50 | CapitaLand Limited Annual Report 2014
Enterprise Risk Management
The Group’s ERM Framework sets out the required
environmental and organisational components which
enable the Group to manage risks in an integrated,
systematic and consistent manner. The ERM Framework
and related risk management policies are reviewed
annually and are periodically validated by external ERM
consultants.
A robust internal control system and an effective,
independent review and audit process are the twin
pillars that underpin the Group’s ERM Framework.
While the line management is responsible for the design
and implementation of effective internal controls using a
risk-based approach, the Internal Audit function reviews
such design and implementation to provide reasonable
assurance to the Audit Committee (AC) on the adequacy
and effectiveness of the internal control system.
Annually, the RAG facilitates and coordinates the
Group-wide Risk and Control Self-Assessment (RCSA)
exercise that requires business and corporate executive
leaders to proactively identify, assess and document
material risks as well as the corresponding key
controls and mitigating measures needed to address
them. Material risks and their associated controls are
consolidated and reviewed at the Group level before
they are presented to the RC, AC and the Board.
Awareness of and preparedness for potential risks
affecting business continuity help CapitaLand minimise
the impact of disruption to its business operations.
The Group has a Business Continuity Management
Policy to guide the business units in the implementation
of business continuity plans. The Information Technology
(IT) team has also formulated a disaster recovery strategy,
which it reviews and tests annually.
CapitaLand believes that having the right risk culture
and people with the right attitude, values and knowledge
are fundamental to the Group’s success. Therefore,
the RAG continues to proactively enhance risk
management knowledge within the Group to promote
a culture of risk awareness through conducting regular
workshops for all levels and functions, and communicating
internally to all employees via its e-newsletter made
available on the intranet.
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CapitaLand undertakes an iterative and comprehensive
approach in identifying, managing, monitoring and
reporting material risks across the Group. Such material
risks include
Competition Risk
The Group faces keen competition from established
players and new market entrants in the real estate
industry. It adopts a relentless approach towards
strengthening its competitiveness through high-
quality products and services, product differentiation,
pricing, asset enhancement initiatives and branding.
The Group also promotes tenant and customer loyalty
through customer-centric initiatives and shopper loyalty
programmes. A team of in-house experts provides
regular analysis on market trends. Regular innovation
workshops are conducted to brainstorm ideas to
anticipate as well as react to these trends.
Economic Risk
CapitaLand is exposed to developments in major
economies and key mnancial and property markets.
These developments may reduce revenue, increase
costs and result in downward revaluation of our assets.
Market illiquidity during a mnancial crisis makes asset
divestment challenging and this can affect CapitaLand’s
investment and strategic objectives. The Group manages
this by adopting a disciplined approach towards mnancial
management, having a diversimed portfolio across
geographies with established Board-approved country
concentration limits, and focusing on cities where the
Group has operational scale and where underlying
economic fundamentals are more robust. A team of
in-house experts monitors the macro-economic
environment and advises senior management and
the SBUs on future macro-economic trends and their
implications on the property market. Scenario analysis
is performed to calculate potential value deteriorations
by applying an in-house developed 7alue-at-Risk (7aR)
model.
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CapitaLand recognises the importance of having an
Environmental, )ealth and Safety (E)S) Management
System to manage E)S risks faced in its development
projects and global operations. Its E)S Management
System is externally audited to achieve ISO 14001 and
BS O)SAS 18001 certimcation across 15 countries.
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Given the Group’s diversimed global business,
CapitaLand is exposed to mnancial risks including
liquidity risk, foreign currency risk, and interest rate risk.
The Group measures and evaluates these mnancial risks
using established statistical risk management models
(e.g. 7aR, stress testing, and scenario analysis).
Corporate Governance & Transparency
