The Finance Risk Management Unit continues to monitor and ensure effective and robust execution of financial risk management through the implementation of the PETRONAS Corporate Financial Policy (“CFP”). The CFP supports the delivery of consistent approach in financial and risk management discipline across the Group. The CFP is supplemented with Guidelines in the areas of Liquidity Management, Cash Repatriation, Financing, Investment, Banking, Asset Liability Management, Foreign Exchange Management, Credit, Tax, Inward Financial Guarantee and Documentary Credit, and Integrated Financial Risk Management. The Group has established its Financial Risk Appetite Setting (“FRAS”) in the areas of Foreign Exchange exposure and Financial Institution Credit Counterparty risks, to mitigate the Group’s risks arising from operations in non-functional currencies and financial loss arising from failure of counterparty banks. Liquidity risk was managed through the monitoring of the Financial Risk Report and its Key Risk Indicators. The Group’s Interest Rate exposures were continuously monitored on case to case basis for each borrowing. The Group is represented in the PETRONAS Financial Risk Management Operational Committee (“FRMOCO”). The FRMOCO is commissioned to address financial risk management, including financial risk governance and operational issues in a holistic manner. This Committee serves as a platform for members to raise, highlight and seek guidance on the said areas. RISK MANAGEMENT PROCESS The risk management process in MISC requires management to identify business risks at strategic, operational and tactical levels, and assess these risks in terms of likelihood and magnitude of impact, as well as to identify and evaluate the adequacy of mechanisms in place to manage these risks. This process involves assessments at business unit level before being examined on a Group or strategic perspective. In essence, the risk management processes are as follows:- RISK PROFILING • Identify risks and existing controls via risk assessment facilitated in a workshop. • Established risk rating based on matrix and registered into Risk Registers. • Selection of appropriate risk treatment option. RISK MONITORING • Continuous monitoring of risk level using the Risk Registers. • The performance of key risks is monitored using Key Risk Indicators (KRI). • Any changes or movement in the KRIs, will provide an early warning. RISK REPORTING • Presentation of Risk Register to RMC and BAC on a quarterly basis. • MISC has developed the MISC Common Risk Dashboard, a risk reporting tool to better represent the overall risk health for MISC. In addition, the following summarises the key risk management activities undertaken during the year under review: • Embedding risk management into strategy planning In sustaining the achievement of business objectives, it is important to manage risks across the Group on an integrated basis with a balanced view of the risks taken against the rewards of business performance. The Business Units (“BU”), Service Units (“SU”) and key Subsidiaries (“Subs”) are required to perform an annual review of their risk profiles with the emphasis in linking risks to MISC’s business objectives. In addition, Key Risk Indicators (KRIs) were reviewed and identified to monitor the movement of risks throughout the year, thus enabling the management to act and take necessary measures in managing risks to ensure that strategic initiatives are implemented effectively and business objectives are met. MISC BERHAD • Annual Report 2016 140 Statement on risk management & internal control
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