2. Risk factors

As the Company has been affected by flooding in 2011, the Company then
has reviewed policy and criteria for risk management and made an
amendment as well as reviewed risk assessment and set up criteria or
manuals in order to support or manage or reduce any anticipated risk
which may cause new type of lost for the whole organization. These
actions are for better performance and for continual business operation.
In addition, risks are forecasted concretely with lost prevention
measures as well as to have insurance for any risk situation. Moreover,
if risk has occurred, there are measures to cope with post-event in
order to limit extent of lost as small as possible.

1.  The following are the Company’s risk management policy

    “The Company must ensure safety of life and body of employees by
    considering as the highest priority and must maintain process
    property and to cope with risk by coordinate with local and
    government offices, make a relationship with other industries as
    well as provide suggestions of necessary and adequate information
    for risk management measures”

    The company has established Managerial Risk Management Committee in
    which executive chairman acts as chairman of the committee and
    member are the management of major department. The role of the
    committee is to develop risk management plan in order to ensure that
    company risk management is adequate and appropriate, staying
    acceptable level, and continually being implemented so that the
    organization will be able to achieve the objectives and goals.
    Management and employees in each business unit are assigned to
    anticipate risks around them so as to set up strategy to prevent
    loss causing from such risk. In case that such risk eventually
    happens, responsive measure needs to be developed to ensure that
    loss is minimized. Monitoring system is also required to watch out
    new risks that possibly occur and then report to the executive
    committee.

    The role of Risk Management Committee:

    1. Risk Management

    - Analyze and assess risk for hazard identification

    - Monitor status of guidelines and manuals for risk response

    - Review and monitor effectiveness of guidelines and manuals

    - Order to correct guidelines and manuals per results of review and
    monitor

    - Conduct training for risk management

    2. Follow emergency procedures in case of crisis situation

    3. Review promptness of information technology system security

    4. Conduct social responsibility activities

    5. Consider measures to prevent recurrent and propose to the
    executive meeting

    1.  In addition to Risk Management Committee, Crisis Control
        Committee has been established with the role to develop
        requirements and measures in case of crisis such as fire,
        develop training plan, create scenario, evaluate, record, and
        inspect security at workplace. TOP GUN team is another support
        team that takes special training to help in the case of fire.

        In case of emergency, an emergency command center will be
        established and the CEO is the chair, deputy CEO is a deputy
        chair, and members are executives. Risk management committee and
        heads of all departments of the Company will work together in
        order to manage that risk and connect risk management
        information with Stanley Electric Company Limited in Japan.

        According to the risk assessment, no significant risk to
        investors has been found. There is only normal business risk
        which is in Average level; namely, such risks can be reduced.
        Budget for reducing risks has to be spent carefully and the
        measures must be developed within time frame. Examples of the
        risks include:

    1. Risk caused from economics and political instability in the
    country

    - Performance Improvement Strategy Office has been established in
    order to study about cost reduction as well as study business
    environment to find measures of maintaining profit margin.
    Management meeting is held and update information is posted on
    announcement board every week.

    2. Risk caused from foreign exchange rate and loan

    1.  - This risk arises because of raw materials importing and
        exporting. Such business transaction is usually in short term,
        approximately 1-3 months with currency of Yen and U.S. dollar.
        Measure of preventing this risk is to use Forward Contract.

        Executive committee is the person who considers acceptable risk
        level for each transaction and each partner. Forward contract
        policy remains unchanged which can prevent risk by 50% of total
        net debt in foreign currency. The contract will be made only
        with the main bank that the company is using service. The
        company will not do speculating business transaction.

        - Risk caused from loan: the company has no significant risk
        from loan clustering. The company made a contract of derivatives
        and deposited cash with the reliable financial institutions.

        3. Risk caused from increasing in materials cost and being short
        of suppliers

        The policy on this matter is not dealing solely with any
        particular manufacturer or supplier. As the supply is more than
        demand for this material, the company can choose the supplier
        who is strong, capable, and stable in financial status. All
        factors can be a purchasing power of the company to negotiate
        with the suppliers.

    4. Risk caused from infrastructure

    1.  As this business needs to be operated by using huge machinery
        and it is developing to be Clean Factory, the manufacturing
        process therefore needs to maintain keep temperature and
        humidity in appropriate level in order to minimize impacts
        toward products and delivery. If electricity problem occurs, it
        will highly effect to the production process, the company
        therefore asks for the cooperation from Provincial Electricity
        Authority (PEA) to supply electricity from 3 PEA substations. In
        addition, the company has constructed 2 of 115 KV substations
        within the company in order to balance load; the purpose is to
        increase efficiency and make sure the stability of power supply
        to the company factory.

        Risk assessment of natural disasters and accident: Last year is
        the first year that the Company is affected from flooding. Then,
        the Company has reviewed risk of natural disaster and accident
        as well as assessed possible loss. In addition, all departments
        has set up prevention plans as well as risk prevention measures
        of those risks especially risk of flooding because the Company
        is located in Pathumthani Province which is flooding risky area.
        Disaster commander center which was established in September,
        2011 in order to prevent loss from flooding is responsible to
        set up plan as well as follow up of plan compliance until all
        prevention measures are implemented completely.