RCBM Enterprise Risk Management
Cement manufacture is a highly energy intensive process and requires the continuous stable supply of power and fuel at cost-effective prices. Power curtailment, poor power quality, and increasing power and fuel prices therefore negatively impact the Republic Cement Group’s performance. The Republic Cement Group’s direct power supply agreements for its plants in Bulacan, Batangas, Iligan, and Teresa, supported by its back-up electricity generating assets and various energy savings measures such as the use of a Waste Heat Recovery system in its Teresa plant, mitigate the risks. The Republic Cement Group also works on reducing its dependence on fossil fuel through its growing use of alternative fuels such as rice husks and other biomass, and other efficiency projects.
On the revenue side, cement and aggregates sales of the Republic Cement Group are dependent on the general economic condition of the country, particularly in the construction sector which is fueled by both private and government spending. The Republic Cement Group addresses market risk by working on consistent product quality, production efficiencies, good and timely customer service, and effective sales and marketing to respond to the needs of the market.
The Republic Cement Group’s activities also expose it to various financial risks – foreign exchange risk, interest rate risk, credit risk, liquidity risk and capital risk – and adequate measures are in place to minimize their potential adverse effects on its financial performance.
The Republic Cement Group’s quarrying and manufacturing operations require governmental permits and compliance with environmental standards. The Republic Cement Group manages its environmental risks by committing to programs of sustainable development, protection of the environment, and preservation of natural resources and energy, adhering to global standards, as discussed above.
The Republic Cement Group also recognizes operational risk or risk of loss arising from causes associated with the Republic Cement Group’s processes, personnel, technology and infrastructure and from external factors such as legal and regulatory requirements particularly on the environment and corporate governance. Management aims to manage operational risk by seeking the avoidance of financial losses and damages to the Republic Cement Group’s reputation while considering overall cost effectiveness and appropriate control procedures which do not unduly restrict initiative and creativity. Standards for management of risk and internal controls have been put in place, and compliance is supported by a program of regular internal audit.