MISC Annual Report 2017

MISC BERHAD | Annual Report 2017 84 Moving forward, we plan to provide comprehensive disclosure of our Sustainability programmes and performance through our corporate website at www.misc.com.my/sustainability. In addition to annual corporate disclosures, all further information and disclosures on sustainability including the MISC Sustainability Strategy pillars, objectives, initiatives and performance updates shall be made available through our website and will be updated on a regular and scheduled basis. BUSINESS RISKS As MISC ventures forth amidst a highly challenging playing field, there are several key risks that we are exposed to in the course of our business and we continue to do our best to mitigate these risks. The following is a summary of the key anticipated or known risks that the Group is exposed to that may have a material effect on our operations, performance and our financial status. We also touch upon the plans we have to mitigate such risks here. The sustainability of the Group’s future earnings is at stake in the face of the expiry of charters for our assets, specifically our Offshore and LNG vessels. Take the case of our Puteri class vessels – when the charters for these vessels expired, this made a dent in our overall profitability. We will face a similar situation with our other assets over the next few years when the existing contracts for our offshore floating production systems (FPSO and FSOs) and recently extended contracts come to an end. To mitigate this, we are actively participating in bids for new projects in the Offshore segment, especially in the Atlantic region which promises more opportunity for Oil & Gas development and shipping requirements. At the same time, we face the risk of earnings volatility from an imbalanced asset portfolio. To counter this, managing the volatility of our earnings will be key. We will achieve this by balancing our exposure to long-term income generating assets with assets traded in the spot market. This will ensure the sustainability of the long-term returns on our investment and the predictability of our future cashflow which funds our investments and returns to shareholders. In addition to maintaining a well-balanced group of core businesses, the portfolio of assets within each of the core businesses will be continually fine-tuned to increase the proportion of assets that generate long-term recurring income. Another risk we face is the inability to trade and deliver market freight earnings from our assets given the age of our fleet. Our older LNG and AET vessels will face increased competition from more efficient and newer vessels in the market, especially in a market where environmental regulations have become more stringent. To mitigate this, we are continually assessing fleet age, rejuvenating the fleet by redelivering or disposing of older tonnage, and investing into systems that will ensure the tradability of the fleet. The availability of projects to be invested in, whether it is in the Offshore or LNG shipping space remains limited due to the low Oil & Gas price market and the oversupply of vessels. In the Offshore space, however, we expect there will be ample opportunities in the Atlantic basin where deepwater field development is taking place. In the LNG Shipping segment, investment into unconventional LNG solutions will be the way forward, particularly in the areas of LNG bunkering, FSRUs and floating LNG power generation amidst a market with limited new shipping requirements. Talent attraction and retention across the maritime industry is a perennial challenge even as the industry competes for experienced maritime personnel. There is also the risk of an insufficient number of readily available successors to assume critical positions within the Group. To mitigate this, we have implemented manpower and succession planning measures to bring about business continuity and sustenance. A structured employee competency development plan ensures that our internal capabilities and competencies are continuously strengthened. We continue to also strengthen employee mobility PRESIDENT/GROUP CEO ’ S REVIEW