MSM Malaysia Holdings Berhad Annual Report 2020

KEY RISKS & MITIGATIONS Mitigation Description Risk Category Financial Risk Poor generation flow from operations A low capacity utilisation will result in a decrease in price rate To restructure loan with bank Financial Risk Non-compliance will trigger an Event of Default (EOD) EOD under General Facility Agreement (GFA) will result in financier, accelerating repayment and may trigger cross-default on the other loans at MSM and FGV To seek letter of indulgence from the financier for the breach and deferment of the imposition of financial covenants (Letter of indulgence obtained from Financier dated 10 Dec 2020) Operational Risk Inability to meet the Test After Completion (TAC) production per day The performance of producing sugar refinery unable to meet TAC as per contract Manage EPC contractor or supplier to provide performance guarantee Operational Risk Failure of critical equipment/ machinery (Failure/tripping of steam boiler during normal operation, Raw Sugar Weigher Malfunction, Failure of turbine generators, Failure of critical equipment/ machineries) i. Aging machinery, computer software and hardware malfunctions, interruption of utility supplies, production disruption and loss ii. Malfunction of the weigher will result in error of weighing and wrong recording iii. Turbine generators tripping will affect the plant production iv. Any breakdown or downtime will cause plant to shut down or melting stop v. All these lead to higher operating cost, lower efficiency and loss of customer confidence i. Comprehensive plant and machine upgrading and replacement programme ii. Planned and scheduled maintenance and service iii. Ensure skilled and trained operators and technicians for maintenance work iv. Establish and update standard operating procedures and hazard Identification, Risk Assessment and Determining Control for all activities v. Establish a consistent schedule of maintenance and servicing of our refining machinery, and where identified have replaced aging machinery with machine upgrades and replacements vi. Ensure maintenance plan are carried out consistently MSM MALAYSIA HOLDINGS BERHAD Annual Repor t 2020 30 CHAIRMAN’S STATEMENT DELIVERING VALUE MSM OVERVIEW MANAGEMENT DISCUSSION & ANALYSIS GROUP FINANCIAL REPORT