Risk Factors

The Company analyzes the environment from both inside and outside including economic, social, political, technological,
industrial, competitor and other trends to identify the major risk factors of the Company with details as follows:

1) Business Risks

1. Strategic Risk

The risk of the competition in the business

Risk Description

Water purifiers are highly competitive products from both domestic and foreign operators. which are different in terms
of product features, styles, prices and sales presentations to customers

Company Risk Management

In order to maintain and increase the market share for SAFE brand the company has developed products and services to
meet the needs of customers, including introducing the Hire Purchase system as the customer’s choice of payment and
after-service. Well-maintained sales Consistently and continuously to maintain and increase customer satisfaction, which
is an important part of increasing the profitability of the company.

The risk of launching new products to the market

Risk Description

The company places the importance of launching in new products into the market. Eachlaunch would require relatively high
investments and designed after studying customer needs and changing factors such as technology, health, well-being,
utility And the competition therefore causes not many new products released each year. Therefore, the company may be
exposed to risks from new product launches that may not be well received by consumers, which could have a significant
impact on the business.

Company Risk Management

Before launching new products to the market, the Company has set goals, strategies and action plans from design and
production as well as has determined marketing and promotional activities. In addition, there are also various
indicators used for tracking and measuring the success of new products launched, which progress results are reported to
the Executive Committee on a regular basis to review the appropriateness of the strategic plan and consider modifying as
appropriate so that the Company can achieve the target set.

The risk from the Company operations being halted

Risk Description

In the current situation, the Company’s business operations are facing with many risks, even if the Company has a
systematic risk management, there are certain risk factors that cannot be prevented, such as epidemic, cyber-attacks and
unexpected events such as lockdown measures from the government, etc. which these factors May affect the marketing of
direct sales staff

Company Risk Management

The Company realizes the importance of business continuity management including preparing a business continuity
management plan to ensure that if any crisis occurs, the company will be able to operate continuously or resume business
in a timely manner. Accordingly, the Company has prepared a business continuity management manual for each department in
order to formulate a plan to respond and act in critical or emergency situations without letting such conditions affect
business operations. Executives in all departments are responsible for analyzing and evaluating business impacts, identifying processes that need to be focused and need to resume or recover within a specified timeframe in order to prepare to deal with the crisis effectively.

2. Operational Risk

The risk of a business being largely dependent on a direct sales team

Risk Description

Business operations rely on direct marketing of salespeople who may encounter problems in recruiting salespeople and turn over salespeople who are unable to recruit salespeople and maintain salespeople to market and increase sales for the company continued due to the impact of various factors such as the COVID epidemic, Changing behavior of people and technology, etc. That may affect the recruitment and retention of direct sales staff to work with the company continuously.

Company Risk Management

The Company has set up a separate direct sales staff recruiting and training unit from the Human Resources Department to support the direct sales department. At the same time, a sales committee has been set up to consider and manage sales results and compensation for sales staff to be appropriate and fair. To incentivize the direct sales staff to work with the company in a sustainable way As a consequence, the Company has expanded its business in the form of Diversified Risks to conduct online-to-offline direct sales and E-Commerce, as well as expanding to do credit lending business, which are; Floor Plan Loans, Truck Leasing and providing more secured loans in order to generate more new income. In 2022, the company has plans for online sales channels and the creation of sales agents in the form of TSR Network that uses more online media as the main. To be in line with the lifestyle of today’s consumers who prefer to buy online. In addition, there are other forms of sales, such as the production and distribution of OEM products to other direct selling companies.

The risk of fluctuation in raw material prices and shortage of raw materials

Risk Description

Because in the production and assembly of water purifiers, it is necessary to order some raw materials, such as water filter housings, filters and electronic parts, etc. Sometimes these raw materials are in short supply or raise the price causing the cost of sales to rise

Company Risk Management

The company has a policy to procure raw materials from at least 2-3 suppliers to reduce dependence on one supplier. as well as to create bargaining power for the company The company plans to purchase raw materials in advance according to production and sales plans. and the plans are reviewed regularly In addition to sourcing strategies The company also prepares a plan to deal with in case of a shortage raw materials by having a certain level of safety stock.

The risk involving safety in consumption and trustworthiness of products from the Company

Risk Description

Because the company’s products are water filters that customers use to provide clean and safe drinking water for consumption. If the customer consumes the water obtained from the company’s water purifier, it affects their health. The company will be liable for such damage and the customer may lose trust in the use of the company’s products and affect the sales and profits of the company.

