54 Environmental, Social and Governance Report 2022 PILLAR 3: CORPORATE PERFORMANCE COUNTERPARTY RISK MANAGEMENT Counterparty risks may arise in situations that threaten or endanger the Group due to our business relationship with other parties. To reduce counterparty risks, we implemented a revised Counterparty Due Diligence Workflow in 2022 through the counterparty due diligence platform “Compliance Desktop®”, which is licenced by Refinitiv, a London Stock Exchange Group (LSEG) company. This platform incorporates both internal and external questionnaires on a risk-based approach to determine the extent of background checks using WorldCheck screenings and different level of approvals. The automated feature of our improved Counterparty Due Diligence Workflow increases compliance and risk management across the Group by fostering greater robustness in our business relationships with third parties. The platform also improves risk management due to its transparency in the compliance status checks for vendors, contractors, capital partners, tenants and suppliers. To facilitate supplier due diligence and selection, we utilise the Compliance Desktop® to determine the counterparties’ money-laundering and terrorist-financing risk assessment prior to the appointment of all counterparties including vendors and contractors. As part of the due diligence process, an internal questionnaire will be completed by the relevant business unit personnel. Based on the final risk rating (i.e., low, medium or high) and screening result, local or group compliance will determine if the counterparty can be onboarded or additional enhanced due diligence (i.e., assigning an external questionnaire to the counterparty) is required. The platform also allows on-going monitoring to be performed for existing counterparties which will enable us to improve our sustainability practices and performance in our supply chain. • 3,716 third-parties screened • 214 ‘hits’ required further review • 67 third-parties underwent further assessment by ESR local offices • 100% resolution rate Phase 1: Remediation (completed in 2019) • Implementation of automated Counterparty Due Diligence workflow • Training of responsible persons, business unit managers and Legal and Compliance teams • Successful roll-out of ESR Compliance Desktop® across 8 markets Phase 2: Automation (September – November 2020) • New function added to Compliance Desktop® where requestors are able to order an Enhanced Due Diligence report • 5,235 third-parties were screened through the platform in 2021 to-date. For 2022, see next page. Phase 3: Execution (January – December 2021) • Due Diligence Questionnaire includes sustainability factors1 in counterparty pre-approval process • Enhanced sanction checks on counterparties in compliance with the relevant regulations • Completed due diligence checks serve as supporting documents for finance to process payments 1 Sustainability factors include green procurement selection, supply chain evaluation and practices, and modern slavery matters. Phase 4: Integration (2022 – Present) AUTOMATED COUNTERPARTY DUE DILIGENCE WORKFLOW Pre-due diligence screening • Data collection and automated screening of responses from counterparties • Responsibility of screening falls on the business unit managers Due Diligence Investigation • Due Diligence reports are generated from Refinitiv • Initiated and overseen by Legal and Compliance teams Post-due diligence monitoring • Monitoring via World-Check, the Screening and Due Diligence database by Refinitiv • Approval of counterparties subject to renewal every 24 months, or earlier, depending on risk levels Risk Management & Compliance
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