GROUP MEMBER’S NAME

219349 NURUL SYAFIQAH BINTI ABDUL RAHIM

219662 NORASEKIN BINTI NASRI

219767 NUR ATHIRAH BINTI MOHD RANI

220585 MOHD SALAHUDDIN BIN SHAHRUN

221582 SITI JAMALIAH BINTI MOHD DAUD

Background

~Founded on 1980~Listed on Bursa Malaysia : 1982

~Malaysia and Indonesia (joint

ventures)~Collaborated with

DuPont

~Founder: Dato’Seri Di Raja Tan Sri Mohd

Zahidi bin Hj Zainuddin

~Main activities : oil palm plantation.

~operating segment :Plantation, property,

biotechnology

~Exported to more than 150 countries including China, European Union, Pakistan, India, United Stated, Egypt

and Japan

Sources of Financial Risk

Liquidity Risk

Will occur when the

company may not be able to

meet short term financial

demands.

Market Risk:Also called systematic risk ,risk that

movements in the level of currencies exposure, interest rate instruments, commodities and stocks or equity,

Credit Risk: Debtors failed to pay interest or not able to pay the principal according to

the terms that have been specified in a credit agreement.

Operational Risk:Company

have make some failure in systems

and processes in the

operation4 Risk

1. Liquidity Risk

~Earlier warning that

involve counterparty

into the experience emergency demand for

fund that are too large to make when

the time out.

Minimise mismatch financial assets and liabilities.

~ company not faced risk by borrowing. But can be seen

through total capital(sum of total equity and total

debt)

~Maintaining good level of cash and

cash equivalents appropriate to expected

cash flow and

operating environmen

t.

Using prudent liquidity risk

management

Cont’d

Financial asset 2010 2011 2012 2013 2014

Total equity 659,445 927,094 764,572 647,722 709,386

Total debt 13,838 16,013 22,137 21,131 19,444

Total capital 673,283 943,107 786,709 668,853 728,830

(To know value of financial health)~ Total equity higher than total debt.

~ Financial in good condition : enough cash to cover debt.

~ Company used equity (long term) : raise capital from shareholder.

Higher total capital compare than others year.

If deficit:1. Borrow capital

from creditors.2. Issues shares

2. Credit Risk

• Genting faced the higher probability for credit risk is from amounts due to– subsidiaries – income fund – cash & cash equivalents– deposit with banks and other financial institution.

• Does not hold any colleteral from creditors

External risk (exposed to the weather and climate conditions)malaysia face heavy flooding espicially at Coast East

region at the end of 2014 (November – December)

Month Palm Oil Production (Million

Tonnes)

Changes in production

November 2014 1.75 -

December 2014 1.4 -20%

3. Operational Risk

News paper cutting..

Legal Risk ( 2 collective agreement)Collaboration with Dupon

Joint venture in Indonesia

1. Commodity Price ExposureTable : Palm Oil Prices in Malaysian Ringgit

(Sources : World Bank)

Month Price Change

Oct 2010 2,899.61 -

Feb 2011 3,801.50 0.27%

Jun 2011 3,259.74 -5.37%

Oct 2011 2,871.57 -6.66%

Feb 2012 3,169.18 -0.20%

Jun 2012 2,948.91 -7.62%

Oct 2012 2,348.56 -13.32%

Feb 2013 2,454.82 3.99%

Jun 2013 2,402.72 4.33%

Oct 2013 2,424.16 2.83%

Feb 2014 2,685.65 5.68%

Jun 2014 2,441.38 -5.54%

Oct 2014 2,200.55 4.08%

Feb-15 2,280.18 -0.96%

Jun-15 2,267.38 4.63%

oct-15 2,268.64 8.92%

Oct-10

Feb-11

Jun-11

Oct-11

Feb-12

Jun-12

Oct-12

Feb-13

Jun-13

Oct-13

Feb-14

Jun-14

Oct-14

Feb-15

Jun-15

Oct-15

0.00

500.00

1,000.00

1,500.00

2,000.00

2,500.00

3,000.00

3,500.00

4,000.00

Palm Oil Prices

Price (RM)M

alay

sian

Ring

git p

er M

etric

Ton

4. Market Risk

2. Market Volatility

graph: Levered and Unlvered Beta of Genting Plantations Berhad (Source from Infinancial 2015)

1-Year 2-Year 3-Year 5-Year

Levered beta 0.91 0.91 0.99 0.820000000000001

Unlevered beta 0.93 0.92 1 0.830000000000001

0.10.30.50.70.91.1

Levered and Unlevered

Beta

Levered : refer to as equity beta (with financial leverage)

Unlevered : beta of a company without any debt

Levered beta = 0.91 + 0.91 + 0.99 + 0.82 / 4= 0.91

Unlevered beta = 0.93 + 0.92 + 1.00 + 0.83 / 4 = 0.92

The beta is very close to 1

3. Global crisis– market risk are exposed to the global crisis (sub-

prime asset) (begining at mid 2007)– the global crisis impact the Malaysia through the

rapid decrease in global demand on trade, production and investment activities in the domestic economy.