Company Risk Management

The company is committed to producing products to meet the needs of customers in terms of consumption of clean, safe and beneficial drinking water for the body. under the terms Relevant regulations which the Company has established a quality management system for its production facilities. The company also has a product traceability system. Clear communication of product information as well as a system for receiving customer complaints about product and installation problems. Sales and Pay

The risk from relying on personnel, especially important, high rankings executive officers

Risk Description

The company’s business conduct requires knowledge, ability, expertise, and experience of the personnel’s especially the highranking executives. If the company cannot retain these important officers or cannot find suitable candidates that is equally qualified as a replacement, it might negatively affect business, performance, and financial position of the company significantly.

Company Risk Management

The Company has developed a succession plan that covers the positions of senior management including the progress of the succession plan that has been monitored to make sure that the Company has executives who have knowledge, abilities and experiences that can inherit important positions in the future

3. Financial Risk
The risk of fluctuation interest rate

Risk Description

The fluctuation of interest rate is one of the risk that may cause to the impact to the financial position and operating result of the Group due to more acquisition of the loans to serve for the business expansion of hire purchasing accounts of water purifiers, filters, electrical home appliances, cars, trucks, ice maker machines freezers, financial lending of floor plan, and loans with asset security that may get the impact of higher funding cost with the fluctuation of interest rate.

Company Risk Management

The Group have operated the hire purchase business for over 45 years to serve the customers to be the owners of water purifiers and expand to the hire purchase business of electrical home appliances with the water purifier customer bases under the subsidiary company to run the hire purchase business for 4-5 years and set up to more hire purchase business of other products like ice maker machine, freezer, car, truck, floor-plan, and loans with assets security with the investment and loans from the TSR Company and other many financial institutions in Thailand that currently provide the Credit Facilities totaling amount of over Baht 800 million. The interest rate charged in the hire purchase or loans contracts will be up to the interest rate market to compete with the competitors and to fit with the funding cost for lending. Now the Group take the consideration to look for the long term loans funding with fixed interest rate to match with hire purchase and loans contracts.

The risk of fluctuation exchange rates

Risk Description

The fluctuation of exchange rate is one of the risk that may impact to the financial position and operation result of the Group from the importation parts of raw material and finished goods from the aboard around 18% of all the Group’s purchasing orders in the operation.

Company Risk Management

The Group plan to order the materials and finished goods in the country and aboard that almost in USD currency. In order to protect the currency risk, the Group will book the forward exchange rate with the banks in line with the estimated landed cost of the imported products.

The risk of fluctuation credit

Risk Description

Due to the main business of the Group be on hire purchase business, the quality of hire purchase accounts is a major factor of the Group to earn the interest income. As of 31 December 2021, the Group had the proportion of total over due 3 months hire purchase accounts (less deferred hire purchase interest and deferred output tax) was at 6.18%. The major portion of the existing hire purchase customers of the company is the individual customers between low to medium level customer group. The Company allow the credit to the customers for owing the company’s products and service easily under the company’s credit policy that have been reviewed and controlled for the accounts receivables with over due 90 days that will be classified to doubtful bad debt accounts that may impact to the company’s operation result.

Company Risk Management

The credit risk of hire purchase accounts can be measured with the amount of hire purchase accounts receivable be written off. The preliminary measurement to prevent the default risk rely on reviewing the quality and creditability of target customers by sale men and sales supervisors before signing the hire purchase contracts. After that, checkers from the credit department will go to the customers; houses for reviewing the creditability and capable of customers to pay the installments and checking the installation of water purifiers by sale team whether it is completed because of their responsibilities to collect the money in each installment. For the hire purchase accounts of electrical home appliances through Thiensurat Leasing Co., Ltd. (TSRL), all hire purchase accounts have to verify with the National Credit Bureau (NCB) and TSRL’s credit policies before approval to sell. In case of bad debts, salesman and their supervisors will take the responsibilities for the loss to the company as the company’s regulations and the company keep to chase the overdue amounts back by the credit enforcement and legal department including with taking the products returned for the overdue accounts.

4. Compliance Risk

The risk of changing policies, rules, and regulations involving the Company’ s business conducts

Risk Description

The present, the Company’s business and distribution of water purifiers are not directly regulated by government agencies. However, there are many government agencies involved in the business of the company indirectly, namely, the Office of the Consumer Protection Board (OCPB), responsible for overseeing that companies that operate hire purchase businesses do not take advantage of consumers, and the Office of the Consumer Protection Board (OCPB) controls direct sales. by requiring direct sales operators to have a specific business license As for the Ministry of Industry, it will oversee the renewal of factory licenses, which the company considers as the main policy to strictly comply with the regulations of the relevant agencies. However, the Company is at risk in the event that government agencies may enforce more stringent rules regarding its business operations.

