SEMINAR & WORKSHOP BEDAH INDUSTRI 2013

1. to SEMINAR & WORKSHOPBEDAH INDUSTRI 2013 Sesi ProspekPembiayaan, Karakter, dan Langkah MitigasiRisikoSektor Pertanian PROSPEK INDUSTRI 2013: UjiProyeksiKinerjaSektorUnggulanbagiBank & LembagaKeuanganLainnya 20 and 21 March 2013 By Ir. Tony Silitonga MBM MBA DBAcan

2. What is AGRICULTURE ?

3. Module Content The Nature of Risk Board Risk Management, Benefits, Process Role Identification of Risks in Agriculture Risk Assessment Mapping in Agriculture Risk Mitigation and Monitoring in Agriculture COSO II Framework Disaster-recovery and Business-continuity Planning in Agriculture Communicating Risk Management Policies Fund Raising Prospect and Investment Characteristics in Agriculture Introduction, and Orientation

4. Module Expectation

5. Module Expectation

6. Module Agenda TIME TOPIK 5 Min Introduction, Orientation 5 Min Board Risk Management Role , Benefits, Process 5 Min Identification of Risks in Agriculture 5 Min Risk Assessment Mapping in Agriculture 5 Min Risk Mitigation and Monitoring in Agriculture 5 Min COSO II Framework 5 Min Disaster-recovery and Business- continuity Planning in Agriculture 5 Min Communicating Risk Management Policies 15 Min Fund Raising Prospect and Investment Characteristics in Agriculture 5 Min Summary, Action Ideas, Closure Introduction, Orientation: The Nature of Risks 6

7. Refresh on Governance, Risks & Compliance Introduction, Orientation: The Nature of Risks

8. Brief Facilitator’s Resume Ir. Tony Silitonga MBM MBA DBAcan Tony Silitonga has been working for more than twenty five (25) years in different countries, different industries, with different multinationals, such as: IBM, Atlantic Richfield Oil & Gas Company (Indonesia), Standard Chartered Bank (The Philippines), Merrill Lynch (USA), China Development Industrial Bank (Taiwan), and Indonesian Bank Restructuring Agency (IBRA). He is the member founder of Total Recovery Strategist (TRS), SentraPemimpin Asia (SPA), and FORESPECT. Graduated from Bandung Institute of Technology major in Petroleum Engineering, he has got his Master in Business Management (MBM) majoring in Finance and Strategic Management from Asian Institute of Management (AIM), Makati (Philippines), and MBA from Columbia Business School (CBS), New York (USA) Finance-Exchange scholars’ program. Recently, he is finalizing his Dissertation for Doctorate in Business Administration (DBA) from De LaSalle University – Manila (Philippines), major in Finance, Strategic Management, and Good Corporate Governance. He was The Executive Director of Indonesian Institute for Corporate Directorship (IICD) from 2004 to 2010, and recently member of IICD Board of Management. Tony Silitonga was also The Executive Director of AAF (Asia Anti Fraud) Foundation that was founded with the mission to increase the body of anti fraud knowledge and support anti fraud professionals within Asian region through seminars, workshops and consultation. Tony Silitonga is the Chairman of FORESPECT, Commissioner of SPA, andBoard of Directors of Total Recovery Strategist (TRS). Tony was working as The WorldBank Consultant on Government Implementation Control System-GICS implementation at BPKP. Tony Silitonga is currently working on The Indonesian Corporate Governance Road Map Task Force at OJK (Indonesian Financial Services Authority) for Indonesian preparation to 2015 ASEAN Economic Community financed by IFC and Asian Development Bank (ADB). Introduction, Orientation: The Nature of Risks

9. Selected Advisories: Introduction, Orientation: The Nature of Risks

10. Selected Hands-on Consultancies: • STANDARD CHARTERED BANK, The Philippines • MERRILL LYNCH, New York, USA • STERLING TRANSTRADE, Manila, The Philippines • DRUGSTORE, INC., Manila, The Philippines • ELNUSA HOLDING CO., Jakarta, Indonesia • GLOBAL FOREST, INC., Singapore • VISEAN ONLINE PTY LTD, Richmond, VIC, Australia • PT.INHUTANI I, II, III, IV and V Jakarta, Indonesia • CIPE – Indonesian CG Scorecard based on OECD Standard Code & Conduct • THE WORLDBANK – ROSC – Report on Observance for Standards & Codes • THE WORLDBANK - GICS Implementation based on PP 60/2008 at BPKP • OJK (Indonesian Financial Services Authority) Introduction, Orientation: The Nature of Risks

