link here.