The Effect financial risk management based on financial performance

2010 2011 2012 2013 20140

10

20

30

40

50

60

7.22

10.3614.58

12.8

48.87

7.2

10.3414.53

12.78

48.84

6.498.61 8.35000000000001

7.86

12.03

Comparison Liquidity ratio and Financial performance

Current ratio(times)Quick ratio (times)ROA( %)

1. Liquidity Risk

2010 2011 2012 2013 20140

100,000

200,000

300,000

400,000

500,000

600,000

700,000

800,000

900,000

1,000,000

112,989 93,495 78,665 88,94128,468

654,151

923,453

757,550

642,480 670,554

Comparison Financial Liabilities (< 1 year) with cash and cash equivalents

Financial liabilities (RM '000)Cash and cash equivalents (RM '000)

2. Credit risk

2010 2011 2012 2013 20140

2

4

6

8

10

12

14

3.78 3.172.29 2.47 0.88

3.93 3.28 2.35 2.53

0.89

6.49

8.61 8.35000000000001 7.86

12.03

Comparison leverage ratio and financial performance

Debt ratio(%)Debt to equity (%)ROA(%)

3. 0perational Risk

Year Operating Income (Rm Billion)Spread Between Operating Income

And Mean2010 0.23 (0.11)2011 0.33 (0.01)2012 0.30 (0.04)2013 0.31 (0.03)2014 0.53 0.19

total operating income 1.70mean (X) 0.34

Variance = 0.0102Standard deviation =0.101Business risk =0.3 (lower risk )

2010 2011 2012 2013 2014

-0.2

-0.1

0

0.1

0.2

0.3

0.4

0.5

0.6

Business risk

operating income (RM billion)spread between operating income and meanmean(0.34)

4. Market RiskYear Consumer Price

Index (2010=100)

Jan-10 99.4Jul-10 100.0Jan-11 101.8Jul-11 103.4Jan-12 104.5Jul-12 104.8Jan-13 105.5Jul-13 106.9Jan-14 109.5Jul-14 110.3Jan-15 110.6Jul-15 11.3

(Source: Bank Negara Malaysia)

CPI

Jan-10

Jul-1

0Jan

-11Ju

l-11Jan

-12Ju

l-12Jan

-13Ju

l-13Jan

-14Ju

l-14Jan

-15Ju

l-15

90.0

95.0

100.0

105.0

110.0

115.0

120.0

Consumer Price Index 2010=100

Consumer Price Index 2010=100

• In other to manage their risk. Genting Plantation berhad has taken this three derivatives instrument which is:

– interest rate swaps, – interest rate capped libor-in-arrears swap – Forward Foreign Currency Exchange.

Genting Plantation Risk Management

• they should balance their integration of external control which is social, ethical economic and environment to make their risk or unexpected situation can be manage well .

• the cost of the risk can be occur if they do not take it seriously.• they have the sustainable palm oil certification. Like Carbon Certification

System and International Sustainability, encompassing ISCC EU.• Two of their Group`s oil palm estates in Malaysia already certified to Code

of Good Agriculture Practice which is Malaysian Palm Oil Board`s (MPOB).

• They also had been certified with the global standards for their environmental, safety, healthy and quality management systems. OHSAS18001:2007 Occupational Health and Safety management

System. ISO14001:2004 Environmental Management System ISO9001:2008 Quality Management Systems.

The Company Regulatory Standard

• they make their internal control and risk management with following the requirement under the Malaysia Code on Cooperate Governance (March 2012) for companies listed.

• They established a Risk and Business Continuity Management Committee (RBCMC).

• They adopt (CSA) Control Self-Assessment to formalize the risk management process.

• Genting Plantations BHD reporting their financial report with compliance to Financial Reporting Standard (FRS) 134: Interim Financial Reporting.

• 1 January 2014 they except for the adoption of new FRSs, amendments and IC Interpretations which is Amendments to FRS10, FRS12 and FRS127 is using for Investment entities, Amendments FRS 132 is for Offsetting Financial Disclosures for Non-Financial Assets, Amendments to FRS136 is for Novation of Derivatives and Continuation of Hedged Accounting. And last is IC interpretation 21, it is for Levies.

Cont..

Conclusion• recommendation and suggestion like, they should do the

cash flow forecasting that can help the company managing their future project well and can low the cost of the risk that can be occur.

• We also suggest them for investing in currency like doing hedged fund. This can helps them to reduce the losses while doing transaction internationally.

• Moreover, we also suggest them to invest in regions where the currency is pegged to the dollar. It is because they have lots of investments in foreign securities, to ensure they have investments in a basket of regions, rather than in just one region.