BUILDING ON OUR EXTENSIVE NETWORK
The AC has a “whistle blowing” or Corporate Ethics Compliance policy in place. The policy provides a channel
for staff to confidentially report violations of the Group’s Code of Ethics, business conduct, and improprieties in
financial accounting, trade practices, conflict of interest, employee discrimination and health & safety. Reports
can be made on an anonymous basis directly to the AC. Appropriate investigation will be carried out and the
informant (if not anonymous) will be informed of the results.
Risk Management Policies
The Group has set up objectives to manage the risks that arise from the normal course of its operations. The
significant risks are summarised below:
(i) General business risk
The Group’s major business is distribution of tyres and wheels. The Group is reliant on a few key suppliers for
the supply of certain major brand of tyres. Some of these suppliers have granted exclusive distribution rights.
Although the Group has a strong relationship with the principals (some exceeding 30 years), there is no
assurance that the principals will continue to appoint the Group as their exclusive distribution agent in the future.
Should any of the major principals decide to discontinue the distribution rights in the future, the Group could
lose some of its market share and this could then have adverse financial impact on the Group. To mitigate this
risk, the Group has been focusing on developing its own range of proprietary ‘in-house’ brands like Sumo Firenza,
Sumo Tire and SSW to become less reliant on its principals.
As in any other business environment, the Group’s assets are exposed to various risks arising from normal
operations and natural disasters. Especially, the Group’s inventory is highly flammable and susceptible to the
risk of fire. It is the Group’s practice to annually assess these risks and/or exposure to ensure that the Group
is protected from potential monetary loss. In addition to other preventive measures, the Group ensures that
adequate insurance coverage is maintained at all times to mitigate such risks except where the cost of insuring
the asset is considered prohibitive in relation to the risks identified.
(ii) Product liability claims
The Group is exposed to claims from its customers from products sold by the Group which contain defects
or found to be unfit for their intended use. The Group may be required to make financial compensation to its
customers in such circumstances. The Group’s principals are well established in the market place and their
products are usually tested for safety before being marketed. The Group continues to spend considerable effort
in ensuring the quality of its products and services. The Group provides its employees with relevant training,
on a regular basis, to uphold the quality of services provided to its customers. The Group has no history of any
significant claim made by its customers.
(iii) Credit and inventory risk
The Group faces normal business risks associated with collection of trade receivables and inventory
obsolescence. The Group’s exposure to credit risks arises mainly from sales made to distributors and retailers
in various geographical locations. The Group has tight credit control policies and procedures to evaluate the
credit worthiness of customers before credit is granted and to prevent significant concentration of credit risk.
The Group also has adequate policies and procedures to minimise the risk of inventory obsolescence. The risk of
inventory obsolescence may arise from changes in consumer preference and technology. It is the Group’s policy
to maintain optimum inventory level at all times. Inventory level is monitored regularly and slow moving inventories
are quickly identified for early disposal. The Group has also put in place a ‘supply chain management’ system to
procure inventories in an effective manner to prevent excess inventories on hand.
The financial risk management objectives and policies are discussed in Note 35 to the financial statements.
Corporate Governance
(Cont’d)
ANNUAL REPORT 2015
26
