Comprehensive Risk Management: Pillars of Sustainability and Growth
Pupuk Kaltim is committed to delivering maximum benefits to shareholders and all stakeholders. We recognize that in every business practice, there are elements of uncertainty—both from internal and external environments—that can affect the achievement of company objectives. In the midst of a dynamic and increasingly complex business climate, these uncertainties become risks that cannot be avoided, but must be managed professionally through a robust risk management framework.
Implementation Foundation and Framework
To ensure that every risk is managed effectively, Pupuk Kaltim has developed a systematic and integrated Enterprise Risk Management (ERM) system. The implementation of ERM in the company environment is guided by the best standards recognized globally and nationally, including:
ISO 31000:2018
GLOBAL STANDARDRisk Management – Principles and Guidelines, as the international standard for comprehensive risk management principles and guidelines.
ISO 22301:2019
GLOBAL STANDARDBusiness Continuity Management, to ensure resilience and operational continuity of the company under all conditions.
SOE REGULATION NO PER-2/MBU/03/2023
NATIONAL REGULATIONState-Owned Enterprises Ministry Regulation, as the foundation for governance and significant corporate activities for State-Owned Enterprises.
Risk Governance and Three Lines Model
Pupuk Kaltim believes that Good Corporate Governance (GCG) and effective Risk Management are fundamental pillars for achieving sustainable growth and creating long-term value. In line with strategic direction from the parent company, PT Pupuk Indonesia (Persero), this system is carefully designed to ensure strong oversight, clear accountability, and embed a risk-aware culture throughout all organizational lines. This commitment is realized through a robust governance structure and layered defense mechanisms.
The governance structure at Pupuk Kaltim is built in three integrated levels, ensuring alignment from strategic to operational levels. At the Board of Commissioners level together with the Risk Monitoring Committee, they carry out oversight functions to ensure strategic policies are implemented with prudential principles. At the next level, the Board of Directors represented by the Risk Management Director is fully responsible for risk management implementation. At the frontline, each business line is tasked with identifying, analyzing, and proactively mitigating daily risks.
Three Lines Risk Governance Model
To effectively implement this framework, Pupuk Kaltim has adopted the Three Lines Risk Governance Model. The first line consists of operational risk owners in business units who are responsible for compliance fulfillment. The second line, comprising Risk Management, Compliance, Legal, and other supporting units, plays a role in ensuring compliance with standards and regulations. As the third line, Internal Audit serves to provide independent assurance to strengthen the overall effectiveness of governance and risk management.
Emerging Risk Monitoring
As a company operating in the fertilizer industry sector, Pupuk Kaltim faces various challenges that can affect operational continuity and the company's long-term strategy. In facing the dynamics of a continuously developing global market and increasingly complex regulatory changes, the company needs to identify and manage emerging risks—risks that have not yet fully materialized but have the potential for significant future impact.
By actively scanning the horizon, Pupuk Kaltim is not only reactive to existing problems, but also proactive in building resilience and agility to face challenges that are not yet fully visible. By understanding and anticipating these risks, Pupuk Kaltim strives to maintain business sustainability and maintain competitiveness in an increasingly competitive market.
Gas Price Volatility
Economic / GeopoliticalRisk Description
Pupuk Kaltim is highly dependent on natural gas as the main raw material in the fertilizer production process. Natural gas is used in ammonia production, which then becomes the raw material for the Company's core product, urea production. The natural gas supply needed is entirely obtained from local suppliers in East Kalimantan through a 60 km pipeline from Muara Badak to production facilities in Bontang. In 2024, total natural gas purchases for production reached Rp10.53 trillion, an increase compared to the previous year which was recorded at Rp9.81 trillion.
As the main raw material that is fully managed by the government, natural gas places Pupuk Kaltim in a position that is very vulnerable to changes in government policies related to gas prices, such as price increases or subsidy reductions. Changing gas pricing policies can affect production cost stability and disrupt the company's operational smoothness. In the production process, natural gas also produces CO2 as a by-product, which is used in the manufacture of other fertilizers. Along with the increase in ammonia production by 1.77% in 2024, the use of natural gas for raw materials also increased by 0.70% compared to the previous year.
Risk Source
External (regulation, global energy market, geopolitical conditions)
Time Frame
Long TermPotential Impact
Unexpected gas price changes can have a direct impact on the company's operational costs. If there is a significant increase in gas prices or reduction in gas subsidies, the company will face increased production costs, which could potentially reduce profitability. In the long term, these policy changes could affect the competitiveness of Pupuk Kaltim products in both domestic and international markets. In addition, dependence on natural gas supply that is fully managed by the government increases supply uncertainty that can disrupt production smoothness.
Mitigation Actions
- Implementing energy efficiency in production processes to reduce dependence on natural gas.
- Energy source diversification by exploring the use of renewable energy or other more stable energy sources.
- Coordinating with the government to ensure sustainable gas pricing policies that support the continuity of the fertilizer industry, including advocacy to maintain gas price stability so as not to affect company operations.
Opportunities
- Technology innovation and energy source diversification for low-carbon production and energy efficiency
- Strategic collaboration for long-term gas supply
Export License Revocation by Government
Economic / GeopoliticalRisk Description
As one of the largest fertilizer producer companies in Indonesia, Pupuk Kaltim relies on international markets to absorb a significant portion of fertilizer products. However, government policy changes that revoke export licenses can threaten the continuity of the company's revenue from global markets. The government may take this step for reasons of food security, domestic consumption prioritization policies, or changes in international trade regulations.
Risk Source
External (regulation, geopolitical conditions)
Time Frame
Long TermPotential Impact
If export licenses are revoked, Pupuk Kaltim will experience a decline in revenue from international markets. This could potentially cause excess production capacity that cannot be absorbed by the domestic market, as well as reduce revenue generated from exports. In addition, the company must also adjust its marketing strategy and find new markets to replace lost export markets, which could take time and resources.
Mitigation Actions
- Export market diversification to reduce dependence on one market or specific country.
- Developing a larger domestic market and increasing demand for fertilizer products domestically.
- Building strong relationships with the government to ensure more stable policies and reduce the possibility of export license revocation.
Opportunities
- Portfolio transformation and product innovation through development of high value-added products.
- Optimization of green incentive schemes and strengthening national food security in collaboration with the government.
Risk Culture
Risk management at Pupuk Kaltim is not only about procedures and systems, but also about building culture. We emphasize the importance of implementing risk management that becomes part of the DNA of every company employee. For this purpose, we continuously provide various development programs to increase awareness and capabilities of executives and employees.
Investment in this competency aims to ensure that the company is not only reactive to risks, but also proactive in identifying opportunities amid uncertainty. Thus, Pupuk Kaltim is able to face challenges effectively, achieve its business strategy, and continue to grow sustainably.
- Whistleblowing System
- E-Procurement
- Pengaduan Pemasaran
- Pupuk Indonesia
- Pendaftaran Customer
- Program Internship
- Portal GRC
- E-Announcement LHKPN
- Pupuk Indonesia Customer Service:
- 0800 100 8001 (Toll Free)
- 0811 991 8001 (WhatsApp)
- konsumen@pupuk-indonesia.com
- Gedung Graha Phonska, Lt. 4. Jalan Tanah Abang III, No. 116 Jakarta Pusat 10160