ESR AR 2019 EN

Risk Management 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 market risks such as rental rate and occupancy volatilities and country specific risks such as competition, supply, demand and local regulations. These risks which can directly impede the Group from achieving its strategic objectives are closely managed and monitored within the organisation. Financial Risk The Group believes that financial prudence is integral to business sustainability and adopts a prudent financial management by maintaining a strong balance sheet and adopting a disciplined investment approach. Financial risks such as liquidity, credit, currency and interest rate risks are closely managed and monitored by Management. Reports monitoring financial metrics and indicators are submitted to the Board at least half-yearly basis. Operational Risk Comprehensive operating, reporting and monitoring guidelines are in place to manage day-to-day activities and mitigate operational risks. Policies, procedures and systems are also put in place to ensure the continuity of key operations. Incident reporting and escalation protocols are in place and communicated to all staff. ESR also recognises that people are the backbone of the organisation and has put in place measures to manage the attraction and management of talent, including succession planning, periodic benchmarking of remuneration, performance-based rewards, among others. In addition, a comprehensive corporate governance framework has been established to maintain responsible and transparent business practices and does not tolerate any illegal or unethical acts by employees. The framework includes policies on whistle blowing, anti-money laundering and counter terrorist financing and prohibition of bribery, acceptance or offer of gifts and entertainment. In addition, there are mandatory annual ethics training and code of conduct declarations by employees. ESR treats all misconduct and dishonesty seriously and the Management reserves the rights to take appropriate disciplinary action, including termination of employment. Compliance Risk The Group is committed to comply with the applicable laws and jurisdictions in which it operates and does not tolerate any breaches in regulatory compliance. The Company had established relevant regulatory related policies and procedures to ensure compliance with applicable legislation and regulations. New and impending changes to regulations are closely monitored. Instances of non-compliance or regulatory breaches are urgently escalated to the Board and Management for follow-up. Technology Risk Technology is fast becoming an essential part of operations. ESR is continuously assessing the adequacy of the computer systems and implement improvements to the platforms due to the increased reliance on technology to improve our operational efficiency and provides high quality internal governance. ESR has set in place measures to protect itself against technology related risks which may arise from both internal and external sources. Risk Culture The Group recognises that risk culture is one of the critical success factors of an effective risk management programme. Driving the desired risk culture starts with the tone set by the Board and top Management, cascaded down to all staff within the organisation. Regular risk communications and trainings to internal stakeholders is necessary to build awareness, understanding and appreciation of risk management within ESR. Management commits to allocate resources to the continuous journey of driving the right risk culture and mindset among all internal stakeholders. 56 Focused