2019 UEM Edgenta Annual Report

53 UEM Edgenta Berhad UEM EDGENTA AT A GLANCE MESSAGE FROM OUR LEADERSHIP STRATEGIC FOCUS OPERATIONAL REVIEW SUSTAINABILITY EFFORTS CORPORATE GOVERNANCE INTRODUCTION FINANCIAL REVIEW ADDITIONAL INFORMATION Annual Report 2019 Key Risks and Opportunities FINANCIAL RISK COMPLIANCE / REGULATORY RISK Context: We are exposed to financial risks such as credit and foreign exchange fluctuation, which arises primarily from trade and other receivables. Credit risk refers to the risk of loss that may arise on outstanding financial instruments should a counterparty default on its obligation. Foreign exchange risk refers to the risk that the fair value or future cash flow of a financial instrument will fluctuate due to changes in foreign exchange rates against Malaysian Ringgit. Context: We take cognisance that our sizeable businesses are concession in nature, operating in various industries, especially Healthcare Support and Infrastructure Services that are subject to a broad range of rules and regulations. Any adversities could result in the suspension of necessary authorisations, licences and rights. A lack of regulatory certainty impacts our operations, reputation and investment decisions. Mitigation: We control credit risk by carrying out stringent credit evaluations and monitoring procedures on customers and receivables respectively. We leverage on technology to keep track of receivables, status and prompt customers the amount due. In mitigating foreign exchange risk, we maintain a natural hedge to the extent possible, by borrowing in the same currency as the future revenue stream to be generated from the overseas entities. Mitigation: With our cross-industry experience, we are well- positioned to meet the strategic needs of our clients and value-add, even in concession businesses. We make a concerted effort to deliver quality services to our clients with strict adherence to service level performance. We have dedicated functions such as Compliance, HSSE, Quality Assurance / Quality Control, and Secretarial to monitor regulatory and policy developments, liaise with relevant governing authorities to stay abreast of regulatory changes and our obligations. To ensure work culture excellence among employees with strong morals and ethics, these are the initiatives in place: • Setting up Integrity & Compliance Function under the requirement of Prime Minister’s Directive No 1. of 2018. • Develop and implement the policies and procedures in relation to integrity and governance (i.e. Code of Conduct, Anti-Bribery & Anti- Corruption Guide, Conflict of Interest Procedures, Compliance Framework, etc.). • Whistleblowing reporting channel, policies and procedures. Compliance / regulatory risk is exposure to legal penalties, financial forfeiture and material loss an organisation faces when it fails to act in accordance with industry laws and regulations, internal policies or prescribed best practices. Financial risks are those which directly relate to financial controls and performance.