GC regularly conduct sensitivity analysis and stress testing to evaluate adverse consequences of events and prepare company's risk mitigation measures in short-term and long-term to enhance stakeholder's understanding of the financial vulnerability and viability of our organization. The cases are analyzed as below.
Long-term Financial Performance
GC analyzes financial situation by considering various factors, such as megatrend, industrial/market trend, technology breakthrough, environmental related policy, regulation, and business. This is to define the Group’s business scenario assumptions for long-term price forecasting as a part of the sensitivity analysis and to develop mitigation measures for preparing in advance to mitigate the risks and capture the opportunities in business operation.
GC is aware of the global climate change which possible to impact on the water situation, such as droughts results in low level of water in reservoirs and not enough to supply GC's operation, etc. According to annual water analysis, GC analyzes the negative impact of the water situation while conducting the mitigation measures to minimize water consumption and impact on GC's business. The water management measures are ready to implement in case such situation happens.
GC establishes the climate strategy and goals to reduce energy consumption and GHG emissions from its operations in alignment with Thailand's GHG emissions reduction target and the Paris Agreement under the United Nations Framework Convention on Climate Change (UNFCCC) to regulate rising global temperature. GC performed sensitivity analysis base on GHG reduction target in the assumption of current business growth and portfolio shift growth.
GC set mitigation measures for GHG reduction by focus on expanding portfolio to downstream, enhancing energy efficiency integration and investing in energy saving technologies and alternative energy projects.
The entry of new players, new technology, and economic scale may affect GC business. Cost curve analysis was then performed to define competitiveness position in different scenarios by analyzing those factors and incorporating them into strategic formulation and business risk evaluation process. GC foresees business direction and prepares mitigation plan, including integration of high-capacity industrial area to enhance current business competitiveness for GC’s future growth.
Monte Carlo Simulation
To manage financial performance targets, GC applies the Monte Carlo simulation technique as a tool for executives to understand how both financial and business factors affect target achievement. We analyze business risks that mainly affect our industry, including operational, market and FX risks. As each factor is inter-dependent, we consider the correlation of main factors of our Monte Carlo model to cover full risk exposure and accuracy to prepare the mitigation plan.