Risk factors impact to Company’s Business and activities
1 Economic Risk
The Thai economy in 2023 faced obstacles that cause economic expansion to be lower than expected. Part of it are the tourism sector and private consumption, which are important factors driving the economy, have not been able to fully recover. These results in investment in the private sector and foreign investment slowed down. The geopolitical conflicts between Russia and Ukraine and between Israel and Hamas have affected imports and exports and increased energy prices in the world market which puts pressure on production costs and inflation directly, causing the central banks of various countries to take measures to increase policy interest rates to control inflation within the target range. As a result, loan interest rates are high and affecting the purchasing power of people within the country due to household debt and informal debt, it is quite high.
2 Competitive Risk
In response to the challenges of the COVID-19 crisis, the life insurance business has adjusted quite a bit. Both in terms of operations Leveraging technology for product presentations and customer service to boosting operations process efficiency and accelerating service delivery. In response to the changing daily lives of consumers and entering the digital world economy. In light of these factors, the company is aware of the changes and gives continuous importance to them. we have developed a business plan that sets a direction for the adoption of digital technology as a part of the organization's drive to develop communication, customer and vendor service, promote the use of various tools to drive the company towards paperless and cashless operations, ensuring the security of the implemented systems. Including setting risk management plans to support changes in various situations, so that it can adjust its business strategies. The company also develops a comprehensive service system, manages sales channels, and develops insurance products to increase its competitive potential. One of the risks that the company is focused on is the risk of sales channels from partners for company’s business sustainable competitive abilities.
In the life insurance business, license is mandatory for brokers and agents engaged in sales. As a result, there are only a small number of insurance intermediaries as life insurance brokers or those who have been in business for a long time may increase the number of life insurance companies. High competition has resulted in larger partners with a large number of customers getting better deals. At the same time, small partners are attractive in expanding their customer base through new channels as well. The Company places importance on maintaining large partners who have long-standing good relationships in maintaining customer bases. In order to avoid the risk of relying too much on any one partner, the company has continued to develop and expand its customer base through online sales and through new channel partners including the management of sales quality risks such as confirmation call, controlling the number of customer complaints regularly for the sustainability of the business, to be able to compete.
In addition to selecting partners to increase competitiveness, the company also considers policies and/or guidelines on social and environmental issues, human rights and business ethics of business partners as well. There is also an Evaluation through Due Diligence-Outsource form and Satisfaction-Assessment of external service providers.
Now adays, in partner risk assessments on the environment, society, and governance, the company will consider the overall Image including reputation, corporate image, operating results, and compliance with the law. As a decision-making criterion, the business unit or project manager related to the partners must assess and review the risks or problems that arise from the partners in such issues before making a decision.
3 Insurance Risk
As outlined below, various risk factors are associated with and may affect the Company's insurance risks.
3.1 Insurance Risk
Insurance risk is the risk that arises from the mortality rate, mobility rate, lapse rate, surrender rate, or deviations from assumptions used in premiums, underwriting, and calculating insurance reserves. This may cause a negative impact on the company's performance. Including the problem of Insurance fraud is also a major factor that has an impact on the insurance business. It increases the cost of doing business and also affects insured who want to use insurance as a tool to manage their risks. such as insured or other individuals may collude with medical personnel or hospitals to keep insured hospitalized for longer than necessary according to medical standards to benefit from the claims for compensation under the life insurance contract. To manage insurance risks appropriate, the company established a product development team to create concepts and develop products that meet the needs of target customers, determining appropriate insurance premium rates that are in line with business strategies under the Company’s risk management policy framework for enhancing employee’s potential inside the organization to estimate the cost of losses and compensate for damages. including setting insurance reserves and risk-based capital that is sufficient and higher than regulatory requirements to ensure that the Company can cope with the risks that may arise in the future. The company also regularly reviews the product pricing to reflect the current costs, and monitors the risks by using early warning system, sensitivity test and stress test.
