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CapitaLand Limited
Annual Report 2015
Financial Risk
Given the Group’s diversified global business, CapitaLand
is exposed to financial risks including liquidity, foreign
currency and interest rate risks. The Group measures and
evaluates these financial risks using established statistical
risk management models (e.g. VaR, stress testing and
scenario analysis). It continues to focus on instilling financial
discipline, deploying capital to earn the best risk-adjusted
returns and maintaining a strong balance sheet to invest in
suitable opportunities. For more information on the Group’s
Financial Risk Management, please refer to the Financial Risk
Management section on Pg 192 of this Annual Report.
Fraud & Corruption Risk
CapitaLand is committed to the highest standards of integrity
as it is one of its core values, and has no tolerance for any
fraud, corruption or bribery in the conduct of its business
activities. Consistent with this commitment, the Group has put
in place an employee code of conduct and an anti-corruption
policy. The anti-corruption policy is designed to reiterate the
tone from the top and sets out CapitaLand’s Global Principles
on Ethical Business Conduct. Every year, employees sign
the CapitaLand Pledge to renew their commitment to uphold
the Group’s core values. It also has a whistle-blowing policy
to encourage the reporting of suspected misconduct by
establishing a clearly defined process through which such
reports can be made in confidence and without fear of reprisal.
Human Capital Risk
Competition for talent within the real estate industry
remains intense. The Group has a competitive remuneration
framework designed to attract, motivate and retain
talent, as well as foster a performance-oriented culture.
The Group seeks to build a continuing leadership pipeline
and strong management bench-strength through an annual
talent review, where succession plans for key management
positions are reviewed and high-potential employees are
identified for leadership development.
Information Technology (IT) Risk
CapitaLand has put in place policies and procedures to
manage IT risks. Group-wide policies and procedures govern
IT security, access controls and data security. Disaster
recovery testing is conducted regularly to validate the system
continuity plan put in place. In addition, network penetration
testing is also conducted regularly to check for potential
security gaps.
Investment & Divestment Risk
At the project level, independent risk evaluation (for projects
above a stipulated investment value threshold) is conducted
by the RAG to ensure that all material risks are identified and
quantified. The risks of each proposal are highlighted and
all parameters are benchmarked against objective market
indicators and historical projects undertaken by the Group.
If necessar y, mitigating measures are proposed.
To ensure that the potential returns of new investments are
commensurate with the risks undertaken, the weighted
average cost of capital and hurdle rates for various
countries and business units are computed and adopted as
investment benchmarks. They are reviewed annually and,
where necessar y, adjustments are made to reflect
corresponding changes in business risk and capital costs
of investments. This seeks to ensure that CapitaLand’s
investment portfolios will create value for its stakeholders
on a risk-adjusted basis. Projects under development are
tracked for progress update and monitored for investment
performance.
Political & Policy Risk
Given the geographic diversity of its business, CapitaLand is
exposed to different levels of political and policy risks such
as political leadership uncertainty, inconsistency in public
policies, social unrest, change in property regulations etc.
Such risks may threaten the economic and socio-political
environment which may, in turn, affect the financial viability
of the Group’s investments. To mitigate these risks, overseas
operations are managed by experienced managers and
teams who are familiar with the local conditions and cultures.
Regular scenario analysis is performed to study the impact
of adverse changes on investments and exposures in all
markets, and to evaluate profit and loss potential.
Project Management Risk
To control project management risk, the Group adopts a
rigorous project management process to ensure that project
cost, quality and time objectives are met. There are stringent
pre-qualification procedures to appoint well-qualified vendors
for projects, where key criteria such as vendors’ track records
and financial performance are assessed. Regular site visits
are conducted to closely monitor the progress of projects,
to manage potential risks of delays, poor workmanship and
cost overruns. In-house teams comprising experienced
technical staff provide guidance and independent audit
checks on quality of architectural design, mechanical and
engineering detailing, and safety.
Regulatory & Compliance Risk
CapitaLand has global operations and is subject to the
local laws and regulations of the markets it operates in.
These include applicable listing, data privacy and
anti-corruption laws and regulations. The Group has in place
a framework that proactively identifies applicable laws and
regulatory obligations, and embeds compliance into the
day-to-day operations across the SBUs.
Enterprise Risk Management
