MISC BERHAD • Annual Report 2016 90 President/Group CEO’s Review and MD&A BUSINESS RISK MISC continues to grow from strength to strength and demonstrate its resiliency amidst a highly challenging playing field. As we venture forth, there are several key risks that we are exposed to in the course of our business and we continue to do our best to minimise these risks. As per Bursa Malaysia’s new disclosure requirements, we are highlighting the key anticipated or known risks that the Group is exposed to that may have a material effect on our operations, performance, financial condition, and liquidity. We also touch upon the plans we have to mitigate such risks. External risks The Group faces the possibility of not being able to achieve MISC2020 and our objective of sustainable performance should certain macroeconomic factors hinder our businesses. Factors such as a prolonged weak or volatile Oil & Gas market may affect the Group’s ability to secure new projects or may see projects being deferred or cancelled. To mitigate the impact of these external risks, the Group’s business segments continue to monitor the external environment continuously and adjust their plans accordingly. At the same time, they remain open to exploring new avenues of opportunity. The LNG Shipping segment, for instance, is set to expand its portfolio of third party LNG charters and ensure they are value accretive despite the current competitive landscape. The Group will also pursue efforts to develop concepts for nonconventional LNG solutions. AET will set its sights on securing more fixed long-term charters and exploring expansion opportunities within the niche shuttle tanker segment. Meanwhile, MHB will focus its efforts on cost management and resource optimisation to reduce its operating costs as well as raise the income base for its recurring marine business. The Offshore Business segment will explore both organic and inorganic growth in the international arena, especially in the Atlantic Basin. On top of this, the possibility of higher bunker costs brought on by higher fuel prices, could pose a significant risk to vessel owners and operators. To mitigate the effects of high bunker costs, we will continue to monitor bunker consumption closely to detect any significant variations and take the appropriate steps to minimise these variations. Additionally, a comprehensive bunker procurement strategy is currently being discussed and formulated at the management level to optimise future bunker purchases. Operational risks The Group may face delays or penalties for material non-compliance with maritime rules and regulations. With a slew of new regulations relating to ballast water management, ship energy efficiency and low sulphur emissions coming into play, MISC continues to proactively keep abreast of the changing regulatory environment and take early steps to ensure full compliance. Internally, we are already reviewing the 2017 retrofit plan for vessels requiring the new ballast water treatment while FMS has already begun gathering data to take the necessary actions relating to ship energy efficiency regulations. Changes pertaining to industry certification may also impinge upon our business going forward. On 1 January 2017, under the STCW 2010 Manila Convention, the new set of amendments to the Standards of Training Certification and Watchkeeping of Seafarers, came into play.
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