3.2 Liquidity Risk
Liquidity risk is the risk that a company cannot meet its financial obligations when they are due. That is, the company is unable to convert its assets into cash and/or cannot raise sufficient capital in a timely manner to meet its obligations when due. both in normal and crisis situations. The company manages liquidity risk by maintaining sufficient levels of cash and cash equivalents to support its operations. It has also developed a cash flow management plan, a capital management plan, and analyzes liquidity ratios to control liquidity risk. This ensures that the company can meet its financial obligations and/or manage liquidity effectively.
3.3 Underwriting Risk
Underwriting risk is the risk of inappropriate risk assessment in the underwriting process or the value of claims exceeding the assumptions made. The company has a risk management process that establishing guidelines for underwriting both health-related and non-health-related risk factors that are in accordance with standards. for example, age (a growing risk factor as the average age of the population increases), gender, occupation, and lifestyle behaviors include medical advances and changing social conditions are also considered factors in underwriting decisions. Moreover, to reduce the risk of paying unexpectedly large claims and increase the potentiality of insurance, the company considers transferring an insurance risk to reliability reinsurers with and financial strength.
4 Financial Risk
4.1 Interest Rate Risk
Interest rate risk can harm the company's income or shareholder value due to fluctuations in interest rates. This risk is particularly significant for the company's deposits at financial institutions, investments in securities, and loans. To mitigate this risk, the company employs a robust risk management framework that considers both investment risks and the suitability of expected returns. Moreover, the company is equipped to conduct gap analysis, which identifies discrepancies in the maturities of its assets and liabilities and assesses the impact of potential interest rate changes on its financial position.
4.2 Volatility of Money Market and Capital Market
This refers to the risk associated with fluctuations in interest rates, foreign currency exchange rates, equity prices, and commodities. This type of risk can impact both investment income and the company's capital. The company effectively manages this risk, ensuring it remains within acceptable bounds and does not exceed the capital allocated in the business plan. Even when considering the combined effect of market fluctuations and other risks, the company maintains a strong capital position, exceeding the legally required minimum.
4.3 Foreign Currency Risk
Foreign exchange risk, a type of risk encountered when investing abroad, arises from numerous factors, such as global economic conditions, individual country fundamentals, monetary and fiscal policies, domestic and international political stability, and currency speculation. To mitigate this risk effectively, the company has established risk management guidelines that may include using futures contracts to hedge against unfavorable exchange rate movements at different points in time.
Currently, the sustainability risk assessment of securities issuers includes environment, society, and governance aspects. The company has not made any specific assessments yet. The company considers its overall reputation, corporate image, operating results, and legal compliance as criteria for use in considering investments.
4.4 Investment Risk for Investors
Risks to securities holders' investments It is a risk because of the uncertainty of the returns that investors will receive. or loss of investment from holding securities or company shares, including
- The company's stock price may fluctuate, increase, or decrease. This depends on many factors, some of which the company cannot control, such as economic conditions and changes in regulations. or various conditions of a business regulatory agency crisis. The emergence of new diseases financial crisis, liquidity, price, and trading volume of stocks Such factors may cause the stock price to fall below the price that investors buy and/or higher than the price of stocks that investors sell. As a result, investors may be at risk from the uncertainty of returns that they will receive, which may not be as expected in order to not affect shareholders. The company has continuously provided information on operating results, essential information, and characteristics that are characteristic of life insurance business operations to investors through various channels
- The risk from dividend payments not being as investors expected. It comes from many related factors, such as the company's future financial performance. This depends on the successful implementation of the company's business strategy, financial factors, competition, and the rules and policies of business regulatory agencies. General economic conditions, customer demand, and other factors, many of which are beyond the company's control, affect the ability to pay annual dividends and/or interim dividends. The company may be at risk of losing capital if it pays dividends at a normal rate. As a result, the company may not be approved to pay dividends or may pay dividends at a rate lower than the policy set by the company, which is not less than 25 percent of net profits.
