Corporate Governance

The Company recognizes the importance of risk management
integration policy to ensure the Company's steady growth

Corporate Risk and Crisis Management

The Company recognizes the importance of risk management integration policy to ensure the Company's steady growth with reduced or minimum damages caused by surrounding environmental and potential risks, which could have damaged the Company's employees, assets, business operations, and reputation.

Executives and the employees are to adhere to the risk management policy so as to create awareness, collaborate, and streamline the risk management practices throughout the organization. Risk management processes and the level of manageable risk at an appropriate level are clearly defined, and in-line with the risk management strategies, action plans, and activity plans of all units. This includes such measures as continued risk assessments, review, enhancement, development of risk management process, as well as the annual review of risk management policy. Such measures aim to ensure the Company's risk management process and policy are in place and able to respond positively to the changing business environment. The Company shall appoint the Risk Management Committee to oversee and manage the overall risk management of the organization, who are required to submit quarterly risk reports to the Audit Committee.

Management Approach

I. Policy
Risk Management Policy that covers the overall of organization risk management and systematically connects other management systems throughout the organization.

II. Responsible Organization
The Board appointed the Risk Management Committee (RMC), consisting of 4 Board members with responsibilities to

  • form and define policy and framework for risk management,
  • provide recommendation,
  • monitor and support operations relating to organization risk management to align with strategies and goals in any situations, and
  • screening high value projects that will gain the trust and confidence of all stakeholders.
For more information on the responsibilities of Risk Management Committee, click

IRPC’s risk management structure consists of the Board of Directors, Risk Management Committee (RMC), Risk Management Steering Committee (RMSC), and Risk Management Division. III. Management System/Process
The Company recognizes the importance of risk management integration policy to ensure the Company's steady growth with reduced or minimum damages caused by surrounding environmental and potential risks, which could have damaged the Company's employees, assets, business operations, and reputation.

Executives and the employees are to adhere to the risk management policy so as to create awareness, collaborate, and streamline the risk management practices throughout the organization. Risk management processes and the level of manageable risk at an appropriate level are clearly defined, and in-line with the risk management strategies, action plans, and activity plans of all units. This includes such measures as continued risk assessments, review, enhancement, development of risk management process, as well as the annual review of risk management policy. Such measures aim to ensure the Company's risk management process and policy are in place and able to respond positively to the changing business environment. The Company shall appoint the Risk Management Committee to oversee and manage the overall risk management of the organization, who are required to submit quarterly risk reports to the Audit Committee.

Risk Correlation The risk analysis was initially identified the correlation addressing the utmost impact to IRPC business, of which resulting in price volatility of raw materials and products as business risk and foreign exchange rate and Interest as financial risk. The statistically data from the previous 3 years have been considered and finding the mathematical equation correlation to forecast the future risk. Sensitivity Analysis and Stress Testing
It is important to IRPC to implement internal control processes to comply with existing regulations and be proactive in developing their control mechanisms. Sensitivity analysis and stress testing is considered as part of an effective risk and crisis management. Sensitivity analysis and stress testing should be performed in order to better capture more extreme versions or more uncommon types of risks in addition to financial risk.

Emerging Risks
IRPC is aware of the long-term risks that company faces and the impacts of these risks on its business. IRPC shows its ability to identify risks that may arise in the next 3-5 years which will result in opportunity loss for the company if it is not appropriately managed. For this reason, IRPC has implemented assessment of the emerging risks such as risk from the changing free trade areas and trade rules.

 

Description of risk

Potential business impact of the risk

Mitigating actions

Emerging Risk 1

Climate change is systemic impact across sectors and geographies presenting a wide range of risks related to extreme weather events such as heat waves, droughts, and floods. Thailand government agreed on reducing 20-25% of greenhouse gas (GHG) emissions by 2030 from 2015 base year during the Paris Climate Conference in 2015 (COP21). However as Thailand’s future regulation related to climate change remains uncertain due to the political uncertainty and policy making process, IRPC has identified this issue as one of our emerging risks that potentially impact to our business. IRPC has identified this issue as one of our emerging risks that potentially impact to our business.

