Risk and Crisis Management
Risk and crisis management are paramount for Central Retail, given its diversified business segments and global presence. In response to dynamic global trends,Central Retail prioritizes comprehensive risk management, including monitoring, mitigating, and responding to risks. Central Retail is committed to enhancing the level of knowledge and understanding of the risk management process for all business units, and creating a robust and proactive risk culture for employees at all levels, aiming to increase resilience and explore new opportunities for expansion.
Target
Impact to Business, Stakeholders, and Human Rights
With an efficient risk management process, preventative measures, and a culture of resilience, Central Retail can minimize the impact from operational disruptions, legal issues or reputational damage. This translates to a more effective work environment and process, higher profitability, and lower operational costs. Sustainable growth of Central Retail can help employees to feel more secure and less stressed. Suppliers get a reliable payment and a dependable partnership, which increases the suppliers’ confidence in Central Retail. Customers experience consistent service and product availability that enhance their satisfaction and loyalty in Central Retail. Local communities that work with Central Retail benefit from having a reliable source of income and long-term financial stability. Government gains stable tax revenue, while investors benefit from increased returns from Central Retail. On the other hand, the effects from ineffective risk and crisis management can disrupt Central Retail’s business operation that led to lower revenue, damaged inventory, and higher operational costs.
Management Approach
Risk Governance
Central Retail emphasizes a comprehensive risk management system throughout the organization. At the board level, the Risk Policy Committee (RPC), comprising directors and executives, oversees enterprise risk management. The Risk Policy Committee reports outcomes to the Board of Directors post-risk policy meetings. Further down, the Risk Management Committee (RMC) conducts biannual monitoring, review and reporting of risk exposures to the Risk Policy Committee. Driving risk management across business segments, the Risk Management Working team, supervised by the CRO and Head of Risk Management, reports issues to the Risk Management Committee and Risk Policy Committee regularly. With 13 directors experienced in risk and business continuity management, Central Retail ensures robust specific training to be updated on the latest practices and global trends, fostering continuous improvement in risk management practices.
87% (13 out of 15) of Board of Directors have experience in risk and business continuity management
Risk Management Policy
Central Retail has implemented a robust Risk Management Policy to ensure an effective risk management system that aligns with applicable laws and international standards. This policy is designed to achieve corporate objectives and mitigate enterprise risks within acceptable levels. The Risk Management Policy covers the following topics:
- Employees at all levels must be aware of risks in their functions and those inherent to Central Retail, manage risks under systematic internal controls, and limit risks to an adequate level
- Establish an enterprise risk management process that is in line with international practices and standards, as well as incorporating risk management into the strategic decision makings
- Set up prevention and mitigation measures to avoid potential damage or loss, and regularly monitor and assess the risk management results
- Apply modern information technology systems to facilitate the enterprise risk management process while also providing access to risk management resources for all employees and establishing an efficient reporting system
For more details on the Risk Management Policy, please see:
Risk Management Policy
Aligning with strategic directions and targets, Central Retail establishes its risk appetite, taking into risk return trade-offs. This risk appetite is reviewed annually to maintain accuracy and relevance. It is communicated to all employees to enhance awareness and vigilance in managing risks within tolerance level. Examples of risk appetite include:
- Compliance Risk: Central Retail maintains a zero-tolerance risk appetite regarding compliance issues, particularly corruption, fraud, and regulatory non-compliance. This commitment reflects the principles of good corporate governance.
- Safety Risk: Central Retail maintains a zero-tolerance risk appetite concerning safety risks. This extends to ensuring there are no work related fatalities among employees, contractors, or relevant workers supervised by Central Retail within the workplace.
Enterprise Risk Management (ERM) Process
Central Retail manages risks according to COSO ERM 2017 standards that adopts an integrated approach to enterprise risk management process, encompassing the concepts as follow:
Governance & Culture
- Establish a structure and assign responsibilities for risk management.
- Fostering an organizational culture of risk awareness
Strategy & Objective-Setting
- Formulating an integrated strategy on risk management
- Develop strategies in accordance with an acceptable risk level and risk appetite
Performance
- Setting and assessing risk level, risk appetite, and sensitivity analysis
- Prioritization of risks based on magnitude and likelihood of potential risks
Review & Revision
- Regularly monitoring of operating results and review of risk exposure
- Review risk mitigation measures for continuous improvement
Information, Communication, and Reporting
- Promoting use of information technology system in risk management
- Raising awareness through proper communication and reporting
Central Retail identifies and assesses risks, including ESG risks, that are deemed as detrimental to the achievement of corporate strategies and business objectives. The risks are then prioritized into low, medium and high based on impact criteria and likelihood criteria. Central Retail’s risk matrix for 2023 is shown below.
