STRENGTH IN UNITY 60 Risk Assessment and Management In-depth risk assessments are performed for key risks faced by the Group with the consideration of the potential drivers, likelihood of the risks occurring and consequences, as well as mitigating controls in place to manage them. These risk assessments are conducted with the risk owners from country and Group levels during facilitated risk prioritisation and training workshops during the year. Action plans are then identified to further manage risks as necessary. Risk assessments are also reviewed periodically to ensure continued relevance to the Group. The process and its outcomes are documented to facilitate communication and provide information for decision-making. This risk review process enables comprehensive identification and prioritisation of all material risks throughout the Group, effective management of material risks at the appropriate managerial level, having effective risk dialogue and proper governance of risk mitigation efforts. The Group has put in place various policies and procedures to mitigate key risks to an acceptable residual level based on the Board and management’s risk appetite and tolerance. These policies and procedures aim to drive consistency in work processes and facilitate the understanding and effective implementation of controls within operations. All policies and procedures are reviewed on a periodic basis to ensure they remain relevant. Key updates and revisions to policies and procedures are approved by appropriate parties and communicated to all relevant parties. Risk Monitoring and Reporting To ensure that risk management remains focused and effective, the Group has set in place mechanisms to monitor and report risks on a regular basis. Appointed risk owners are responsible for the continuous monitoring of their respective risks. They undertake an iterative and comprehensive approach according to the established risk governance structure and process in identifying, assessing, managing, monitoring and reporting of key risks. Key issues noted are highlighted to appropriate parties in a timely manner. On a half-yearly basis, key updates on any material changes to Group’s risk profiles, the implementation status of the risk management activities and controls, and plans undertaken to manage key risks are presented to the management, Audit Committee and Board for reviews and discussions. The Group has also developed internal key risk indicators that serve as an early-warning system to highlight risks that have escalated beyond the agreed tolerance levels. In addition, the Management has established required follow-up actions to be taken when risk thresholds are breached. The key risks and key risk indicators are reviewed by management and Audit Committee before they are drawn to the attention of the Board. RISK CATEGORIES Strategic Risk The Group strives to bring sustained value and growth to investors and shareholders by maintaining and strengthening its position as a leading logistics real estate platform. ESR Group's managed portfolio is subject to industry related market risks such as rental rates, occupancy volatilities and country specific risks such as competition, supply, demand and local regulations. Such risks are quantified and monitored for existing assets and prospective acquisitions, where applicable. Each new investment opportunity is subject to a rigorous, disciplined and thorough evaluation process including assessing the asset quality, market valuation, yield accretion, expected returns, professional third-party due diligence, future growth potential and sustainability of asset performance, taking into account the existing economic and financial market conditions. Each development project is subject to rigorous evaluation of land acquisition, review of the design and build of the assets and construction methods. Investment proposals are subject to rigorous scrutiny by ESR Group's Investment Strategy Committee and/or the Board in accordance with its approved delegation of authority. These risks which can directly impede the Group from achieving its strategic objectives are closely managed and monitored within the organisation. In addition, the Group ensures that there is effective communication with investors and business partners through regular dialogues to manage expectations, along with delivering excellent performance and track records. Leveraging its strategically diversified network spanning key markets across Asia Pacific, coupled with a quality tenant base focusing on e-commerce and third-party logistics companies, ESR Group has remained resilient to market changes and disruption with its disciplined capital management and robust fund raising for its thirdparty vehicles. In addition, ESR Group actively monitors macroeconomic trends, policies and regulatory changes which affect its operating markets, while assessing its investment projects. The Group provides a suite of private real estate fund and REIT products that embrace every stage of the asset life cycle in the New Economy and prime commercial sectors. It also develops and manages a network of superior logistics, data centres and commercial assets across APAC’s dynamic growth markets. The Group continues to drive strategic long-term growth in establishing new REITs, private real estate funds and investments in various real estate sectors, including the New Economy. In addition, the Group is committed to integrate ESG into every aspect of its business, investments and operations.
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