ESR Group Limited Annual Report 2023 61 Financial Risk The Group believes that financial prudence is integral to business sustainability and adopts a disciplined financial management by maintaining a strong balance sheet and robust capital management. Management closely manages and monitors financial risks — such as liquidity, credit, currency, and interest rate risks — through well-staggered debt maturity profiles, vigilant monitoring of credit spreads and interest rate volatility, hedging strategies, and maintaining a low Gearing. Management also maintains a robust cash flow position and ensures that there are sufficient working capital lines to meet financial obligations. The Group also proactively diversifies its funding sources to reduce dependency on any single funding channel for its financing and refinancing needs. Reports monitoring financial metrics and indicators are submitted to the Board at least on a half-yearly basis. Operational Risk The Group has established a set of comprehensive policies and procedures designed to identify, manage, monitor and report operational risks associated with the day-to-day activities and to facilitate the understanding and implementation of different work processes. These operational procedures and guidelines are reviewed regularly to ensure relevance and effectiveness. In addition, compliance with policies and procedures is assessed through employee training and regular reviews by the Group Internal Audit department to provide recommendations on any gaps that are identified. As part of the business continuity procedures, incident reporting and escalation protocols are established and communicated to all staff for emergencies. This is to ensure the Group is able to respond effectively to disruptions resulting from internal and external events, while continuing its critical business function and minimising impact on its people, assets and operations. ESR Group also recognises that human capital is key to the business and has put in place measures to manage the attraction and talent management, including succession planning, periodic benchmarking of staff remuneration, performance-based rewards, among others. The Group has established a performance management framework to review employees' performance annually. A rating will be given to each of the employees depending on their performance and remuneration will be rewarded accordingly based on the rating. ESR Group has a dedicated talent management and learning team within the Group HR function as an independent Centre of Excellence, designed to drive group-wide talent management and learning strategies. Training activities include job related training opportunities, such as those pertaining to new regulations, external certification, safety related courses and other customised leadership workshops. These training programmes will form part of the training targets of 16 to 26 training hours annually for all staff in order to fulfill their individual plan. With climate change and the associated changes in climate regulations, in addition to the increased focus on the reduction of carbon footprint, ESR Group evaluates the environmental performance of its existing and assets under development, where feasible, and the potential financial implications such as direct damage to assets and indirect impacts from supply chain disruptions. The objective is to build a resilient portfolio and achieve its sustainability efforts, while incorporating environmental risks as part of its due diligence process. A comprehensive ESG investment checklist, approved by the Investment Strategy Committee, was established focusing on ESG requirements by fund investors, which covers climaterelated risks, building certifications, renewable energy adoption, indoor environmental quality, material sourcing and sustainable procurement, building technical assessments and environmental management systems, energy, water and waste management efficiencies, occupier considerations, amongst other factors, where applicable. ESR Group has adopted the Task Force on TCFD recommendations — now under the purview of the ISSB as a framework for assessing and managing climaterelated risks. The TCFD provides recommendations on how to assess, identify, understand, adapt and/or mitigate climate-related risks and opportunities (both physical and transition) which will have medium and long-term effects on ESR Group’s business, including potential financial impacts, through scenarios analysis and climate risk assessments. As the world transitions to a low carbon future, ESR Group will continue to increase its exposure to renewable energy solutions, explore innovative technologies and attain green building certifications, where feasible. ESR Group proactively engages with its tenants, contractors, and vendors on ESG best practices to help drive a sustainable economy. The Group monitors evolving changes in climate regulations under every country’s jurisdiction that it operates due to the more stringent regulations, disclosures and increased expectations from stakeholders. As Asia Pacific’s leading real asset manager powered by the New Economy, ESR Group is focused in raising the bar in its sustainability efforts as a competitive advantage against its peers. STRATEGIC REPORTS CORPORATE GOVERNANCE FINANCIAL STATEMENTS
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