141 ANNUAL INTEGRATED REPORT 2021 HOW WE ARE GOVERNED REINFORCING SUSTAINABILITY ADDITIONAL INFORMATION FGV GROUP’S KEY RISKS Through the ongoing risk management process at the management level and deliberation of agendas brought to the Board, the Board matters are assessed against risks of achievement of the Group’s objectives and strategies. The following are the key risks faced by FGV in FY2021, and its mitigation measures: FGV’s risk management process is summarised as follows: MONITORING & REVIEW The monitoring and review process tracks the current status of the risk profile, detects changes in the risk context and ensures that the controls are adequate in both design and operation. RISK ASSESSMENT PHASE 1 PHASE 2 RISK IDENTIFICATION Identify uncertainty arising from risk events that may impact the achievement of objectives, which form the basis for further analysis. PHASE 3 RISK ANALYSIS Assess risks in terms of impact and probability, and plot them on the FGV risk matrix to derive a prioritised list of risks for further action. PHASE 4 RISK EVALUATION Establish an understanding of the risks by considering the relationships between the causes, risks and consequences and thus enable us to evaluate key risk-mitigating controls. PHASE 5 RISK REPORTING Communicate and consult with internal and external stakeholders, as appropriate, at each stage of the risk management process. ESTABLISH CONTEXT Establish the strategic, organisational and risk management process context by considering the environment within which the risks are present. RISK TREATMENT Identify controls and responses to manage inherent risks to an acceptable residual risk level. LABOUR Our estates operations are highly labour intensive and heavily dependent on migrant workers. Labour shortages experienced during the year largelydue tocross border restrictions compromisedestates’ operational efficiency leading to lower yield production, sales and profitability. The risk of further labour attrition remains a challenge to the palm oil sector. To mitigate this, FGV has embarked on more efficient utilisation of its workforce by increasing mechanisation and applying more structured block crop recovery work arrangements for harvesters across its estates to minimise the effects of labour shortages. On top of this, various efforts are being undertaken to increase the number of local workers. TRADING & MARKET The Group is exposed to commodity price risk since the Crude Palm Oil (CPO) prices and their derivatives are subject to fluctuations due to unpredictable factors such as weather, changes in global demand and production, crude oil prices and global production of similar and competing crops. In mitigation, the Board has approved a commodity trading policy to ensure that the market and trading risks are managed within the acceptable threshold set therein. The policy also requires Management to monitor closely the trends of CPO, forex and other commodity price movements with limits on forward sales and hedging. SUSTAINABILITY The palm oil industry continues to be subjected to greater scrutiny on sustainability concerns, whether it be on the labour rights front, deforestation claims or impact on the climate. Alleged labour issues have shown how sustainability risk can materially impact FGV’s reputation and business as seen from the Roundtable on Sustainable Palm Oil (RSPO) certification suspension and United States (US) Customs and Border Protection (CBP) ban, affecting the sales of our palm oil products to certain international markets. Extensive work has been expanded to better manage sustainability-related risks to FGV. FGV has taken initiatives to improve the working and living conditions, as well as enhance the recruitment process and terms of employment of our labours. FGV has collaborated with the Fair Labor Association (FLA), an international association, working at promoting and protecting the human rights of workers and improving working conditions worldwide. FGV has also engaged an independent assessor to verify and close the gaps in our labours situation as alleged by US CBP. On the climate front, FGV has launched its Climate Action Plan which includes commitments to United Nations (UN)-backed Science-Based Target initiative (SBTi) Business Ambition for 1.5ºC pledge and net-zero emissions throughout its value chain.
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