Pursuant to Paragraph 15.26(b) of the Main Market Listing Requirements (“MMLR”) of Bursa Malaysia Securities Berhad (“Bursa Securities”), the Board is also required to include in the Company’s annual report, a statement about the state of internal control of the listed issuer as a group. Accordingly, the Board is pleased to provide the Company’s Statement on Risk Management and Internal Control for the financial year ended 31 December 2015 which was prepared in accordance with the ‘Statement on Risk Management & Internal Control: Guidelines for Directors of Listed Issuers’, endorsed by Bursa Securities. ACCOUNTABILITY OF THE BOARD The Board recognises its principal responsibility of establishing a sound risk management framework and internal control system, as manifested in Recommendation 6.1 of the Code. Accordingly, the Board has entrusted the responsibility of risk management oversight to the MISC Board Audit Committee (“BAC”). In respect of risk management, the BAC is supported by the MISC Risk Management Committee (“RMC”). The Company has a systematic risk management framework adopted from PETRONAS. During the year, the Company further strengthened its risk management framework by adopting the newly launched PETRONAS Resiliency Model (“PRM”), which incorporates the PETRONAS Enterprise Risk Management (“ERM”) Framework (previously known as PETRONAS Risk Governance Framework). The PETRONAS ERM is used to identify, evaluate and manage the principal risks of the Group and implement appropriate internal control systems to manage these risks, details of which are set-out in the following pages. In addition to the risk management process, the BAC periodically reviews and/or tests the efficiency and effectiveness of the Group’s internal control system to ensure viability and robustness of the system. In doing so, the BAC STATEMENT ON RISK MANAGEMENT & INTERNAL CONTROL is also supported by the Management Committee (“MC”) to reflect the prominence and focus by management on the control and risks of the organisation. In dealing with risks, the Board understands that it is not always possible, cost-effective or practical to eliminate risk altogether. Accordingly, these internal control systems can only provide reasonable assurance against material misstatement or loss. Thus, the Board adopts a cost-benefit approach to ensure that the expected returns outweigh the cost of risk elimination. RISK MANAGEMENT FRAMEWORK In April 2015, the Board approved the adoption of the PRM and a revised Risk Policy which provides an integrated view for managing risk focusing on three frameworks namely: i. Enterprise Risk Management (“ERM”) ii. Crisis Management (“CM”) iii. Business Continuity Management (“BCM”) The Risk Policy states that:- “MISC shall adopt and implement risk management best practices by identifying, assessing, treating and monitoring risks as well as effectively responding to crises. In the event of prolonged disruption, business continuity practices shall be adopted to restore and ensure continuity of MISC’s key business activities.” Hence, for the implementation of risk management best practices, the Company leverages on the ERM Framework to ensure all business risks are prudently identified, evaluated and managed accordingly. The aim is to reduce the likelihood and impact of all identified risks to enhance the organisation’s ability to achieve its strategic objectives. The Malaysian Code on Corporate Governance 2012 (“the Code”) recommends as best practices that the Board establishes a sound risk management framework and internal control system, and disclose in the Company’s Annual Report the main features of the risk management framework and internal control system. REDISCOVER I REBUILD I SUSTAIN 112
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