Risk Assessment Criteria and Matrix
| Risk Level | Impact Criteria | Likelihood Criteria |
|---|---|---|
|
High Risk (Unacceptable) Need to manage immediately and report the result to Top Managements |
High impact on the business operation |
High chance of occurrence |
|
Medium Risk (Acceptable) But need to be controlled and monitored regularly by Risk Owners or set additional mitigating actions |
Moderate impact on the business operation |
Moderate chance of occurrence |
|
Low Risk (Acceptable) The risk is controlled by the existing processes as usual |
Low impact on the business operation |
Low chance of occurrence |
| Risk Category | No. | Risk Item | Risk Level 2023 |
|---|---|---|---|
| Strategy risk | S1 | Macroeconomic risks |  |
| S2 | Competitive risks |  |
|
| S3 | New store formats / concept expansion | |
|
| S4 | Shortage of talented staff | |
|
| S5 | Lack of reskills and upskills for new business | |
|
| Operational risk | O1 | Inventory and obsolescence risk |  |
| O2 | Product quality and service standard failure | |
|
| O3 | Business continuity, crisis management and disasters response failure | |
|
| IT risk | IT1 | Data leakage and information security risk | |
| IT2 | Cyber threats | |
|
| IT3 | Critical change and environmental sustainability | |
|
| Environmental risk | E1 | Natural Disaster | |
| E2 | Emerging Infectious Diseases | |
|
| E3 | Climate change and environmental sustainability | |
|
| Financial risk | F1 | Interest rate risk | |
| F2 | Lack of liquidity | |
|
| F3 | FX risk | |
|
| Compliance risk | C1 | Risk of non-compliance or Breach the law e.g. PDPA | |
| C2 | Fraud risk | |
Risk Culture
Central Retail strives to foster a culture of risk awareness throughout the organization. This begins with comprehensive risk management training sessions for employees at all levels, covering essential principles and hands-on workshops addressing various topics, including workplace safety and personal data protection. To ensure accountability, Central Retail established targets and performance indicators for risk management across relevant employee tiers, with monthly progress reviews and annual evaluations. Outstanding performers receive special incentives as recognition for meeting these targets. Moreover, Central Retail encourages proactive risk identification through a dedicated communication channel, providing continuous feedback for enhancement. Furthermore, Central Retail integrates risk assessment into innovation, new business formats, and product design processes to mitigate potential negative impacts of technological advancements.
Emerging Risks
Central Retail is consistently identifying and assessing emerging risks, or those that may have a low level of impact in the short term but may evolve to become significant risks in the long term. Central Retail has identified the cost of living crisis and terrorism as significant emerging risks specific to Central Retail’s context, which are also included in the World Economic Forum Global Risks Report 2023. To mitigate the impact of these emerging risks, Central Retail places importance in strengthening its resilience.
Consumer Behaviour Change from Emerging Cost of Living Crisis
| Category | Societal |
|---|---|
| Description |
The cost of living crisis is a social risk that ranks among the top 10 in global risk rankings. It is likely to occur during the next 2-3 years, which directly causes people to become more careful and conservative in their consumption behavior by focusing only on products that are daily necessities. In addition, fluctuations in inflation rate and prices, especially in the prices of energy, goods and services, lead to varying interest rate adjustments that can affects debt problems and the government’s fiscal planning. Reference: https://www3.weforum.org/docs/WEF_Global_Risks_Report_2023.pdf |
| Impact |
The increase in the cost of goods and services not only increases Central Retail's operating costs but also increases the cost of living, which is inconsistent to the stagnating household income and economic growth. This may result in reduction in the purchasing power of consumers. Meanwhile, retail business becomes more competitive due to increased competition from online-commerce and mass-market retailers. These factors can have negative effects on Central Retail’s sales and revenue. In the short-term, positive effects from the government’s economic stimulus policies may help retail, but specific details on eligibility may hinders benefits for Central Retail. |
| Timeframe | 2024 - 2026 |
| Mitigating Actions |
|
Increasing Risks of Terrorism
| Category | Geopolitical |
|---|---|
| Description |
According to the 2022 Global Terrorism Index (GTI), a survey of 163 countries on terrorism conducted by the Institute for Economic & Peace (IEP), it was found that Thailand's GTI is ranked 26th globally. This shows an increase of 4 ranks higher than previously in 2021, indicating that Thailand has higher risks of terrorism. Reference: https://www.visionofhumanity.org/maps/global-terrorism-index/#/ |
| Impact |
GTI shows that Thailand is likely to be at a higher risk of terrorism, which can take many forms including people exhibiting increased stress and violent behaviour in public. For example, a shocking terrorist incident involving mass-shooting occurred at a department store located in downtown Bangkok in October 2023. Such terrorism incidents cause loss of life to people, and can negatively affect the department store and Central Retail’s reputation if appropriate response measures are not readily and quickly in effect. It also cause customers’ confidence and shopping experience to become damaged as they can feel fear and insecurity. Additionally, Central Retail operates many department stores in prime downtown locations that serve as popular destinations among international tourists. Terrorism incidents turn away potential tourists and can significantly decrease Central Retail’s sales and revenue. |
| Timeframe | 2024 - 2026 |
| Mitigating Actions |
|
Project Highlights
Governance, Risk, and Compliance Training for the Board of Directors
In 2023, Central Retail organized a training session for the Board of Directors and executive management to better understand the Governance, Risk, and Compliance (GRC) principles and implementation. An external expert facilitated the training, sharing expertise about GRC to guarantee that participants could effectively oversee GRC in business operations.
Risk Management Training
Central Retail has initiated a Risk Management Training program to equip employees at different levels with the knowledge and skills required to identify, assess, and mitigate potential risks effectively. Workshops facilitated by experts in enterprise risk management and GRC have been conducted for Risk Champions, providing them with practical tools and strategies. Manager-level employees receive training focused on the technical aspects of the GRC framework and available tools, empowering them to make informed decisions. Additionally, Central Retail has introduced an internal GRC E-Rulebook accessible to all employees, aimed at promoting company-wide understanding of the GRC framework, best practices, and proactive risk culture.
Risk Management Manual
Central Retail launched a Risk Management Manual to provide employees with the knowledge and skills to identify, assess, and mitigate potential risks within their roles. The Risk Management Manual can be conveniently accessed via Central Retail’s intranet system and has been communicated to key risk management functions including the Risk Policy Committee, Risk Management Committee, Risk Champions, and Risk Owners.