Thailand government encourages private sectors to move toward low carbon economy as the country has pledged for reduction GHG emissions. IRPC can be subjected to new regulatory requirements on GHG emissions. Such regulations could impose the following impacts to IRPC:

  • Additional production costs to related to regulations pressure on GHGs emission reduction
  • Increasing risk of fines for non-compliance
  • More difficulties in securing social license to operate for operations with highest GHG emissions
Hence, due to these potential risks that could impact IRPC’s financial performance in the future, IRPC is well aware about this issue and initiated mitigation actions to prepare for this challenge.

Mitigation actions to address risks related to regulation changes from climate change starts at the top with high level plan that IRPC initiated the strategy of climate change management for short-term in 2020 and long-term in 2030 targeting to reduce direct and indirect greenhouse gas emissions and water consumptions in accordance with QSSHE Policy. Our climate strategy underpinned risks related to climate change at all levels of the business, which it consists of 6 pillars: GHG accounting, GHG reduction, risk mitigation, opportunities, engage & disclosure, and ensure accountability. In addition, IRPC developed KPIs related to climate change such as Energy Intensity Index (EII) and GHGs reduction.

Emerging Risk 2

The peak of petroleum business is expected to  coincide in 2030-2040 due to the growth of electric vehicles (EVs) market that is increasingly cost-competitive from changes in technology and support from governments.
However, there are some uncertainties related to EVs including economic growth, policy making, and evolution of energy demand. Thus, IRPC is well aware on the impact of EVs and classified this issue as one of our emerging risks that requires actions to response and manage such risks.

The global automotive industry is shifting focus towards EVs. According to IRPC’s analysis, it is expected that EVs will significantly impact oil gas industry in the next 5-10 years. In addition, Thailand government is expected to encourage EV production via incentives and tax reductions. IRPC may be impacted by EVs in the following ways:

  • Declination of sales in petroleum business including fossil-fuel and other oil products
  • Obligation to pay higher sales tax of fossil-fuel and other oil products
Therefore, IRPC is expected to face challenges in petroleum business and require to plug into proactive actions to protect loss in future revenue and sustain our long-term business growth.  

IRPC has drawn up a long-term management approach to mitigate EVs risks by defining a strategy to shift from petroleum business to petrochemical business as petrochemical business especially Polypropylene market that forecast to be increased from EVs parts’ demand.
IRPC has executed Upstream Project for Hygiene and Value Added Products (UHV Project). UHV Project was developed to convert fuel oil into Propylene. Meanwhile, IRPC has also developed a plan for the second phase of this project which focuses on converting heavy naphtha and aromatics into paraxylene. In addition, IRPC initiated a project to produce Ultra High Molecular Weight Polyethylene (UHMWPE) Powder, which uses as material for micro-porous membrane in EVs’ energy storage. With these actions and plans, IRPC can assure investors’ confidence by addressing efficient and proactive mitigation actions to manage risks from EVs.


Emerging risks are also shown in 2018 Corporate Annual Report, page 185 click

Risk Culture
Strong risk culture throughout the organization is a key to the development of an effective risk and crisis management. IRPC ensures that the importance of risk is understood and risk mitigation plans are well-followed by all employees through individual’s performance review, compensation, training on risk management principles, potential risk reporting mechanism for all employee, etc.

