Risk Factors

As The Great Hor Kham has a vision of becoming a prominent leader in construction and infrastructure business operator in ASEAN region by providing international standard quality services, it is considered necessary to identify, manage and terminate both internal and external risks beforehand which might hinder or affect its business operations. We believe that efficiency in risks management is a key factor in achieving our planned targets. It is also a form of good corporate governance.

It can be seen that the way we approach risk management has been developed over time. To maximize its ability in risks management, the Company has to make sure it always complies with and make the best of latest risks management system. By looking at the comparison of the concept of traditional risk management model and new risk management model below, one can easily tell how effective and beneficial the new management model can bring about.

The Company, following the new model of risks management system, identifies risks in advance and takes control of it with suitable manner. As a preventive manner, the risk management handbook and employee handbook are under preparation for the Company’s employees to use as work operation guidelines on their daily basis. The Company also performs risks monitoring and risks assessment on both internal and external in various circumstances. The risks factors which might give rise to business operator and investor are as follows:

Traditional ModelNew Model
Accident
Risk Identification
Examining
Risk Analysis
Specifying Cause
Risk Evaluation
Take ControlRisk Treatment

 

Risk from Management

he Company, while fully understand risk from its management, tries making every effort to prevent any flaw which might happen. Risk factors which generally occurs from management are 1. Unqualified or insufficient management system 2. Operational delay and 3. Unqualified products.

For the Company to operate flawlessly and manage risks effectively either in its head office or in project area, good operational standard is necessary. For good operational standard, it needs competent workforce and good management model. To obtain competency in its human resource, the Company not only recruits skilled employees, but also promotes skills, ethics and accountability of its current workforce by supporting them to attend workshops, public lectures, and other relevant events. The Company also, from time to time, invites the professionals to come and give lectures and share their knowledge. In 2015-2016, the Company has supported its relevant employees to attend Safety Supervisor Course, ISO 9001:2015 Quality Management Course, and other engineering courses given in Yangon, Mandalay and Taung Gyi. Moreover, with the guideline and support of Myanmar Engineering Society (MES), the Company managed to invite the professionals from Myanmar Thames International (United Engineering Group of Companies) to conduct a work safety lecture in its head office.

For quality management, for the time being, the Company is still trying to obtain ISO 9001: 2015, the international quality system standard accreditation.

Risks from delays in various project operations are generally due to either employer’s part, or contractor or by unfortunate events without any liable party.

Delays due to employer’s part could be design review and approval, changing designs, unable to clear the payment in due time. The delays could affect the project period and cost. The Company finds mitigation and resolution to the risks from such delays by cooperating and coordinating with employers. While regarding employer’s problem as our own problem, therefore, the Company tries to find the best solution that suits both sides to ensure the successful completion of the task on it is carrying.

Delays due to contractor’s part could be shortage of construction materials, malfunctions of machinery, etc. To proactively prevent such kinds of undesirable situation, the Company usually purchases construction material such as cement, aggregate, metal, oil etc., by making monthly, annually or project-periodically fixed-price material purchasing agreement with its suppliers. To prevent malfunctions of the machinery, the Company usually check the function of its machinery with the category of daily, weekly and monthly.

Delays due to events without any liable party could be, for example, natural disasters such as flood, natural fire, earthquake, political disorder, war etc. The Company usually take insurance to cover such kinds of loss.

The Company, during its four of experience, has never incurred such risks of delays due to the Company or its subsidiaries’ part, but the Company does experience delays caused by its contractual parties. For example, difficulties in land compensation, in Muse Central Business District (MCBD) Project, and difficulties in using stone demolition explosives and also problems in land compensation in the 105-mile Fruit Wholesale Market Project, of which the Company is main contractor for infrastructure construction, considerably affected the projects’ construction periods and cost.

According to the Company’s nature of business operation, the product quality plays quite an important role. The Company firmly believes that unqualified products not only defame the Company, but also endanger its consumer. For example, in a road construction business, the project has been completed and delivered but with defect products which, let say in some parts, do not meet the design specification. This scenario could more or less create hazards and endanger road users. It is the construction company whose products are defect to bear liability. To prevent this kind of circumstance, the Company established its own lab to test the quality of its products. Only after the products yield successful result in the lab test, they are to be used in the construction. After the completion, the Company test the quality of the road again.