The Company has managed the investment risks of the Company's securities holders. By conducting business and setting policies covering financial and other risk management, including reputational and image risks, sustainability risks and legal compliance risks efficiently including tracking economic conditions, rules, regulations, policies of regulatory agencies and other departments closely related to the company. So that the company can prepare to adapt and/or change quickly and keep up with various situations to ensure that the company will have a strong and stable financial position and can give investors the opportunity to receive returns/dividend levels that good and consistent.
5 IT Risk and Cyber Threats Response
To align with current consumer behavior in the digital age, the company has adapted its service model by incorporating innovative technology and information systems for efficient delivery of consulting and policy services to customers, agents/brokers, partners, and contract hospitals, as well as application development. However, increasing reliance on such technology amplifies technology risks, including system glitches that could enable unauthorized access to personal or critical company information, as well as cyber threats such as website phishing, malware, and virus attacks that may cause business interruption. To safeguard information systems and prevent cyber threats, the company emphasizes risk management within the Enterprise Risk Management (ERM) framework, along with IT risk management framework and information security framework. The objectives are to ensure consistency in complex scenarios and align with international standards such as ISO 27001:2013 Information Security Management and ISO 27701:2019 Personal Information Security Management.
6 Legal and Compliance Risk
Due to the company's operation under the supervision of government agencies such as Office of Insurance Commission (OIC.) and The Securities and Exchange Commission (SEC), the company recognizes that changes in laws and regulations can impact business operations, potentially leading to financial or operational cost implications, or even probation, fines, or lawsuits caused by non-compliance or negligence. To mitigate these risks, the company has established a management structure that leverages the three lines of defense model. This structure supervises and monitors department activities to ensure compliance with regulatory agency regulations, company policies, and updates in relevant laws. The company also communicates these changes to relevant departments and individuals for their acknowledgment and consideration, ensuring consistent adherence throughout the organization.
7 Sustainability Risk
Nowadays, a sustainable business model (Environmental, Social, Governance: ESG) is one of the focusing factors for business model. Because it represents the company's responsibility not only profit return but also taking into environmental, social, human Rights, and governance of society. Therefore, the company places importance on ESG risk management by specifying it as one of the risk factors in the Corporate Risk Assessment covering important activities of the Company. Conform to the company's risk management policy and framework to prepare for prevention and adaptation to various risks, including seeking business opportunities from those risks efficiently.
7.1 Social and Environmental Risk
Social and environmental risk is caused by natural disasters and environmental issues which is the effect of climate change that may impact human activities, lifestyle, business continuity, increasing cost of compensation, and also reduce the price of securities that the company invested. To ensure that the company can run its business through social and environmental changes, The Company has carried out a risk assessment in view of the likelihood and impact of the Company's activities being disrupted in the event of an emergency from a natural disaster. Social and environmental changes such as fires, floods, sudden climate changes. By creating a business continuity management plan that demonstrates readiness to cope, adapt, and to ensure that the company can operate continuously Including setting various policies to support and operate in accordance with environmental rules and regulations of government agencies and/or international standards.
7.2 Human Rights Risk
Human rights risk can arise from violating the right to receive equal treatment according to human rights principles for employees, partners, customers, and related persons. as well as safety in the workplace and a good environment which may affect business operations and the image of the organization. By providing for the implementation of guidelines for a comprehensive examination of human rights, which includes the announcement of a policy on human rights. Human rights impact assessment Establishing guidelines for preventing or mitigating impacts on human rights. Monitoring and reporting human rights impact assessments Scope of relevant stakeholders Including human rights issues according to the human rights risk register. In addition, it is required to report Loss data and near-miss data that arise from human rights risk factors, which is part of the company's risk management. Including channels for reporting clues or complaints (Whistle Blowing) that may occur the main human rights risks that the company faced in the past year such as data leakage, inappropriate use of customer information, and Compliance risk Labor Protection Act, etc.
