MISC Annual Report 2017

143 Corporate Governance The framework of risk management comprises the following key elements :- • Risk Management The Group’s Risk Management Policy guides the overall best practice of identifying, evaluating, managing, reporting and monitoring the ever changing risks facing the Group and specific measures to mitigate these risks. The emphasis is to effectively reduce the impact of risks, respond to immediate risk events and recover from prolonged business disruption to ensure continuity and sustainability of key business activities as well as delivery of business objectives. • Risk Governance Structure The Risk Management Committee (RMC) was established to review and monitor the Group’s risk management practices. It consists of mainly Vice Presidents and Heads of key service units, and is primarily responsible for driving the implementation of the Risk Management Framework and acts as the central platform for the Group to undertake the following responsibilities : • Assist the Management in identifying principal risks at Group level and providing assurance that the ERM is implemented group-wide to protect and safeguard MISC interest; BOARD OF DIRECTORS BOARD AUDIT & RISK COMMITTEE RISK MANAGEMENT COMMITTEE • Review and recommend policies and frameworks specifically to address risk inherent in all business operations and environment pertaining to the Group; • Review, deliberate and recommend mitigation actions to ensure that the Group’s risks are being mitigated effectively; and • To provide a reasonable assurance to the BARC that the Group’s risks are being managed appropriately. Risk management activities are undertaken at corporate and business units/subsidiaries levels and risk reports are reviewed and monitored by the Corporate Planning Department (CPD) on regular intervals prior to escalation to RMC. Each appointed and dedicated risk focal person has the responsibility for risk management activities in their specific department/unit to ensure consistent implementation of risk management processes across the Group. The Group 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 (KRI). In 2017, the Group FRAS has been extended to cover the Interest Rate risk, Leverage Ratio and Minimum Cash Balance (MCB). The Weighted Average Cost of Debt (WACD) of the Group for the specific year were used to monitor the effect of interest rate fluctuations towards the overall finance cost of debt of the Company. The Leverage Ratio was set to meet the requirement of the rating agency whilst the MCB was established to ensure the Group can meet its operational requirement at all times. STATEMENT ON RISK MANAGEMENT & INTERNAL CONTROL