A fledgling economy, yearly natural disasters, changing regulations, skill shortages… It’s all part of being a risk manager in Vietnam, says VinaCapital’s Ly Xuan Thu

Ly Xuan Thu

Challenging economic conditions, supply chain disruption and regulatory changes are the three biggest risks faced by corporates operating in Vietnam, according to VinaCapital’s Ly Xuan Thu. The Vietnamese investment management and real estate development firm’s head of risk and compliance believes that an overheating economy, global economic failure and price volatility are all major threats to her country’s fiscal wellbeing. 

“Right now, many factors contribute to this concern,” she says. “For example, the government is trying to restructure the sector to review the non-performing loans (NPLs) and control the inflation rate, while still maintaining a reasonable economic growth rate. It established a company to buy NPLs back from companies to improve the liquidity of the local banking sector.”

Thu is well placed to understand these economic challenges, having worked for several large accounting firms, including PwC, in Thailand, Singapore and Vietnam. Last year, she joined VinaCapital, which manages three closed-end funds trading on AIM, the international market for growing companies trading on the London Stock Exchange. They are the VinaCapital Vietnam Opportunity Fund Ltd (VOF), VinaLand Ltd (VNL) and Vietnam Infrastructure Ltd (VNI). 

“For the capital market, most of the time, we deal with market risk and we rely on the health of the Vietnam Stock Index,” she says. “Because we have equity funds and we trade every day, we depend on the health of the blue-chip companies in Vietnam; if they have a good performance, we also have a good performance for the fund.”


Describing her current role as focusing on building an integrated enterprise risk management strategy across VinaCapital, Thu explains that her team develops a risk register at corporate and fund level and then reports quarterly to the board. “We balance risk and return for every single project we engage in, and the board has very experienced people who have strong backgrounds in risk management and corporate governance. 

“They challenge and ask questions about risk and return
for our projects, so we are comfortable with the knowledge of the board members not only at the fund level but also at the corporate level.”

The VNI fund invests in energy, transportation, telecommunications and environmental utilities projects. “We look for opportunities to build with the government in the infrastructure sector – big projects, such as bridges, hydropower plants and industrial parks – so it depends on the stability of the economy and government policy,” she says. “We are comfortable with this operation at a corporate level, but we keep an eye on the macroeconomic risk.” 

There are particular risks that must be dealt with when managing VNL, a real estate fund that makes direct investments in the residential, retail, hospitality and office sectors. The main issue is that, in the past five years, an oversupply of residential and commercial buildings has built up while demand has decreased. “Sales are way down, leaving a huge inventory of properties. Prices have fallen as owners try to sell quickly.”

Water and electricity scarcity, labour imbalances, outsourcing and natural disasters all challenge supply chains. “There is a threat of natural catastrophe every year in Vietnam, particularly in central Vietnam,” Thu says, adding that the country’s natural catastrophe exposure can make it difficult to secure appropriate insurance. “We purchase insurance policies to protect property, but some insurers don’t want to cover us because we have a really high risk. However, other insurers are willing to write the policy for us.”


Thu points out that other industries are not always able to source appropriate insurance, so they devise alternative strategies. “Many manufacturing companies don’t even have factories in central Vietnam, as natural catastrophe is the big issue for the manufacturing sector there. They establish distribution channels there to deliver goods or products, but they avoid that area during the high-risk time. Natural catastrophes have a significant effect on the logistics of a company and its supply chain.”

Thu, who is based in Ho Chi Minh City but grew up in the Mekong Delta, also points to regulatory changes as a major area of concern. “Vietnam is a member of ASEAN and the World Trade Organization and the next step is join the Trans-Pacific Partnership. Vietnam needs to look at the regulatory issues and adapt with the requirements of development as soon as possible, and that’s really a big challenge.” 

Elements of people risk, such as retention and acquisition of talent, succession plans and income disparity, are also a concern. “Vietnam is making an effort to integrate with the international and regional environment but still encounters labour imbalances and human capital scarcity, particularly with skilled labourers. For example, it’s difficult for international companies to fill top management positions with local Vietnamese, so they have to hire expats to fill those positions. Vietnam needs to think about how to fill this gap in the future.”

Foreign products

Failure to innovate, particularly for the local companies when they need to compete with multinationals, is another risk. “For example, most Vietnamese consumers still prefer foreign products rather than local brands,” she says. Then, there’s reputational risk, which Thu says local companies “don’t consider a key risk for them, because they are not multinational companies at this stage”. 

She notes that the government’s strategy is to open Vietnamese markets to multinational markets, but that “as well as benefits, this will bring challenges for the country, particularly for small- and medium-sized companies that might be hurt by this programme because of the lack of competitive advantage to compete with multinationals”. 

What’s important, she says, is that Vietnam thinks “about how to build a framework to protect the small- and medium-sized companies”. Sean Mooney