Risk Factors

Given that the instability of business conditions today, Risk Management continues to be an inevitable tool for any business especially operating its business through an unexpected situation. Thus, it is necessary for AIT to has an essential tool to manage its business in the current circumstance as well as enhance itself to be ready for future competition.

The Company realized the impact from risk factors and therefore, AIT has established the measurement in order to risk reduction to the accepted levels. The Company also regularly reviews and evaluates risk factors and new threats which could affect to the Company and its stakeholders.

Besides, The Company established the Risk Committee in 2003 in order to efficiency risk management for implementing any projects. Project risk management is considered as the most crucial to the Company’s revenue. The main objectives of risk management are ensuring that the Company is able to achieve its goals and strategies, while continuing create and maintain the confidence to the Company’s shareholders and stakeholders.

Risk Relating to Change of Technology

Due to the rapidly changing in the Information and Communication Technology industry, the Company has indicated the importance of strived on maintain the leading of technology in order to prevent loss opportunities or loss of its competitiveness. In the near future, the trends of Cloud Technology and Internet of Everything (IoE) will be increased towards Digital Transformation.

The Company encourages its engineers and sales including marketing, to regularly monitor technological developments and to regularly attend related seminars maintain the leading in the ICT industry. Besides, AIT also operate businesses closely with its partners to clearly understand all aspects of the market and key technology developments.

Risk Relating to Dependency on Major Customers

The Company predominantly earns revenues from sales and services of network system installation for TOT Corporation Plc. (TOT) and CAT Telecom Plc. (CAT), which revenues contribution is approximately around 38% of the Company’s total revenue. The Company realized the aforementioned risk factors from two key customers. As the national infrastructures in Thailand has not yet fully developed, Major infrastructure investments and developments are often coming from the Government sector in order to support national directions of Digital Economy, National Broadband, and other projects, which related to ICT infrastructure investments.

Core Networking service is a specific skill which is difficult for competitors to imitate enter the Thailand’ market. Hence, The Company is enhanced to be well-positioned as the leading ICT infrastructure service provider in the current and future.

Our customers consist of State Enterprise and Private Company, which can be classified as follows:

Customer Type Customer Revenue/Total revenue
Telecom I : Mobile & Wireless Group CAT Public Limited Company 25%
Telecom II : Fixed line and Network Group TOT Public Limited Company 13%
Enterprise : Fixed line and Network Group State Enterprise, Private Company, Educational Institution 62%

In addition, The Company plans to continue to drive long term maintenance assistant (MA) services with the existing key accounts to further balance the project revenues. Clearly, the Company has been striving to minimize the risk relating to the dependency on a few major customers and is constantly seeking opportunities to diversify its customer base in the future.

It is likely that going forward revenues from maintenance assistant (MA), which can contribute higher revenue proportion comparable to revenues from major customers, as well as maintain its existing customer base.

Risk from Dependency on Key Employees

The nature of Information and Communication Technology business highly depending on high-caliber human resources in term of marketing, engineering, and project operation. These high-caliber human resources including advising, designing and implementing the product sales and services. At the present, the Company has totaling 312 skilled and experienced employees in various departments.

  • Sales & Marketing
  • Customer Service (Engineering)
  • Software
  • Project Management, and
  • Financial & Management

Most of our employees are engineers, which have work experienced approximately 4-6 years and our employee’s turnover rate was approximately 8% in the previous year.

In order to retain its employees, the Company provides attractive compensation packages and good working environment. The Company also established the internal control system to prevent the risk of losing key employees which may affect its business operations.

AIT has developed a multi-level organizational structures and compensate policy, in which to replace key employees in any emergency situations.

There are the internal meetings weekly between the executives to acknowledge and discuss any problems to immediately determine the necessary actions to reduce problems that might occur.

Risk from Dependency on a Single Suppliers more than 30%

Normally, the Company purchases its products directly from the manufacturers or the distributors, which have representative offices in Thailand. The Company is the key distributor and strategic partner with Cisco Systems (Thailand), which is the world’s leading the manufacturer of Information and Communication Technology in the IP (internet Protocol) segment.

In 2016, the Company purchase of network equipment from Cisco Systems accounted for approximately 41% of the total cost of sales. The reason behind such high purchase volumes in each year from Cisco Systems because of Cisco’s products have wide acceptance from both local and international customers.

