Risk Management Policy

RISK MANAGEMENT

The company continually strives to provide the greatest benefit shareholders and stakeholders. However, in its business practice, the uncertainty that comes from internal and external factors may affect the achievement of company’s goal. The uncertainty factors are greater due to faster and more complex business climate. The uncertainty factors are unavoidable business risk, yet should be managed through a mechanism namely “risk management’.

A company that can manage its risk well is considered to have sensitive ability to detect risk, has the flexibility to respond risk and ensure its resource capacity to perform action in minimizing risks, whereas those that are unable to well-manage their risks will waste their resources and time, thus lead to unattainable company’s goal.

As one of the pillars of GCG implementation, risk management plays an important role in providing reasonable and useful confidence for the continuity and improvement of the Company's business amid the uncertainty of the business environment.

Implementation of risk management in all business activities undertaken by the Company is always based on the risk that is controlled optimally, so it is expected not to cause impairment to the company. In some cases, efforts are made to exploit risks into opportunities that can increase corporate profits. Pupuk Kaltim has a risk management guideline which serves as a guidance for Pupuk Kaltim to implement risk management and is expected to provide an understanding for all employees regarding the substance of the Risk Management Policy set by the Board of Directors as a reference for the implementation of risk management for all work units. In implementing risk management, one must pay attention to risk characteristics and the way to manage them.

PUPUK KALTIM RISK MANAGEMENT SYSTEM

BASIC IMPLEMENTATION OF RISK MANAJEMEN IN PUPUK KALTIM:

1. Decision of the General Meeting of Shareholders (hereinafter referred to RUPS) of Pupuk Kaltim dated June 5, 2012, to apply Good Corporate Governance Practices referring to the Decree of the Minister of State-Owned Enterprises Number PER-01/MBU/2011 on the Implementation of Good Corporate Governance Practices on SOEs and to apply Risk Management using ISO 31000: 2011 SNI Framework (hereinafter referred to as ISO 31000).
2. Regulation of the Minister of State-Owned Enterprises Number: PER-01/MBU/2011 on Practice of Good Corporate Governance Implementation on State-Owned Enterprises in Article 25:
   • in every decision/action making, the Board of Directors must consider business risk;
   • the Board of Directors must build and execute integrated corporation management risk program, which is a part of the Good Corporate Governance program implementation;
   • the implementation of risk management program is conducted by:
     1. Establishing a separate working unit under the Board of Directors
     2. Assigning an existing and relevant work unit to carry out the risk management function
     3. The Board of Directors shall submit a risk management profile report and handling it in the same time with the company's periodical report.
3. Decree of the President Director of PT Pupuk Kalimantan Timur No. 40/DIR/VII/2013 dated July 08, 2013 on the Implementation Policy of Good Corporate Governance throughout the company.
4. Circular Letter Number SE-03/II/2013 dated February 4, 2013 on Risk Management Policy and Guidelines of PT Pupuk Indonesia (Persero) and Subsidiaries.

RISK MANAGEMENT UNIT

The Risk Management Working Unit experienced a fairly dynamic organizational change. Since its establishment, Pupuk Kaltim Risk Management was managed by the Department of Risk Management and Compliance led by the Head of Department under the Director of Finance. On July 7, 2011 there was a change of organizational structure in PT Pupuk Kaltim according to Board of Director’s Decree (SKD) No. 44/DIR/VI.2011, the Risk Management and Compliance Department was changed to the Risk Management Department and led by Manager under GM Financial Administration.

The need for risk management in Indonesia is increasing that the Government issued a Regulation of State Minister of State-Owned Enterprises No. 01/MBU/2011 to regulate the integration between Good Corporate Governance, Risk Management and Internal Control. In order to comply with the regulation, the infrastructure of Risk Management unit was improved.. On March 28, 2012 in accordance with SKD No.13/DIR/III.2012 the Risk Management Department was changed into the Compliance and Risk Management Department headed by a Manager in the Main Directorate under the Corporate Secretary.

Based on the direction of the Shareholders as stated in the letter No. U-1283/A00000.UM/2014 dated September 5, 2014 on the Working Standardization Policy of Corporate Governance and Risk Management, on December 8, 2014 a Board of Directors Decree is stipulated. SKD No. 50/DIR/X.2014 that was valid from October 1, 2014 regulates about the improvement of Directors' Decision Letter concerning with the Organizational Structure of PT Pupuk Kalimantan Timur, the Compliance and Risk Management Department was changed into the Department of Corporate Governance and Risk Management to date.