Baker Technology LimitedAnnual Report 2014
35
The recent drop in oil prices from a high in June 2014
to a near six-year low of in January 2015 has reduced
oil and gas expenditure, especially in exploration.
To mitigate this risk, the Group, through Baker
Engineering, has forayed into the less volatile oil
productionmaintenance segment.
With steel being the main element in the Group’s
products, volatility in prices or delayed delivery of raw
materials resulting in extended completion time and
couldweighon theGroup’s financial performance.
Tobettermanagepricefluctuations inthemarket,theGroup
accounts for steel price volatility within its contracts with
customers, while maintaining close working relationships
with its long-term suppliers toensure timelydeliveryof raw
materials for thesmoothcompletionofprojects.
Baker Tech continues toexplorebusinessopportunities
to diversify its core activities and actively engages
in research and development to stay current with
technological developments and product innovations
in order to fortify its existing range of products and to
developnewproducts toextend itsmarket reach.
FINANCIALRISKS
Due to the nature of the oil and gas market and the
geographical spread of Baker Tech’s customers and
suppliers, theGroup isexposed tocurrencyfluctuations,
primarily inUSdollar, Euro andSingaporedollar.
To minimise the impact on its financial performance,
the Group adopts natural hedging by procuring
resources in the same currency as the sales currency
and undertakes spot conversion of excess foreign
currencies toSingaporedollar as required.
Most of the Group’s operations are project-based
executed over a prolonged period of time. With
paymentsmadeprogressively, theGroupcanpotentially
run into credit risks anddefaults.
Toensurefinancialdiscipline, theGroupadoptsapolicy to
impose credit verifications and predominantly deals with
counterparties with high credit ratings. Inmost instances,
theGroup also collects up-front non-refundabledeposits
andclosely reviewsoutstandingdebtsanddebtors.
OPERATIONALRISKS
Operational risks are particularly inherent in the
manufacture of heavy and oversized offshore
engineering equipment. Accordingly, the Group has
put in place measures that allow for pre-emptive
identification of areas of potential exposure which can
beaddressed tominimiseadverse impact to theGroup.
Risk assessment is also carried out before the start of
production activities and daily toolbox meetings are
conducted by supervisors to reinforce the importance
of workplace safety andhealth to all workers.
All operational employees of the Group are required to
undergo internal safety briefings, external competency
training,orientationprogrammesandfireevacuationdrillsto
ensurepreparednessandcooperationduringemergencies.
Toensure seamless andefficient operations, it is crucial
for theGroup to hire and retain skilled and competent
employeeswith relevant experience.
Tightening labour regulatory measures in the marine
sector can result in hiring challenges. To address this
risk, Baker Tech has established comprehensive human
resource policies for the recruitment, compensation,
development, engagement and retention of staff, to
maintain its competitiveedge.
By observing internal andexternal controls, theGroup
is determined to maximise operational efficiency
through any downtime and ensure continuity to fulfil
customer obligations.