Risks from Exchange Rate

In the present time, although the Company has no any project that generates incomes in foreign currencies, some construction materials including oil, some foreign experts hiring fee, some service fee of foreign companies and local companies are to be paid in foreign currencies. Thus fluctuation of foreign currencies exchange rate may affect the Company’s operation. To prevent such risk, the Company deposits in foreign currencies in the Foreign Currency Deposit (FCD) account. Whenever the Company has to expense in foreign currencies, the FCD account fund shall be used.

Concerning a more sophisticated risk that could occur from foreign exchange rate, the Company shall carefully proceed by consulting its advisors and relevant experts.

Risk from construction material price and oil price.

Construction work, even it is a profitable project based on desk estimation, it is actually profitable only if the cost actually incurred within a specified project could be precisely controlled with efficient manner. In other words, if the expense during the construction period is poorly managed, it will not be profitable.

The cost of a project depends not only on construction material and labor cost, but also on oil price. Based on the Company’s experience as contractor, when a total operating cost of project is summed up, the amount spent on oil is among the highest. Fluctuation of oil price, therefore, could affect very much on operation cost of a project.

So that the fluctuation of construction material including oil price would not affect the original estimated cost of a project during the construction period, the Company, then, manage such risk by entering into purchasing contract with its suppliers, be it monthly, yearly or according to the project duration.

Moreover, the Company is also establishing a subsidiary in Mandalay for manufacturing necessary construction material. This will also be able to minimize risk from shortage of material and impractical price increase. While it could be able to give the Company bargaining power with major suppliers in today’s competitive market, it would hopefully be able to generate profit for all shareholders as well.

Risk from Changes of Government Policies

Changes of Government policies could sometimes be risks for business operation. For example, the Company had signed MOU with Shan State Government on October 7, 2014, for the 20 MW Nam Paw Hydro-power Project (NPHPP). However, after 20 days from MOU signing, on October 27, 2014, the Union Government issued Myanmar Electricity Law, under which Section 4, Article 9 (A) states that even though small-sized power plant (below 10 MV) and medium-sized power plant (above 10 MW and below 30 MV) could be managed by state level government, to join the National Grid, however, the investor has to sing MOA with the Union Government. The Company which just recently signed MOU with Shan State Government, therefore, has to rush into signing MOA with the Union Government again. This process has delayed the Company’s operation for NPHPP at least for nine months.

To prevent such kind of uneasy situation from happening again in the future, the Company had established the legal and business Advisory Committee to the BOD, and plans to employ either part-time or full time law experts.

Risks from design and estimations

To work out precise cost factors of a project, production capacity etc., first thing to do is to do is designing. To be able to carry out designing work, again, it needs survey data on geology, hydrology, topography and so on. If the survey data is not correct, the design will not be trustworthy, or dependable. Then there could be unnecessary cost and inaccurate product capacity estimation. Such mistake could be a big risk for the whole project. For example, based on design estimation, NPHPP’s annual energy output is 83.30 kW.h. With this output estimation, the Company will have to enter into Power Purchasing Agreement (PPA) with the Government. The important fact is that the Government has to pay for all the annual energy output as estimated and described in PPA. However, if the annual energy output does not reach the estimated figure, the Company has to pay or compensate for the depleted energy volume.

To prevent above-mentioned risk as well as getting rid of unnecessary cost, the Company, on May 13-14, 2016, had conducted design optimization with HHPDI in Hunan, China. This design optimization had reduced Nam Paw Hydro Power Project cost almost 7-billion MMK.

Risk from Dam Breaking

Dam breaking, although a rare incident, it is still counted as one of the risk factors. To ensure the dam safety, it has been technically designed to withstand one-thousand-year flood, and also to be compatible with its catchment area, local climate and precipitation. To prevent undesirable circumstance, the Company entrusted SYDRO Consult from Germany to conduct Dam Breaking Analysis for the NPHPP.

