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
Impact of external circumstances and factors on financial performance
GC analyzes financial situation by considering various factors, such as megatrend, industrial/market trend, technology breakthrough, environmental related policy, regulation, and business, including geopolitical tension. 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 conducts crisis tests based on the simulation of the most extreme situations that generate significant business and financial impacts, such as the trade war between superpowers, the conflict between Russia and Ukraine, and the economic slowdown. The tests take into account impacts on raw material prices, product prices and business performance as well as prepare measures to mitigate potential impacts and ensure that risks are appropriately managed while also creating business opportunities.
GC conducts a sensitivity analysis in the case of drought by exploring the water situation in major reservoirs based on rainfall assumptions, water consumption and simulations that analyze water shortage risks in various plant sites. GC also prepares measures to mitigate impacts, such as appointing a working group to monitor water situation, developing a business continuity plan for water consumption reduction and locating additional water sources, etc., in preparation for drought crises. In doing so, GC collaborates with both the government and the private sectors.
GC conducts a sensitivity analysis by comparing greenhouse gas emissions from new investment projects and greenhouse gas reduction from current operations against goals to assess the emission gap which is used to define goals and shape greenhouse gas emissions management guidelines in each business group.
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.
Competitiveness analysis in changing environmental situation
Analyzing economic and industrial situation under changing and intensive implementation of different climate change policies (Base Case, Accelerated Energy Transition Case, and IEA’s Sustainable Development Scenario); assessing impacts on the petrochemical industry, end industry and GC’s competitiveness in the medium and long run (5-10 years) to determine strategic plans and risk management measures.
Financial Simulation Model
GC analyzes potential financial impacts on its turnover by taking into account changes of various key factors, such as raw material prices, key product prices, currency exchange rates. Furthermore, the company closely monitors market updates on a weekly basis to analyze changes in product prices and their impact on the company’s turnover as well as define plans and guidelines to mitigate potential impacts.