• 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 halfyearly basis, key updates to risks and controls are presented to the management, Audit Committee and Board for review and discussions. 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’s portfolio is subject to industry related market risks such as rental rate, occupancy volatilities and country specific risks such as competition, supply, demand and local regulations. 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 review by ESR’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. Throughout the COVID-19 outbreak, ESR has demonstrated the strength of its resilient business model with solid operating results, disciplined capital management and robust fundraising for its third-party vehicles. Leveraging its strategically diversified network spanning key markets across Asia Pacific, coupled with a quality tenant base focusing on e-commerce and thirdparty logistics companies, ESR has remained resilient to market changes and disruption. In addition, ESR actively monitors macroeconomic trends, policies and regulatory changes which affect its operating markets, while assessing its investment projects. In view of the successful acquisition of ARA Asset Management Limited (“ARA”), including its subsidiary LOGOS in January 2022, the enlarged ESR platform 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 centre and commercial assets across APAC’s dynamic growth markets. As part of the integration process, the senior management team is focused on harnessing the synergies and opportunities of the enlarged Group driving 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 acquisition allows the Group to further strengthen its ESG leadership and offerings, given that both ARA and LOGOS have been pioneers on the sustainability front. The Group is committed to ensure it continues to integrate ESG into every aspect of its business, investments and operations. 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. Financial risks such as liquidity, credit, currency and interest rate risks are closely managed and monitored by management which are mitigated by a well-staggered debt maturity profile, hedging strategies and a low gearing ratio. Management also maintains a robust cash flow position and ensures that there are sufficient working capital lines to meet financial obligations. 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 policies and procedures designed to identify, manage, monitor and report operational risks associated to the day-today 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. 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. RISK MANAGEMENT R E A C H I N G N E W H E I G H T S 62 CORPORATE GOVERNANCE
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