The Inherent Risk of Garuda Indonesia Around 2013 Until 2015
The Inherent Risk of Garuda Indonesia Around 2013 Until 2015
The Inherent Risk of Garuda Indonesia Around 2013 Until 2015
2015
2013
Indonesia's aviation industry growing by leaps and bounds from year to year
and has claimed to be the third-largest in the world in 2012. The rapid
development was also followed by the existence of potential risks such as
those derived from changes to the macro environmental factors such as
fluctuations in the price of fuel and limited infrastructure contribute in
increasing operating costs. In addition, the business competition has also
become an additional obstacle that has to be faced by the airlines.
1. Fluctuations in the price of aircraft fuel supply and aircraft fuel prices
impacted significantly to operating expenses and business results of
the company. In general the price fluctuations are influenced by
geopolitical issues as well as supply and demand. Fuel availability also
depends on the period when the market surpluses and deficits and can
be affected by demand as gasoline.
The company had been hedging for fuel during the year 2013, both to
fuel the Hajj as well as regular flights. Total fuel hedge conducted of
97% for the Hajj and 9% for regular flights. Such hedging has managed
to suppress the cost of fuel until it reaches 2% lower than the market
price. Other than hedging the company also did a Fuel Conservation
Program to save the cost of fuel use.
2. Information technology system failure against the achievement of
corporate business by 2013, the company has implemented a new
information technology system, i.e. New PSS Altea for reservation and
ticketing, inventory, as well as its integration with DCS. The existence
of the new system is expected to help the company's operations to be
more effective and efficient.
Some of the efforts that the company has done in maintaining the
reliability and availability of information technology systems, among
others:
Perform infrastructure improvements as needed new PSS well against
bandwidth, reliability and security.
Carry out Joint Planning Session between a QX and Asyst to enhance
cooperation and make plans ahead for IT products to be delivered to
the Unit.
3. Liquidity. Not achievement of a target planners associated with cash
flow of incoming and outgoing cash flow can lead to the existence of a
disruption to the financing of operational activities of the company. It
can be caused by the sales did not reach the target or the existence of
a significant unplanned expenses.
Some efforts have been made to maintain the liquidity of the company,
among other things:
Increased control over the performance of the company and
subsidiaries
Do a commercial loan
Issuance of bonds
4. Limitations to recruit, train and retain pilots and cabin crew
The company's production capacity in 2013 is increasing along with the
addition of the fleet this year. The enhancement is done to follow the
growth of the business and market needs. However, the company
experienced a considerable constraint particularly in terms of the
fulfillment of human resources, namely pilots and cabin crew, to
support increased operational activities
The company has performed a variety of efforts to address the
limitations in the companies recruit, train and retain pilots and cabin
crew, that is by doing a pioritas implementation training from Chief
Pilot to accelerate the qualifications a pilot recuiting ab initio, as
scheduled, to recruit hire expat (licence crew), and increases control
over assignment of pilots to optimize operational and training
activities.
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Enterprise
Risk
During the year 2013, the effectiveness of risk management has been a
review on a regular basis (per quarter) Units through Enterprise Risk
Management (ERM). The review was conducted with the contribution of each
unit called the PIC with the PRO Team (Performance and Risk Officer Team)
through the media workshop, focus group discussion, or sharing session.
In addition to the review of risk management on a regular basis, Unit ERM
together with the PRO Team also did a review of the associated possibility of
the emergence of new risks that have not been identified before and
ensuring the adequacy of mitigation actions to be performed.
-
2014
Safety risks
Garuda Indonesia is determined to maintain its reputation in the aviation
industry through the continuous investment while maintaining safety and
security aspects of the flight. Garuda puts the level of risk associated with
the aspect of safety and security that could potentially harm the flight
operations at an acceptable level. One of these is risk mitigation implement
Safety management systems (SMS-Safety Management System). SMS is a
systematic and comprehensive approach to managing safety in Garuda
Indonesia. As like all system management, SMS Garuda has set targets and
goals, planning, creating programs, conduct surveillance, and safety
performance measurement. SMS is a part of the company's overall
management system is needed to assess, develop, implement, achieve and
maintain job safety and health for employees, partners and customers.
