THE PERFORMANCE
MATERIAL RISKS | continued
CREDIT, LIQUIDITY AND
MARKET RISK
4
The profile of the credit book with regards to concentration
and geographical risk, remains a risk factor. The lower out-
look on farmer profitability puts further pressure on the pro-
ducers’ balance sheets and constrains the primary industry
of the agricultural value chain.
Opportunities
Diversification and/or expansion of cur-
rent product and/or service offering and
solutions;
Diversify or externalise into new markets;
and
Optimisation of current and/or develop
ment of new products, services and solu
tions relating to the mitigation of credit,
liquidity and market risk.
The Senwes group is also exposed to medium-term liquidity
and volatile interest rate changes. Market risk includes the
repricing of the South African economy, with regards to credit
ratings.
Mitigation and control
The potential credit concentration risk relates mainly to deb
tors. Debtors consist of many clients, spread over different
geographic areas. Credit is extended in accordance with the
credit policy of the group. Prudent credit evaluation proces
ses are strictly adhered to. The group is also naturally hedged
against fluctuating interest rates to a large extent since inter-
est-bearing debt is mainly utilised for interest-earning assets,
both at floating interest rates. Contracts, however, are all
linked to the prime rate.
URBANISATION, SCARCITY AND
RETENTION OF SKILLS RISK
The group is exposed to rural and/or agricultural areas, not
only with regards to business operations, but also with re-
gards to the scarcity of necessary skills in these areas.
The retention and recruiting of the right fit employees are a
challenge in the industry and to Senwes. The rural operating
areas of Senwes add to the risk exposure.
Mitigation and control
Our integrated skills development framework guides pro-
portionate, yet balanced, investment in various skills de-
velopment categories across all levels of the organisation.
The framework sets clear guidelines for employees to ac-
quire the full spectrum of training, ranging from technical to
job-specific skills, without neglecting the need for personal
growth, people skills and leadership development.
Volatile commodity markets such as grains, oilseeds, fertili
ser, steel and oil markets have an impact on input costs and
the cost of capital goods for producers and therefore create
trading risks.
Opportunities
Optimisation of current and/or deve
lopment of new hedging instruments
or products. New, innovative and ef-
fectively managed products will add
value to the pricing portfolio of the
client.
Mitigation and control
The group uses derivative instruments to manage and hedge
exposure to commodity price risk. In accordance with the
group’s risk management policy, only minimal unhedged
market positions exist from time to time. The hedging instru-
ments used, consist of soft commodity futures contracts, as
well as option contracts.
Strategic focus areas triggered
Reorganisation of business models.
For more info on the group strategy see p. 40
Strategic focus areas triggered
Diversification, horizontal integration and
consolidation;
Reorganisation of business models; and
Externalisation.
For more info on the group strategy see p. 40
5
7
TRANSITION AND
CUSTOMER RISK
The group is exposed to technological quantum leaps in
agriculture, alternative storage solutions, customer needs
and priorities, which could all lead to a paradigm shift within
the agricultural sector. The group's sustainability and repu-
tation is at risk without transition and diversification.
Mitigation and control
Opportunities
Invest in integrated rural skills deve
lopment programmes;
Optimisation of development pro-
grammes relating to personal growth,
people skills and leadership;
Optimisation of skills retention stra
tegies and succession planning; and
Development of solutions for emer
ging farmers.
Strategic focus areas triggered
Diversification, horizontal integration
and consolidation;
Reorganisation of business models;
Unlocking value synergies;
Increased investment in efficiencies
in the value chain; and
Externalisation.
For more info on the group strategy see p. 40
56
6
COMMODITY PRICE RISK
SENWES INTEGRATED REPORT 2019
Senwes still believes in strong client relations and daily at-
tempts to better these relations. Customer needs and our
ability to fulfil those needs remain high on the company’s
agenda.
Senwes has further embarked on a project to develop com-
prehensive farm management solutions, which will enhance
our customers’ ability to take crucial business decisions
based on key drivers. These solutions will integrate the
various aspects of the Senwes business value chain in a
seamless way, in order to enhance the overall customer ex-
perience. The group's Innovation and Integrated Solutions
division is responsible for the design and development of
innovative business solutions, that will enhance the overall
customer experience and ultimately increase revenue.
Alternative storage structures are addressed by innovative
market transactions and by investments in technology and
infrastructure at the silos.
Opportunities
Leveraging innovation and techno-
logical advancement in the agricul-
tural sector to gain and retain clients
and to cater for their evolving needs;
Optimisation and development of
current products, services and solu-
tions;
Developing innovative, integrated,
top of the range, solution-driven
products, services and advice to
meet clients’ evolving needs;
Reorganisation of business models;
and
Increased investment or participation
in the areas of the value chain, which
are yielding good long-term results
and would be beneficial in mitigating
transition and customer risk.
Strategic focus areas triggered
Diversification, horizontal integration
and consolidation;
Internal integration of the customer;
Reorganisation of business models;
Unlocking value synergies;
Increased investment in efficiencies
in the value chain; and
Externalisation.
For more info on the group strategy see p. 40
SENWES INTEGRATED REPORT 2019
57