Risk Management
In 2023, the residential market has still been highly competitive, particularly in horizontal projects that the real estate developer companies in the market have mostly turned to emphasize more. Therefore, the Company must adjust its marketing procedures for more efficiency to ensure the attraction of the remaining supply in the market.
The Thai economy in 2023 has still been affected by the COVID-19 pandemic situation. In previous years, even though the situations have been alleviated, and tended to be improved, the state of the economy which has still been in recovering condition, has had a direct impact on the consumers’ purchasing power and confidence in making decisions on the purchase of residence a lot. A decrease in the purchasing capability of the consumers may cause the expansion of the residential trading market at a declining rate, resulting in an increase in intensified business competition as risks which the Company must specially monitor, and adjust the appropriate strategies to mitigate impacts to avoid serious damage to the Company.
1 Risk Management Policy and Plan
The Board of Directors has emphasized the risk management assessment by determining the international standard risk management system and procedures. The Risk Management Committee is assigned to assess the management efficiency, verify the assessment result for risks and work processes to control risks of work units, report to the Board of Directors for acknowledgement, review and propose the risk management-related policies at least once a year, as well as emphasizes early warning signs or abnormal transactions, and disclose in Annual Report.
2 Risk Factors for the Company’s Business Operation
The factors of risk likelihood and impacts on the Company’s business operation in 2023 are as follows :
2.1 Competition Risk
The house and land development business has always been a highly competitive business due to the availability of many entrepreneurs in the market. Each entrepreneur focuses on an increase in sales volume and profit. Particularly at present, every company has turned to more and more emphasize horizontal projects which are the core products of Sammakorn, resulting in higher competition in the market of horizontal projects. The corrective guidelines are to require close monitoring of the residential market situation, particularly in developed houses and economic condition direction, appropriately make advance planning of construction, and build quality houses based on market needs. The importance is the need for cost control, focus on customer confidence and satisfaction, use of efficient marketing methods and media, target customer accessibility under the set budget, and differentiation. In addition, the Company shall adapt itself to keep abreast of the events if there are signs of economic deflation or occurrence of oversupply of developed houses and focus on strong Sammakorn branding, particularly with the new generation target group which is the group of people who are looking for purchasing houses or will purchase houses shortly. One of the most important has been making the Sammakorn brand to be more recognized in the target group, and also more understanding of the brand business.
2.2 Purchasing Power Decrease Risk
The risk related to the consumer purchasing power due to the existing regression of the state of the economy as the result of the pandemic in previous years has affected the country’s economic growth rate accompanied by uncertainty about the Thai economy's recovery. Therefore, even though the consumers have had purchasing power, but they may lack confidence and be more careful of spending.
The corrective guidelines are that the Company shall increasingly emphasize building quality houses at competitive prices using innovation as an aid in both material designs and the construction process. The Company shall use more diversified marketing and increasingly direct to the point in each target group to stimulate sales volume. Moreover, the creation of brand value has also been the main goal of the Company, contributing to an increase in easier purchase decisions of customers on our brand without the need to excessively decrease prices since from survey results, most customers often agreed to purchase the product with a strong and well-known brand at higher price than weak brand even though it is the same kind of product.
2.3 Liquidity Risk
The said risk is a very important risk for real estate development companies. The illiquidity problem will be caused by the revenues of the entity being much lower than the target while total expenditure is high or in the case of low liquidity but an increase in a large amount of investment or incurrence of a large amount of short-term obligation that must be paid on schedule.
The corrective guidelines are that the Company shall closely monitor the liquidity problem, particularly cash flows, revenue, and expenditure account, and not incur a large amount of debts over solvency capacity, and may postpone the investment that incurs a large amount of debts. If the investment is required, the risk must be assessed as prudently and concisely as possible. In addition, the Company shall negotiate and make an agreement with the bank for relief as much as possible and shall reserve cash to be adequate, as well as apply for a loan limit with the bank as a reserve. In addition, it is important to have an early warning signal to timely foresee before a problem occurs.