Reference no: EM133006315

DBE Poultry International (DBE) is a feed producing company in Malaysia dealing with processing  and producing animal feed from raw agricultural products. DBE's involvement in feed manufacturing includes operating breeder flocks and hatcheries as well as downstream activities in different parts ofthe world. Having integrated business operations in this sector is crucial mainly to maintain the quality of the feed but DBE faces high competition from local and global manufacturers. The companydistributes broiler chicken and table eggs for consumption in Malaysia and other Asian markets such as Singapore, Thailand, Vietnam and Indonesia.In its operations, DBE is involved with suppliers of commodities for feed production, mainly cereal grains such as corn and soybean meal. The company relies on 100% imported corn and soybean mealprimarily from Argentina and Brazil due to their desirable moisture content, and also other countries such as the USA, Thailand, Pakistan, Myanmar and Indonesia. Prices of cereal grains are volatile andthe prices are based on the Chicago Board of Trade CBOT futures prices. On top of this, some of the buyers are from politically unstable countries which may experience unusual events such asdemonstrations against the government in Thailand in early 2020 and Myanmar's Spring Revolution in early 2021 that could result in late payments. DBE has fixed and floating rate loans in its balance sheet.

• The average tenure for the loans is 5 years and on average the interest rate now is about 4.5% per annum. In the past 3 years, the company hastaken both fixed and floating rate loans at an average interest rate of 6% per annum. It is expected that the interest rate will increase shortly.In the last 2 years, DBE entered into an agreement with an Indonesian-based company, PT Nubika Jaya to produce and distribute broiler chicken in West Java. During the initial planning, the project wassupposed to take off in August 2021 but recently it has met with delays due to loan import permit issue with the local government which has yet to be resolved. The company has made a huge loss in another project in Myanmar, due to the company's facility being located in a politically unstable region.

Problem 1: Determine FIVE (5) main sources of financial risks that DBE Poultry International is facing in its dealing with various counterparties. Support your answer with relevant examples from the case facts.