65
Annual Report 2014
Corporate Governance and Transparency
In recent years, the dry bulk shipping index has recorded
historical lows as the shipping industry is experiencing
excess capacity thereby leading to lower charter rates.
The fluctuations in the BDI result in an uncertain outlook
for the dry bulk shipping industry, which typically has
an impact on vessel owners’ willingness to place new
orders for bulk carrier vessels, which in turn affects
demand for the Group’s services and products.
2. INTERNAL RISKS
Internal risks are those arising from factors primarily
within the Group’s control, including from the Group
structure and processes.
INFORMATION TECHNOLOGY INFRASTRUCTURE
The Group depends on accurate, timely information and
numerical data from key software application to aid day-
to-day business and decision making. Any disruption
caused by failings in these systems, of underlying
equipment or of communication networks could delay
or otherwise impact the Group’s day- to-day business
and decision making and have materially adverse effects
on the Group’s performance.
OPERATIONAL PERFORMANCE AND PROJECT
DELIVERY
Failure to meet production targets can result in increased
unit costs, which are pronounced at operations with
higher levels of fixed costs. Unit costs may exceed
forecasts, adversely affecting performance and the
results of operations.
Failure to meet project delivery times and production
budgets could have a negative effect on operational
performance and lead to increased costs or reductions
in revenue and profitability.
In addition, the Group faces third party risks of
underperforming and non-performing contractors,
suppliers or vendors affecting the Group’s ability to
execute its projects as planned, resulting in delays and
cost overruns. These effects are compounded when
substitute suppliers or vendors are not easily available,
particularly for specialised or customised equipment.
A number of strategies have been implemented to
mitigate these risks including management oversight
of operating performance and project delivery through
regular executive management briefings, increased
effectiveness of procurement initiatives to reduce unit
costs and improvements in delivery times of projects.
The Group also has in place a selection process for
contractors, suppliers and vendors and also regularly
monitors those who have been selected.
The Group has also established an enterprise technology
standards system under the guidance of Singaporean
and South Korean experts to enhance the basic design
and detailed design of ships and marine engineering
products.
EMPLOYEES
The Group depends on the continued contributions of its
executive officers and employees, both individually and
as a group. While the Group reviews its people policies
on a regular basis and invests significant resources in
training and development and recognising individuals
with high potential, there can be no guarantee that it will
be able to attract, develop and retain these individuals
at an appropriate cost and ensure that the capabilities
of the Group’s employees meet its business needs. Any
failure to do so may affect the Group’s performance.
The ability to recruit, develop and retain appropriate
skills for the Group is made difficult by competition for
skilled labour. The failure to retain skilled employees
or to recruit new staff may lead to increased costs,
interruptions to existing operations and delays in existing
and new projects.
A number of strategies are implemented to mitigate this
risk including attention to an appropriate suite of reward
and benefit structures and ongoing refinement of the
Group as an attractive employee proposition.