11. Module References • OECD – Organization for Economic & Corporate Development Materials-WWW.OECD.ORG (Search for “Tony Silitonga”) • The WorldBank –IFC, “In-Depth Advanced ToT” • FAO, “Risk Mitigation and Management for Agricultural Investment” • FAO, IFAD, IMF,OECD, UNCTAD, WFP, the World Bank, the WTO, IFPRI and the UN HLTF, “Price Volatility in Food and Agricultural Markets: Policy Responses” • IRGSC Policy Brief No 002, February 2013 • Youtube, for Quotes & Supported Films • The Worldbank Facilitation Consulting Recorded Film • SOX – Sarbanes & Oxley • WWW.TRS-Leadership.webs.com • WWW.IICD.OR.ID Introduction, Orientation: The Nature of Risks

12. The Recent Global Issues ? What are BIG PICTURE Introduction, Orientation: The Nature of Risks

13. The Recent Global Issues ? What are BIG PICTURE Introduction, Orientation: The Nature of Risks

14. The Recent Global Issues ? What are BIG PICTURE Introduction, Orientation: The Nature of Risks

15. The Recent Global Issues ? What are BIG PICTURE Introduction, Orientation: The Nature of Risks

16. The Recent Global Issues ? What are BIG PICTURE Introduction, Orientation: The Nature of Risks

17. “WINNING The GLOBAL MOMENTUM” ? The ten largest economies in the world in 2050, measured in GDP nominal (billions of USD), according to Goldman Sachs in 2011 Are You Ready in Introduction, Orientation: The Nature of Risks

18. Are You Ready in “WINNING The GLOBAL MOMENTUM” ? BIG PICTURE Introduction, Orientation: The Nature of Risks

19. Are You Ready in “WINNING The GLOBAL MOMENTUM” ? BIG PICTURE Introduction, Orientation: The Nature of Risks

20. Are You Ready in “WINNING The GLOBAL MOMENTUM” ? BIG PICTURE Introduction, Orientation: The Nature of Risks

21. The Recent Findings? What are BIG PICTURE Introduction, Orientation: The Nature of Risks

22. The Recent Findings? What are BIG PICTURE Introduction, Orientation: The Nature of Risks

23. The Recent Findings? What are INDONESIA BIG PICTURE Introduction, Orientation: The Nature of Risks

24. The KEY in “WINNING The GLOBAL MOMENTUM” ? LEADERSHIP Introduction, Orientation: The Nature of Risks

25. Board’s Role The Board Should Know About and Evaluate The: Most Significant Risks Facing The Company Possible Effects on Shareowners Company’s Management of A Crisis Importance of Stakeholder Confidence in The Organization Communications With The Investment Community The Board Should Ensure That: Sufficient Time is Devoted To Discuss Risk Strategy Appropriate Levels of Awareness Exist Throughout The Organization Risk-Management Processes Work Effectively A Clear Risk-Management Policy is Published Board Risk Management Role, Benefits, Process 25

26. Directors Role, Tasks, & Responsibilities On Risk-Management • Directors’ ROLE: • Directors are responsible for protecting shareholders’ investments and promoting shareholders value. • 2. Defining RISK TOLERANCE LIMITS: • The boards should define its tolerance as to risk and require the installation of a risk management system commensurate to such a tolerance limit. Board Risk Management Role, Benefits, Process

27. Directors Role, Tasks, & Responsibilities On Risk-Management • 2. Director’s TASKS in Setting The Risk Management Policy is as Follows: • Know the CAPACITY of the company to accept and manage risks. • Know theORGANIZATIONand APPROACHof the company for taking on and managing risks. • Monitor the risk by ensuring that he/she gets the INFORMATION NEEDED as a Director. Board Risk Management Role, Benefits, Process

28. Directors Role, Tasks, & Responsibilities On Risk-Management • 4. Directors’RESPONSIBILITIES are as follows: • To protect the company’s assets and reputation and promote shareholder value by TAKING PRUDENT RISKS. • To view risk on an enterprise-wide basis by understanding the nature of risks inherent in the business, SET UP PROACTIVE CONTROLSfor those risks and CONSIDER RESPONSES FOR ANY CRISIS. • To participate in the SETTING UP OF A RISK MANAGEMENT POLICY. Board Risk Management Role, Benefits, Process