  • Inclusion of risk management criteria in the HR review process for employee evaluations
    IRPC prioritizes the importance of integrating risk management process into HR’s employee evaluation process. Setting the clear and concise risk management criteria help HR department to effectively evaluate, identify gaps and execute gap closing activity to ensure Human resource management excellence. Incorporating risk criteria in the product development or approval process IRPC incorporates risk criteria and fully integrate our risk management practices in product & business development processes to ensure that we have reduce impact of risks from market situations, competitors’ action as well as environmental and social factors to the point where it has little or no impact to our businesses. IRPC has developed financial incentives which incorporate risk management metrics. For senior executives, financial incentive is tied in with business performance and risk management performance using the KPIs. For Non-financial incentive we will develop “ERM Ambassador and ERM Auditor” that exemplify all employees for level of care and Adherence to rules behavior that form individual behavior to organization behavior or risk culture. For line managers, their business performance and risk management performance is tied with financial incentive through KPIs.
  • Incorporating risk criteria in the product development or approval process
    IRPC incorporates risk criteria and fully integrate our risk management practices in product & business development processes to ensure that we have reduce impact of risks from market situations, competitors’ action as well as environmental and social factors to the point where it has little or no impact to our businesses.
  • Measuring of Risk Culture Effectiveness
    As IRPC risk culture model for measuring of risk culture effectiveness, we evaluate aspect behavior of management by RCSA (Risk Control Self-Assessment). In 2018, we have achieved the target of RCSA with the score of 93%. IRPC is ambitious to continue our performance in increasing the risk awareness for our executives by setting a challenging target of RCSA at 95% for 2019. For individual employee, IRPC has applied Organizational Health Index (OHI) to evaluate risk culture and we plan to setup the new model to evaluate risk culture more effectiveness in 2020. After the model implementation, we will conduct the semi-structured interview to top management and line manager for aspect behaviors evidence in 2020. The interview shall include Transparency of risk, Acknowledgment of risk, and Responsiveness of risk. The results will be an input for the model of new aspect behavior or gap improvement.
  • Focused training throughout the organization on risk management principles
    IRPC has its annual enterprise risk management training rolling as requirement for all business units. Our main audiences are risk manager/risk owner and risk agents from those business units who will act as facilitators and change agents to support risk management activities within their business units. In the future we will set the enterprise risk management course annually Training for all employees to build risk management awareness and culture.

    IRPC organized series of risk culture promotion activities, e.g. compulsory risk trainings for risk managers in all departments, integration of risk criteria in the annual employee performance evaluation, integration of risk management performance indicators as a monetary incentive of executives. IRPC also appointed ERM Ambassador and ERM Auditor to assist in monitoring of risk management practices and promote good practices among employees. In addition, IRPC plans to organize formal trainings to raise awareness of risk management for 95% of all employees by the year 2020. IRPC carries out a Risk Control Self-Assessment for executives every 2 years in order to assess the risk awareness and application of risk management framework within the organization.
  • Potential risks reporting throughout the organization
    IRPC has many measures implemented to ensure “all the voice” is heard regards risk management. For example, the monthly risk management reporting session, IRPC corruption mailbox (PO BOX 35) for reporting corruption risks, Behavior Based Safety System (BBS) for identifying Safety and Operation risk, Zero Accident Campaign, Lesson Learned to all employee, etc. It is clearly that there is not only whistle blowing mechanism, but also every channels regarding to risk of all employee in every level reach to Corporate Risk Team.
IRPC encourages and cultivates risk management to be a part of an organization culture. The culture embeds knowledge and understanding for the board of directors, managements, and employees on the importance and obligation for practicing standard risk management framework to allow IRPC to grow sustainably and firmly. IRPC has in place dedicated committee to oversee implementation of risk management framework by managements and employees and continuously report the progress in board level, management level, and operation level as well as improving and reviewing management approach in a timely manner. The committee is also responsible for communicating risks throughout the organization through various channels such as Board of Director’s meeting, Management Committee meeting, Function meeting, Operation meeting, Workshop training, E-mail notification, E-learning, ISPIRIT activities and IRPC DNA activities etc.

Regular Education on Risk Management for Non-Executive Directors
IRPC aims to promote and actively cultivate risk culture throughout the organization. Risk training is particularly important for IRPC to enable board for effectiveness in managing and addressing risks. Therefore, IRPC encourages the board continuing education on risk management by supporting them to participating risk training regularly at least once a year.

IRPC encourages the board continuing education on risk management by supporting them to participating risk training regularly at least once a year. IRPC’s directors regularly receive training from Stock Exchange of Thailand (SET) certified training such as Director Accreditation Program (DAP), Director Certification Program, and Thai Institute of Director Training. In 2018, IRPC's directors received additional training related risk management on Business Continuity Management System (ISO22301:2012) that was conducted by Splendid Consultant Company, and risk training during company site visits in Thailand and South Africa (training topics include risks product development, and risks and opportunities in energy industry).