Type of Risk and Its Management
Risks related to the safety aspect appeared when normal operating activities,
as a result of business expansion and contraction, any change management
system, equipment, programs, products and services, as well as the
implementation of new work procedures and equipment.
Risk management safety at Garuda Indonesia carried out through six main
steps, namely:
1. Identify the risks through a combination of approaches in reactive,
proactive, and predictive. The risk may be obtained from the results of the
analysis of occurrences, audits, and change management
2. Determine the cause
3. Determine the level of risk at this time and set a target level of risk after
the mitigation
2015
RISK MANAGEMENT
The risk of aviation industry against external factors such as macroeconomic
conditions, fluctuations in fuel prices, foreign currency fluctuations and
limited infrastructure put pressure alone in the business of the company.
In addition, the number of competitors in both the domestic and international
market became one of the factors determining the competitiveness of the
company in the industry. The existence of uncertainty towards those factors
lead to increasingly higher risks in the aviation industry.
The Concept Of Risk Management
Implementation of the risk management system of the company is carried
out based on the mechanism of the ERM process, namely the following:
Mechanism of risk management using ERM process is done on a regular basis
to identify risks that may impede the achievement of the target company.
ERM process begins with the identification of risk, risk measurement,
mitigation and monitoring of the operations of the mitigation. The company
routinely conducts monitoring Corporate Risk Profile (CRP). In addition, the
ERM process is also integrated with corporate strategy which is owned by the
company, so any decision making is done taking into account and respond to
uncertainties in the business.
Each year, the company performs the measurement of the effectiveness of
the application of risk management through Enterprise Risk Management
(ERM) Maturity Assessment. Assessment of the level of maturity of the ERM
done against the six main pillars, namely:
The result of the assessment of the level of maturity that will be used as one
reference in drawing up a work program of the implementation of risk
management in the company. It was intended to, there is an improvement in
the effectiveness of risk management.
Currently, the company has five magnitudes of risk categories i.e. risks
related to strategic, operational, security and flight safety, financial, and
compliance risk. The five magnitudes of these risks has its own criteria to do
management. The management course is based on the level of risk assessed
priorities based on the magnitude of the exposure risks. The following is an
overview of the main risks of the company which have been identified by
2015:
1. The challenges in reaching the Target Revenue
2. the result of the nature of the airline industry are prone to cycles of
economic, political and social can negatively affect the financial condition
and results of the company's business
In addition, by 2015 in the form of natural disasters, external factors have
significant influence towards the achievement of the company's revenue
such as volcanic eruptions, smog and other disasters. As the impact of
volcanic eruptions by 2015, there was the closure of the airport in Denpasar
and Surabaya which have an impact on the cancellation of the flight.
To minimize the impact of those risks, the company has taken steps in
conducting the strategic risk mitigation, there are:
a. strengthening of pricing strategy and marketing plan
b. the development of Ancillary Revenue programs
c. Optimizing revenue through alliances
d. improving the competency and retention program of sales force
3. Liquidity Pressure could affect the company's ability to meet Obligations
Maturing
The existence of external factors that affect the company's business results
lead to experiencing the pressure of liquidity. The company's ability to
regulate the payment of debt and other fixed obligations will depend on
operational performance and cash flow, which will ultimately depend on the
economic and political conditions currently, factors
Finance, competition, regulation, business, natural disaster and other, where
many of these factors are beyond the control of the company.
As for mitigation, which the company has done in the face of such risks
include:
a. push the cost efficiency
b. Finding alternative funding such as limited public offering (right issue) and
bonds
c. Designing ancillary revenue programs
3. The limitation of the capacity and Facilities of the airport in Indonesia
Although commercial aviation infrastructure Indonesia has experienced
significant progress in the last few years, the resources of several segments
on the aviation industry including airports and air traffic pemandy system, its