Page 169 - CRC_One Report 2021_EN

Business Overview and Performance Corporate Governance Financial Statements Enclosure

The business operations of Central Retail in Vietnam largely depend on the country’s overall economic condition.
In 2021, Vietnam has been significantly impacted by the COVID-19 and adversely affected majority of
consumer’s income. Consequently, consumers are cautious on their spending. Hence, Central Retail has executed
operational plan with prudence during COVID-19 pandemic including financial discipline. Additionally,
omnichannel channels helps to mitigate those impacts on the Company’s performance. Central Retail believes
that such situation may affect the business operation in the short term because consumers still believe
in Vietnam’s economic development despites, the ongoing COVID-19 pandemic. Moreover, consumers trend
is shifting to healthcare or other products which are constantly growing in line with consumer spending,
such as health care products, food and beverage segments and utilities product, etc.

Furthermore, Vietnam still has strong growth potential over the next 5 years and is expected to become
one of the fastest growing emerging markets in Asia. The major contributing factors are the large number
of workers in Vietnam and the good quality of education is good compared to other countries in Southeast Asia.
In addition, Vietnam would benefit from being a manufacturing hub in the industrial sector due to reasonable
labor costs. Many multinational companies are interested Vietnam due to such aforementioned reason
and expand their production base or diversify production supply chains in Vietnam in order to reduce the risk
from supply chain’s disruptions, politics, and etc.

In comparison to legal system of the developed countries, Vietnam’s legal system is still unstable, inestimable
and also unable to provide the private sector business a protection in same level as the developed countries.
Laws and legal instruments used for economy control are still in the beginning stage of development
and its foundation is still not as strong as the developed markets. Vietnam’s laws are still lack of development,
consistency, or clarity. Its legal system is not the system that bases on judgement (Case Law) or the instrument
which helps interpreting the judgement as a basis. Thereby, change of policy or enforced law interpretation might
cause an unexpected result. Also, the determination of pattern and conditions of the compliance with newly
issued law and regulation may still not be done, or the interpretation or enforcement of law done by relevant
organizations may not be consistent. Practically, since the public sectors are usually responsible for operations
regarding laws and regulations and determination of the legal correctness and enforcement instead of the court,
it is hard to estimate when Vietnam’s legal system would be developed to be as clear and certain as the countries
with developed legal system. Moreover, Vietnam’s laws and regulations regarding suppression of bribery
and corruption may not be as strict as the countries with more developed legal system.

For this reason, some subsidiaries of Central Retail in Vietnam might be at risk from those law’s interpretation.
The conditions in contract or some transactions done by such company to be declared void or voidable.
This may affect in term of fine paid according to the Vietnam’s law. However, the non-compliance with such
conditions usually occurs in the new market like Vietnam. Thereby, the noncompliance with such conditions done by
the outsiders may cause the contract between Central Retail and the outsiders to be declared void or voidable
according to Vietnam’s law.

Since investments in overseas markets fall within the new business scope, Central retail has then carried out
investments with prudence while arranging its organizational structure to assign responsibility to a unit to closely
oversee and monitor business progress with the management team in Vietnam that countries in order to develop
risk response plans and solve emerging problems in a promptly manner

(7) Risks in Business Operation in Italy

Future sales, profitability, cash flow, and growth of Central Retail’s businesses in Italy are sensitive because of
the negative effects from general economic conditions, consumers’ trust, consuming pattern of the consumer,
disruption of European markets, and COVID-19 pandemic. Moreover, there may be negative effects caused by
political or economy tendency or development actually occurred or estimated to occur in the local, regional,
national, or international level. This would decrease consumption needs of the consumers. These tendencies
and developments include unemployment ratio, inflation or deflation, after-tax income level, change of interest
and / or VAT rate, offer of personal loan, household debt, consumer confidence, and instability of overall conditions
of the economy in the future. Moreover, the change of market due to extreme or inconsistent weather,
natural disasters, health hazards, or other important situations or the tendency of such situations may affect
consumption level and consumer confidence.
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