Company Risk Management

The company has set guidelines for working in accordance with the guidelines set by the government at present. Along with following up on information about the guidelines for the modification of the relevant regulations at all times. in order to develop and improve the Company’s operations in accordance with government regulations. At present, the company has 4 factories to produce, assemble and repair, of which the main factory for the production, assembly and repair of water purifiers is located at Tambon Bang Kradi, Amphoe Mueang Pathum Thani, Pathum Thani Province The other 3 factories are located in Nonthaburi Province. All factories have been granted factory licenses and in 2019, the government amended the Factory Act, resulting in no need to renew the factory license annually. From the aforementioned act, the factory has an expiration date until the termination of the factory business is notified.

Risk of Infringement of Personal Information (Data Privacy)

Risk Description

In the digital world, information has become a vital tool in building business advantages. Companies can analyze data and add value to their businesses. As a result, many businesses are trying to collect every information in order to be further developed and benefit the business in the future. Until sometimes it violates the privacy of consumers, this may be considered as an offense according to the Personal Data Protection Act 2019 that may affect the image and reputation of the Company.

Company Risk Management

The Company realizes the importance in protecting personal information with a focus on giving respect and importance of rights, personal information and personal data protection. These are fundamental rights to privacy that must be protected under the Personal Data Protection Act 2019. For this reason, the Company has set a policy to be the key in protecting personal information as a guideline for executives and employees at all levels in the use of personal information, which covers from the collection of personal information, the use or disclosure of personal information, the quality of personal information, the measures for the security of personal information and rights of the data subject for the purpose of the appropriate use of personal information and does not violate privacy according to Personal Data Protection Act A.D. 2019 has set.

2) New Emerging Risks

New Emerging Risks

Outbreak Risk of Coronavirus Disease 2019 (COVID-19)

Risk Description

From the situation of the COVID19 outbreak, which has spread in many countries around the world since the end of 2019 including Thailand from January 2020 and has directly and indirectly affected health, economic and social conditions, many countries have taken measures to restrict economic activity and travel, which have widespread impact on supply chains in many countries. This may significantly have a negative impact on the business performance and financial status of the Company in a wide range of health, economy and society. In 2021, the epidemic of COVID-19 was so widespread and severe that the company’s sales decreased by 13.20% and profits by 78.33% because of the outbreak situation, the company was unable to increase and maintain teams. Direct selling because employees and customers are infected with covids until the company is unable to visit customers at home to present products like normal events. as well as the income of the customers themselves have decreased until they have to reduce their spending and unable to pay for products to the company

Company Risk Management

Although the company realizes the importance of being prepared to cope with the outbreak situation. But this year’s COVID-19 epidemic situation is so severe that companies have to conduct risk assessments to identify potential impacts on each side of their business. including preparing an appropriate response plan and covering all important aspects with the establishment of an executive committee to fight the war to act to drive different policies to proceed in the prescribed way, including monitoring the operations and recovering the incidents in their department so that continuity can be managed and returned to normal as soon as possible

Risk from Digital Technology Changes

Risk Description

The transformation of digital technology is evolving and changing rapidly, which affect changes in behaviors on perspectives and people’s lives around the world including business operations and the competitiveness of the Company.

Company Risk Management

The Company pays attention to technology development to increase competitiveness, operational efficiency and to create diversity in products and services of the Company. For this reason, the Company has established a team to make a plan, follow digital technology trends and prepare for such changes as Development of sales channels through Online Platform. Development of Customer Data Management System to effectively respond to customer needs. Use of RPA (Robotic Process Automation) and new manufacturing technologies to increase work efficiency.

Risk of Securities Holders' Investment

The risk of conducting business as a holding company

Risk Description

The Changyoo family is the Company’s major shareholder group (further details can be obtained from Part: Listing Securities and Shareholding Structure). As of 31 December 2021, Changyoo group held 322,453,877 shares or 58.69 % of issued shares. As a result, the Changyoo group is able to control almost all resolutions of shareholders’ meeting, including the appointment of directors or any matters that require the majority votes of shareholders. The power of the major shareholder, however, does not include the issues related to laws or regulations, for which threefourths of the shareholders are required. Given the control power of the major shareholder, other shareholders are unable to gain votes enough to balance the power of the major shareholder group for some particular issues proposed by the major shareholder.

Company Risk Management

The Company Being aware of this risk factor, arranges the management structure, consisting of the Company’s Board of Directors and the Audit Committee. The members of these committees are those with high experiences. 5, out of 10, are independent directors from outside, of which 3 independent directors act as the members of the Audit Committee. These members provide comments in regard to connected transactions prior to proposing to the Company’s Board of Directors and shareholders’ meeting.