Financial Risk Early Warning System for Coal Mining Company in Facing Disruption of Supply Chain

Abstract

Business environment has changed a lot lately. Most of the factors that fuelled a surge in commodity prices are supply chain disruptions, Covid-19, and have been exacerbated by the war in Ukraine and the resulting sanctions on Russia. As a result, prices of commodities have soared and will remain high for most of the year. This global supply chain disruptions can negatively impact companies in a way of higher operational cost and the risk of low supply of the materials. In order to be able to face these risks, the company needs to understand the current financial risk of the company, build the early warning indicator for the risk, and decide what actions could be taken to minimize the impacts of the risks. This study is mainly composed of 4 parts: risk assessment, z-model analysis, financial ratio analysis, and risk prevention formulation. After conducting the risk assessment of internal and external factors, found that the main risk sources are supply chain disruptions, difficulties in getting financing, weather challenge, major accidents, and coal market volatility. Z-score model analysis from last 5 years data resulting the company pose great risk of profitability. Further analysis of financial ratios of profitability ratio is carried out resulting that mostly the profitability ratio of the company is below the industry average. Combining these qualitative and quantitative analysis leads to the company should focusing on supply chain disruption risk. Thus, the early warning system is constructed and the risk prevention formulation is defined.