8 Emerging Risk
Emerging risks are losses that may not have occurred or been experienced before, presenting challenges in both opportunity assessment and estimating the severity of their occurrence. These risks are difficult to predict due to uncertainties and changes in environmental factors, such as pandemics, legal changes, political shifts, societal dynamics, technology, and physical environment alterations, including natural changes. They can significantly impact business operations, and the company has established processes to handle these new risks. This involves monitoring and understanding new risk factors that may arise, analyzing their potential impact on operations, and ensuring the financial stability of the company.
8.1 Climate Risk
is a risk factor due to climate change that has a significant impact on business operations. The company considers risks from physical and environmental impacts such as sudden natural events such as floods, droughts, and sea level changes. It also considers the risks of transition and the regulations associated with a green economic society. International laws and agreements hold businesses accountable for their greenhouse gas emissions through tax mechanisms. Investors and financial institutions have taken the management of risks and opportunities from climate change as one of the factors for investing in businesses that have an impact on the environment, alongside growing consumer demand for sustainable practices.
8.2 Social Risk
The company places importance on changes in the population structure. As Thailand transitions into an aging society, there may be a significant shift in social structure, product development, and service offerings to cater to this new consumer demographic. This shift may result in negative financial impacts and compromised operating results due to increased competition if the company does not have a contingency plan for this change. Therefore, as the demand for products and services catering to the elderly surges alongside the expanding market size, it is crucial for business to adapt and capitalize on these opportunities.
The mutation of existing diseases in both animals and humans, influenced by environmental changes, and the random spread of diseases from human to human. Current societal behaviors, adapting to a "new normal," still involve interactions and various activities, contributing to potential infections, especially in densely populated areas. The challenge lies in the ease of transmission, limitations in vaccine distribution, and the swift utilization of vaccines from new innovations for rapid prevention. This approach introduces a novel aspect that requires ongoing monitoring, potentially acting as a factor prompting accelerated mutations in certain cases. Additionally, there are cases where incomplete vaccine coverage in some populations complicates the control of the spread.
8.3 Emerging Infectious Disease Risk
Emerging Infectious Disease Risk refers to new types of communicable diseases that have not occurred before, requiring time for research on new diseases to study treatment methods. These include infectious diseases caused by new infectious disease, diseases found in new geographical areas, re-emerging infectious diseases, antimicrobial-resistant organisms, and those resulting from human activities with bioagents. These factors contribute to the rapid spread of diseases, prompting many countries to prioritize and prepare for effective response.
9 Strategic Risk
The risks have a beginning from the disposal of policies, strategic plans, operational plans and abusive practices or inconsistency with internal factors and the external environment including the change in society and technological, public expectations, customer behavior and economic conditions. The company has set measures for risk management by preparing corporate financial and operational risk assessments together with the company business plan for consider the environment and risk factors of business operations in any period of time as well as regularly review risk factors and business goals and targets
10 Operational Risk
Risks arising from errors or inadequacies in work processes, personnel, work systems, and lack of good corporate governance. lack of good control or from external factors that may affect income Funds and reputation The company has important operational risk management, namely creating efficiency of the internal control system. The organization structure and environment are conducive to adequate internal control, such as the management structure. decentralization and inspection Including setting standard work process steps. Taking into account factors in sustainable business operations. There are various work systems to support steps or work processes. Including effective data security to reduce operational risks The company emphasizes participation from employees at all levels. An organizational risk assessment form is prepared. Reporting of loss incidents from all departments to use the loss data obtained to analyze risks and prepare appropriate measures for dealing with those risks. In addition, the company has prepared a business continuity management plan to ensure that the organization can operate continuously if faced with a disaster event that affects business operations and has organized rehearsals. Communicate and understand the plan regularly.
