Among the various risks that affect the Group include, but are not limited to:
1.
Industry and customer risk
The market demands and customers specific requirements constantly remind the Company not to be
complacent and to keep up and be able to cater to the needs in the market and of its customers. In the
event the Company is unable to meet customer and industry requirements, there may be a possibility that
its products and/or process will become obsolete, and its customers may take their business to those who
are able to meet such requirements. As such, the Company works closely with its customers and industry
sources to ensure that its technology and product roadmaps are in line with customer requirements.
2.
Under utilization of production capacity
The Company’s business is characterized by high fixed costs including plant facilities, manufacturing
equipment and machineries. In the event when it’s capacity utilization decreases due to poor demand
or cancellation or delay of customer orders, the Company could encounter significantly higher unit
production costs, lower margins and potentially significant losses. Under utilization of production capacity
could also result in equipment write-offs, restructuring charges and employee layoffs.
3.
Dependence on a small customer base
In the highly competitive industry with low margin and customers could easily bring their orders
elsewhere, the loss of one or more of its major customers or a substantial reduction in orders by any major
customer, for any reason, could have a material adverse effect on the Group’s revenue. To mitigate the
risk of losing customer the Company works closely with its customers, so as to be able to build long term
working relationships and, hence, build long term customers’ trust and loyalty.
4.
Primary materials prices and timely supply of materials
The Group relies on a limited number of qualified suppliers for some of the materials used in its precision
metal component division manufacturing processes. Any increase in the price of primary materials would
affect the cost of manufacturing. The Group mitigates the risk by not committing to large orders of
fixed price materials thus enabling the Group to adjust prices when appropriate and feasible. The timely
supply of sufficient quantity of raw materials by its supplier is also crucial in meeting the commitments
to its customers. To mitigate the risk the Group employs supply chain management and builds long term
relationships with qualified suppliers.
I N N O T E K L I M I T E D
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CORPORATE
GOVERNANCE REPORT