Although the dam to be built has been designed to withstand one-thousand-year flood, however, it has not been designed to fully control the flood. That means in continuous raining, there still could be flood at any time like before. The flood situation would, however, be less severe than before, for the dam could hold flood water up to a certain amount. In an emergency situation such as flood, if there is no preparedness plan, there could be a loss for the Company as well as for the downstream villages. In the purpose of preventing such risk, and as an emergency preparedness plan, the Company invited Dr. Hubert Lohr, dam expert from SYDRO Consult, Germany, to come and conduct stakeholders meeting on emergency preparedness plan on July 2-3, 2016.

ကုမ္ပဏီပိုင်ဆိုင်မှု၏ ငွေကြေးဖြစ်လွယ်မှုမှ စွန့်စားမှုများ

ဆောက်လုပ်ရေးကုမ္ပဏီတစ်ခုသည် စီမံကိန်းတစ်ခုခုအတွက် သက်ဆိုင်ရာကုန်ကြမ်းများဝယ်ယူခြင်း၊ လုပ်သား ငှားရမ်းခများပေးခြင်းစသည်ဖြင့် လုံလောက်သော အရင်းအနှီးရှိဖို့လိုအပ်ခြင်းကြောင့် ကုမ္ပဏီ၏ပိုင်ဆိုင်မှုများမှ ငွေကြေးဖြစ်လွယ်မှုသည် အဓိကအရေးပါသည့် အချက်တစ်ခုဖြစ်သည်။ ငွေကြေးဖြစ်လွယ်မှုအတွက် ထိရောက်သော စီမံခန့်ခွဲမှုမရှိလျှင် စီမံကိန်းအသစ်များကို ဖော်ဆောင်ရန်လည်းကောင်း၊ လက်ရှိစီမံကိန်းများကို ပြီးစီးစေရေးအတွက် ဆောင်ရွက်ရန်လည်းကောင်း အခက်အခဲများစွာ ကြုံတွေ့နိုင်သည်။

ကုမ္ပဏီ၏ အတွေ့အကြုံများအရ လွန်ခဲ့သော ၃ နှစ်ခန့်တွင် မူဆယ်မြို့ တော်ရွက်၊ စွမ်စော်နှင့် ဟိုမွန်ဧရိယာအတွင်းရှိ ဧကပေါင်း ၇၀၀ ကျော်သော မြေနေရာကို ဒေသခံ ကုမ္ပဏီ ၃ ခုခန့်က အိမ်ယာစီမံကိန်းအဖြစ် ဆောက်လုပ်ရန် အပြိုင်ကြိုးစားခဲ့ကြဖူးသည်။ သို့သော် ယင်းစီမံကိန်း၏ ငွေဖြစ်လွယ်မှု
နှင့် ချိန်ထိုးကြည့်သောအခါ ခေတ်အခြေအနေအရဖြစ်စေ နေရာဒေသအရဖြစ်စေ ငွေဖြစ်လွယ်မှု စွန့်စားချက် ကြီးမားနေသည်ကို တွေ့ရသောအခါ ယင်းစီမံကိန်းမျိုးကို ဂရိတ်ဟော်ခမ်းက စိတ်ဝင်စားမှု မဖြစ်ခဲ့ပါ။

လက်ရှိအချိန်တွင် ကုမ္ပဏီပိုင်ဆိုင်သည့် MCBD အတွင်းရှိ Shop House ဆိုင်ခန်းများသည်လည်း ငွေဖြစ်လွယ်မှုတွင် စွန့်စားချက်ရှိနေသည်။ ယင်းစွန့်စားမှုအတွက် ဆိုင်ခန်းများအချို့ကို ကာလပေါက်စျေးအရ ရောင်းချ၍သော်လည်းကောင်း၊ ဘဏ်ချေးငွေယူခြင်းဖြင့်သော်လည်းကောင်း ကုမ္ပဏီ၏ ငွေကြေးလည်ပတ်မှုအပေါ် ထိခိုက်ခြင်းမရှိရလေအောင် ပညာရှင်များနှင့် တိုင်ပင်ပြီး သင့်လျော်သည့်နည်းလမ်းဖြင့် ဖြေရှင်းမည်ဖြစ်သည်။

To generate more job opportunities for locals, to support local development as well as to contribute electricity
As The Great Hor Kham has a vision of becoming a prominent leader in construction and infrastructure business operator
Introduction Nam Paw Hydro Power Project is a major project in the Company’s current investments. The main reasons