RISK MANAGEMENT POLICIES AND PROCESSES
Pursuant to the requirements as stipulated under Rule 1207(4)(d) of Chapter 12 of the SGX-ST ListingManual as issued by the Singapore
Exchange Securities Trading Limited, the operating and financial risk management policies and processes of the Group are set out in
the following.
OPERATING RISK
Management of growth
The Group has experienced rapid growth in the past few financial years in terms of the number of employees, scope of activities,
geographical markets and level of technical expertise. This growth has resulted in added responsibilities for the Group's management
who are responsible for overseeing the expansion of the Group's operations into new products and geographical markets. Further, in
order to meet the demand of its current and future projects, the Group will need to attract, motivate and retain a significant number of
highly qualified professionals who have significant relevant industry experiences. As a systems integrator providing highly sophisticated
information technology and industrial automation solutions and services locally andoverseas, theGroup requires qualifiedprofessionals
who are experienced and possess the relevant skill sets. Given the exacting job specification, the pool of qualified professionals is
relatively small. As such, the Group faces keen competition for such pool of qualified professionals. Moreover, due to rapid growth in
the global information technology and industrial automation markets, increasing competition for such professionals may also increase
the Group's labour costs. To manage and sustain its growth effectively, the Directors must continue to expand its management team
by attracting more talent into the Group and to motivate and retain such professionals at a competitive cost, as well as improve its
operational efficiency and financial management.
Risks associated with future acquisitions
The Group intends to continue to pursue strategic acquisitions that will provide it with complementary products/services, customer
bases, technologies and qualified professionals. Such acquisitions present risks that could potentially have an adverse effect on the
Group's operations and earnings, such as diversion of management's attention, failure to retain key acquired personnel, assumption
of liabilities, and amortisation of goodwill and intangible assets. Moreover, customer dissatisfaction with, or problems caused by, the
performanceof any acquired technologies couldhaveanadverse impact on theGroup's reputation. Inaddition, theacquiredbusinesses
may not achieve the anticipated returns. The Group will continue to adopt a cautious approach and to exercise due diligence when
considering all acquisitions. For example, the Groupmay impose performance guarantees and other warranties on vendors in all major
acquisitions. Key acquired personnel are also expected to enter into service agreements with the Group to retain their expertise for
the Group's benefit.
Competition
The Group competes internationally with many firms that are substantially larger and have substantially greater financial, professional
and other resources than the Group. The Group's continued success depends on its ability to compete effectively with its competitors
as well as to persuade customers to use the Group's products and services instead of those developed in-house by the customers. The
Group intends to further develop its niche markets in the energy and petrochemical / chemical, oil and gas and power and process
utility industries, as well as the water, drainage, sewerage and environmental (pollution and hydrology) industries, and the public sector.
The Group intends to achieve this by offering customers industry specific knowledge and cost-effective solutions. Such a strategy has
enabled the Group to enjoy significant growth in recent years as reflected in its turnover and profits.
FINANCIAL RISK
The internal auditor will review a monthly confirmation of the outstanding position with all banks that the Group transacts with. The
bank is required to confirm any resolution relating to banking facilities and/or the way the Group operates its banking transactions with
the company secretary or an independent director.
The financial risk management objectives and policies of the Group are set out in the Notes to the Financial Statements in Note 30
under risk management.
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ANNUAL REPORT 2014