29. Benefits of Risk Management OPERATIONAL PERFORMANCE Increases The Likelihood of Achieving Business Objectives Uses Incidents To Highlight The Risk Environment and Helps Management Develop Performance Indicators or Risk Indicators To Enhance Business Performance and Processes Facilitates The Management of The Delivery of Risk in Key Projects and Initiatives FINANCIAL Protects and Enhances Value By Prioritizing and Focusing Attention on Managing Risk Across The Company Contributes To A Better Credit Rating As Agencies Increasingly Focus Upon Enterprise Risk Management Builds Investor and Stakeholder Confidence, and Shareowner Value Reduces Insurance Premiums Through Demonstrating A Structured Risk-Management Approach DECISION-MAKING Shares Risk Information Across The Company, Contributing To Informed Decisions Facilitates Assurance and Transparency of Risks at Board Level Enables Decisions To Be Made Against Risk Appetite Board Risk Management Role, Benefits, Process 29

30. OECD Principles Of Corporate Governance “The Board should fulfill certain key functions including: Ensuring the integrity of the corporation’s accounting and financial reporting systems, including the independent audit, and that appropriate systems of control are in place, in particular, systems for risk management, financial and operational control, and compliance with the law and relevant standards.” “In every single business failure of a large company in the last five decades, the board was that last to realize that things were going wrong.” Peter Drucker, Managing for the Future Board Risk Management Role, Benefits, Process 30

31. OECD Principles Of Corporate Governance “The Board should fulfill certain key functions including: Ensuring the integrity of the corporation’s accounting and financial reporting systems, including the independent audit, and that appropriate systems of control are in place, in particular, systems for risk management, financial and operational control, and compliance with the law and relevant standards.” SOX: GRC Board Risk Management Role, Benefits, Process 31

32. OECD Principles Of Corporate Governance “The Board should fulfill certain key functions including: Ensuring the integrity of the corporation’s accounting and financial reporting systems, including the independent audit, and that appropriate systems of control are in place, in particular, systems for risk management, financial and operational control, and compliance with the law and relevant standards.” PURPOSE of GOVERNANCE ? Board Risk Management Role, Benefits, Process 32

33. Risk And Performance “To improve performance, you have to understand how to better manage risk.” Sir Nigel Turnbull, UK, 1999. Identification of Risks in Agriculture 33

34. Identified Risks STRATEGIC Unfocused strategy Strategy not aligned with capabilities Complacency arising from past success Unsuccessful acquisition/abortive bid Failure to manage major changes Reputational risk Loss of investors’ confidence Political/general economic risk PEOPLE Leadership/Management unable to drive company forward Inadequate succession planning Loss of key players Poor employee motivation Internal communication weaknesses MARKETPLACE Not responding to market trends/failure to motivate Missed opportunities – new tech., global markets Weak brands Over-reliance on a few customers Poor customer satisfaction – quality/timeliness ETHICAL Failure to enact high standards of ethics Obtaining contracts unethically Stakeholder concerns on products/business probity SUPPLIERS/OUTSOURCERS Over-dependence on suppliers/outsourcers Failure to manage cost/quality of outsourced service Supply chain problems Joint ventures, strategic alliances not working FINANCIAL Cash flow/going concern problems Treasury operations risk Susceptibility to fraud/accounting irregularities LEGAL/COMPLIANCE Failure to protect intellectual property Health, safety, environmental issues Litigation risk Breach of competition, corporate, employee, tax laws Identification of Risks in Agriculture 34

35. Activity: Identify Risks Form Small Groups Identify Key Risks for A Corporation That You Are Familiar With Write The Risks on A Flip Chart Consider: Strategic People Marketplace Ethical Suppliers/Outsourcers Financial Legal/Compliance Environmental Political Activity: Identify Risks 35

36. Risk Management A logical and systematic method of Identifying, Analyzing, Assessing, Treating, Monitoring and Communicating risks associated with any activity, function or process in a way that will enable organization to minimize losses and maximize opportunities BRUCE LEE BRUCE LE Risks Assessment Mapping in Agriculture 36