Besides, AIT has invested considerably in training its engineers and sales employees in accordance with Cisco’s certified. AIT has appointed as a Gold Partner from Cisco Systems, which is the highest level of strategic partnership for many years.

The long term Gold Partnership encourages the Company to receive better support in both technical and discount, which is greater than lower ranked partnerships. Nevertheless, in order to mitigate the risk of being overly dependent on single supplier, the Company also partners with other well-known manufacturers as reputable as Cisco Systems, which are the leading suppliers in their own fields of business.

Risk from Delivery the Projects

Deliver periods of the ICT projects normally range approximately 6-12 months depending on the sizes of each project. If the Company unable to deliver the project on time as stated in the contract, the Company responsibility for the penalty. In the last 5 years, the Company has been penalized average around 1% of the total project sales revenue, which considered as a low level when compare with other suppliers in the same business.

The main reasons for the delay in project delivery are mostly due to external factors delays outside our control, such as the delay of the equipment delivery from the manufacturers or the change of installed equipment types. To protect the Company from the penalty, the project management method has to clearly defined. This method requires closely monitor to all processes of a project and seamlessly coordinate with AIT’s resources, customers, and manufacturers. Therefore, potential problems can be identified earlier and their effect can be minimized or prevent in advance.

After the Company is selected for a project, we will constantly monitor and examine the timing of product delivery. However, in some cases where our customers urgently need to use their ordered system, the Company will be able to install a standby system for their temporary usage.

Risk from Foreign Exchange Rate

Generally, the Company must estimate the project costs at a point approximately 1-2 months prior to the beginning of the project for the auction processes. If the Company need to partly import equipment from international, the project cost may be affected from the fluctuation of the foreign exchange rates. As of 31 December 2016, the Company had the foreign currency trade account payables totaling USD 7.0 million and the balance of FX forward contracts totaling USD 6.8 million at the agreed rate of Baht 34.73-35.78 per USD 1.

Given an aforementioned risk, the Company has applied the risk reduction by;

  • Determine the value of foreign exchange rate risk in the calculation of the total project cost, and
  • Enter into a FX forward contract to cover the whole amount

In 2016, the Company prepared to utilize various financial tools to enhance efficiency in managing risks to maximize benefits to the Company.

Risk from Change in Government Policy

ICT business is considered as the high growth industry in Thailand, most especially as the government continuously promotes its industry by major government’s projects which continuously investing in ICT systems and infrastructure, such as the Digital Economy policy. The government also establishes the early stage of an action plan to promote accessing broadband Internet in village and establishes a connection to the Internet as a Regional Hub of ASEAN or the 3G and 4G license auctions. The implementation of these projects and policies is expected to bring more business opportunities to every enterprise. However, any change in the government policy might also impact on the Company’s business opportunities. Therefore, the Company regularly monitors such policies closely and shall inform investors as soon as a major policy change.

Risk from Economic Situations

The global economy remains quite volatile, especially due to the largest trade partners, such as China and the United States, both of whom have been at the heart of many past economic problems. As a result, customers have been slow to implement their budgets to develop or change technologies within their organizations, in both the public and private sectors. Investments most recently have been in a slowdown.

Risk from Uncontrollable / Unpredictable Situations

In the event of natural disaster, which cannot control and usually cannot predict, may affect any business to be in a slowdown. Clearly evidence of this was the flooding in 2011 which affect the Company in order to unable to deliver projects to its customers. As a result, revenue did not meet the goals and was even lower than the revenue in 2010. In 2015, Thailand suffered a severe and lengthy dry spell that has dramatically impacted agricultural productivity. The followed effect has been a decreased purchasing power from both the agricultural and private sectors.

In 2016, Thailand was affected from natural disaster, such as severe dry spell in the first half of the year and heavy rain that may cause flooding in many areas. This uncontrollable event of any natural disaster may affect the Company’s operating systems.

Risk from intensive competition of Game Changer and New Players from entered the AEC

Lately 2015, Thailand officially entered the ASEAN Economic Community (AEC). It is expected that many multinational companies will now enter into the AEC market. The new format of the competition has been changed from what the Company previously experienced.