MS AR 2018 (1)
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Plans And Strategies For Mitigating Principle Risks<br />
Principle Risks<br />
Strategic Risk<br />
The technology employed is or may<br />
become obsolete in the near future<br />
leaving the Company unable to deliver the<br />
required level of expertise and support for<br />
consistent growth.<br />
Commercial Risk<br />
Decrease in the demand for Company’s<br />
products may have an adverse impact on<br />
its profitability.<br />
Competition from business competitors<br />
may create a hostile environment for the<br />
Company and result in business loss.<br />
Operational Risk<br />
Increase in employee turnover at critical<br />
positions.<br />
The Company may not be able to<br />
operate at an optimal capacity due to the<br />
unavailability of electricity.<br />
Adverse price movement or no availability<br />
of raw materials may deter smooth<br />
production.<br />
IT security risk<br />
Risk of major accidents impacting<br />
employees, records and property<br />
Financial Risk<br />
Customers and banks will default in<br />
payments to the Company.<br />
Insufficient cash available to pay liabilities<br />
resulting in a liquidity problem.<br />
Fluctuations in foreign currency rates.<br />
Mitigating Strategies<br />
At Mughal steel we believe in regular balancing, modernization and<br />
replacements of all our production facilities, ensuring our production facilities<br />
are state of the art while utilizing latest technological developments for cost<br />
minimization, energy efficiency and output optimization.<br />
At present there is significant demand in Pakistan for steel products. A further<br />
increase in demand is expected due to increase in activity in the housing<br />
sector on back of growing population leading to increased consumption of<br />
finished steel goods and initiation of mega projects.<br />
Projects of such nature are capital intensive and require specialized technical<br />
knowledge to operate. Similarly, procurement of raw material requires<br />
considerable experience. These factors act as barriers to entry for new<br />
investors. Being in the industry for over 5 decades has enabled Mughal Steel<br />
to effectively compete with existing companies in the industry. Moreover,<br />
the recent CAPEX to achieve cost efficiency, helped the Company to attain<br />
unmatched competitive advantage.<br />
The Company has a detailed succession plan and a culture of employee<br />
training and development, continuously promoting and rotating employees<br />
within the departments.<br />
The Company has installed a gas-fired captive power plant. The Company has a<br />
dedicated 132 KVA grid station, whose load capacity has been enhanced from 19.99<br />
MW to 79.99 MW.<br />
With an experience of over 5 decades, the Company has developed a<br />
procurement team who is well versed in acquiring the necessary raw material<br />
for production. Further, the Company has built strong relationship with its<br />
suppliers.<br />
IT controls are in place to prevent unauthorized access to confidential<br />
information.<br />
Implementation of strict and standardized operating procedures, employee<br />
trainings and operational discipline.<br />
Most of our sales are either against cash or advance. For credit sales, credit<br />
limits have been assigned to customers. Risk of default by banks has been<br />
mitigated by placements funds with banks having satisfactory credit ratings.<br />
The Company has a proactive cash management system. Committed credit<br />
lines from banks are also available to bridge a liquidity gap, if any.<br />
Majority of adverse impacts are passed on by increasing sale rates.<br />
Annual Report <strong>2018</strong><br />
35
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