37. Risk Management A logical and systematic method of Identifying, Analyzing, Assessing, Treating, Monitoring and Communicating risks associated with any activity, function or process in a way that will enable organization to minimize losses and maximize opportunities IAAT - MC Risks Assessment Mapping in Agriculture 37

38. Risk Management Risks Assessment Mapping in Agriculture 38

39. Risk Assessment Likelihood – Probability of occurrence Consequences/ Impact – Severity of loss Risk Assessment Mapping 39

40. Likelihood HIGH Likely To Occur Each Year More Than 25% Chance of Occurrence MEDIUM Likely To Occur in A 10-year Period Less Than 25% Chance of Occurrence LOW Not Likely To Occur in A 10-year Period Less Than 2% Chance of Occurrence Risk Assessment Mapping 40

41. Consequences / Impact SIGNIFICANT Financial Impact on The Organization is Likely To Exceed $Xx Significant Impact on The Strategy or Operational Activities Significant Stakeholder Concern MODERATE Financial Impact on The Organization is Between $Xx And $Xx Moderate Impact on The Strategy or Operational Activities Moderate Stakeholder Concern MINOR Financial Impact on The Organization is Likely To Be Less Than $Xx Low Impact on The Strategy or Operational Activities Low Stakeholder Concern Risk Assessment Mapping 41

42. Risk-Assessment Matrix CONSEQUENCES & LiKELIHOOD 1 2 3 4 5 RC5,RL5 5 4 3 2 1 Risk C onsequences RC1,RL1 Risk L ikelihood Risk Assessment Mapping

43. Risk-Assessment Matrix CONSEQUENCES , LiKELIHOOD & APPETITE • The amount a firm is willing to lose • The financial resources it has available • The amount it is getting paid to take risk 1 2 3 4 5 5 4 3 2 1 Risk C onsequences 1 2 3 4 5 Risk A ppetite Risk L ikelihood Risk Assessment Mapping

44. Risk Response Potential Responses Reduction (mitigation) Avoidance Transfer Acceptance Assessment of Potential Response Consequences Selection of Response Risk Response & Monitoring 44

45. Risk-Management Process/Steps Risk Identification Risk Assessment Deciding on Appropriate Action Risk Monitoring Risk Mitigation and Monitoring in Agriculture 45

46. Risk Response Examples of Action to reduce Risk Likelihood • Compliance Program • 2. Review on Contracts • 3. Review on Organization • 4. Review on Business Process and Model • 5. Training • 6. Supervision • 7. Quality Management • 8. Process Control • 9. Maintenance • 10. R&D Risk Mitigation and Monitoring in Agriculture

47. Risk Response Examples of Action to reduce Risk Consequences • Contingency Planning • Disaster Recovery Plans • Public Relations • Pricing Policy • Activity Relocation • Insurance • Outsourcing • Strategic Alliances Risk Mitigation and Monitoring in Agriculture

48. Effective Risk-Monitoring Tools Monitor “Key Performance Indicators” Provide Red Flags, Usually Via “Dash Boards” or “Balanced Scorecards” “Traffic Lights” and “Heat Maps” are Common Include Flexibility To Question The Risk-monitoring Personnel and Request Feedback Ensure That Formal Follow-up Actions and Recommendations by The Board are Implemented by Management Risk Mitigation and Monitoring in Agriculture 48

49. Risk-Management Framework: COSO II Approach Adopted by Indonesian Government on Government Internal Control System – GICS / SPIP (Sistem Pengendalian Internal Pemerintah) PP.60 / 2008 COSO II Framework 49

50. Risk-Management Framework: COSO II Approach Risk Management (RM) is defined by COSO as “a process, affected by an entity’s board of directors, management and other personnel, applied in a strategy setting and across the enterprise, designed to identify potential events that may affect the entity, and manage risk to be within its risk appetite, to provide reasonable assurance regarding the achievement of entity goals” COSO explains the RM in three (3) dimensions: • Organization’s objectives (from RM perspective) • Components of RM • Levels of Business Organization The goal of RM Framework is to help the organization achieve its objectives. The horizontal dimension divides the organization’s objectives into four (4) types: • Strategic: High-level goals of an organization which support it in achieving its mission • Operations: Effective and efficient use of its resources • Reporting: Reliability of reporting • Compliance: Compliance with applicable laws and regulations COSO II Framework