MISC Annual Report 2018

STATEMENT ON RISK MANAGEMENT & INTERNAL CONTROL 10.The Group observes the respective Code of Conduct and Business Ethics (“CoBE”) that extends to employees and directors within the MISC Group and third parties performing works or services for or on behalf of MISC Group of Companies. MISC also observes the principles set out in the Anti-Corruption and Bribery Manual which provides further guidelines in dealing with improper solicitation, bribery and other corrupt activities as well as issues that may arise in the course of doing business. A Compliance & Ethics Programme is a comprehensive programme approved by the Board in June 2016 on CoBE related matters focusing on Anti-Bribery and Corruption and compliance monitoring and review. It underpins the role of the Board and Management in combatting bribery and corruption, provides for enhanced training and communication programmes, implementation of appropriate counter- party due diligence and anti-bribery risk assessments. The Board further adopted an enhanced Anti-Bribery and Corruption Policy Statement, to reflect the following: i. The Group’s continual improvement of MISC’s Anti-Bribery Management System (“ABMS”); ii. Establishment of a Whistleblowing Policy as an avenue for all employees and members of the public to make reports on any improper conduct involving MISC and/or its employees and iii. The establishment of a Compliance function with the responsibility to oversee the implementation of the MISC Compliance and Ethics Programme and the ABMS. The Compliance function has direct access to the Board and Management for issues relating to bribery and corruption. MISC Berhad was successfully certified with the ISO 37001:2016 ABMS on 28 January 2019 by SIRIM. The certification, which sets out the requisite requirements to prevent, identify and respond to bribery, further fortifies the internal control processes and systems of the Company in respect of anti-bribery and corruption management. In this respect MISC has put in place the Anti-Bribery Management System Manual (the ABMS Manual). The remainder of the MISC Group will also embark on obtaining the ISO 37001:2016 ABMS certification. The Group continues to monitor and ensure effectiveness of the Compliance and Ethics Programme. Based on the anti-bribery and corruption risk assessment conducted in the previous year, certain high risk activities were given emphasis i.e. enhancement of the management of the Company’s supply chain and procurement from vendors. Amongst others, a Vendor Integrity Pledge and Declaration, supplemented by the CoBE for Third Party Service Providers, have been developed and will be rolled out to the Group’s Business Partners to ensure that they understand and agree to comply with the standards of ethics and behaviours expected of them. Acknowledging the importance of creating awareness of the CoBE to third parties and business associates, MISC has conducted a CoBE Awareness Session during the MISC Group Contractors HSSE Forum 2018 for Vendors in November 2018. A comprehensive anti-bribery and corruption Due Diligence were also conducted during the procurement tender processes. The Group continues to monitor any potential conflicts of interest, and the receipts and/or giving of any gifts via the employees’ Conflict of Interest Register and employees’ Gift Register. A mandatory refresher training program for all employees on the CoBE continues to be done on an annual basis. Through the CoBE “See, Speak, Support” Campaign that was launched in 2017, various awareness sessions were organised in 2018 with the key objective of enhancing employees understanding on the elements of CoBE. 11. MISC established its Corporate Disclosure Policy (“CDP”) and Corporate Disclosure Guidelines (“CDG”) in 2016. The CDP guides the Board, Management and employees when communicating and making disclosure of information to external parties such as Bursa Securities, investment community, media, government authorities and other relevant stakeholders. It also sets out the parameters to enable timely, adequate and accurate disclosure of such information. The CDG, which is an internal document, provides more definitive guidelines for communication and disclosure of information in the above areas. 12.The MISC Economic Sanctions and Export Control Policy and Guidelines underpin MISC’s commitment to comply with relevant economic sanctions and export control regulations in the jurisdictions it operates through identifying, mitigating and managing such risks. 13.MISC established a Corporate Privacy Policy and Master Guidelines. The policy and guidelines demonstrate the commitment to handle and manage personal data in accordance with the general principles of personal data protection in accordance with applicable laws in various jurisdictions. 14.The Group keeps a register on conflict of interest or potential conflict of interest situation for company directors in the Group which is reviewed on an annual basis. Results of the review and any new recommendations for improvement are tabled to the BARC and Board for information and further action, where necessary. ASSURANCE FUNCTIONS Group Health, Safety, Security & Environment (“HSSE”) The HSE Management System (“HSE MS”) which incorporates the HSE Mandatory Framework (“HSE MCF”) is developed based on PETRONAS HSE Management System and serves as reference in planning and mitigating the risks of Health and Safety of staff, visitors, contractors and sustainability of the environment are to be kept as low as reasonably possible. Group HSSE ensures the Group Security Risk exposures are reviewed according to national and international regulatory requirements and best practices; accordingly plan and implement mitigating measures to ensure the security of staff, visitors, contractors and assets are to be kept as low as reasonably possible. HSSE assurance is carried out on the respective business units, vessels and floating facilities by Group HSSE with the objective to verify, evaluate and review the HSSE operational activities to ensure business units, the vessels’ and floating facilities’ operational integrity and reliability are maintained at all times, consistent with international regulations, HSSE controls and internal policies. MISC Group vessels are subjected to stringent audits, vetting and inspections to meet various regulatory and commercial requirements. These include vetting by oil majors, audits by the Malaysian Marine Department and ship classification societies to maintain international safety and security management certification under the relevant codes. In addition, MISC is also subjected to periodic management reviews by its customers’ risk management units. The Group HSSE Council, chaired by the President/Group Chief Executive Officer (“CEO”) with the Management Committees and Managing Director/CEO of all subsidiaries as members, reviews the Group HSSE performance on a monthly basis and HSSE policies and strategies periodically, to ensure that they are in line with business objectives. The BARC oversees the HSSE risk and control effectiveness through review of the assurance findings on a quarterly basis. GROUP INTERNAL AUDIT MISC Group Internal Audit (“GIA”) supports the BARC by providing independent feedback on the adequacy of risk management, governance and the efficiency and effectiveness of the internal control system. The GIA processes and activities are guided by the approved Internal Audit Charter and aligned with internal audit industry standards i.e. The International Professional Practices Framework. Further information on the internal audit functions are set out in the Statement on Internal Audit Function on pages 190 to 191 this Annual Report. OTHER MATTERS With regard to the associated companies and joint ventures, the Board does not regularly review the internal control system as the Board has no direct control over their operations. Nevertheless, MISC’s interests in the associated companies and jointly controlled entities are served via representations on the boards as well as review of management accounts and inquiries thereof. AFFIRMATION BY THE BOARD The Board has received assurance from the President/Group Chief Executive Officer and Vice President, Finance that the internal control and risk management systems of the Company and its subsidiaries for the year under review up to the date of approval of the statement are, in all material aspects, operating adequately and effectively. There were no material losses incurred during the financial year under review as a result of weaknesses of internal control. REVIEW BY EXTERNAL AUDITOR The external auditor, Messrs. Ernst & Young, have reviewed this Statement on Risk Management and Internal Control for inclusion in the Annual Report for the financial year ended 31 December 2018, in compliance with paragraph 15.23 of the Listing Requirements in accordance with guidelines issued by the Malaysian Institute of Accountants, and reported to the Board that nothing has come to their attention to cause them to believe that the statement intended to be included in the annual report is not prepared, in all material respects, in accordance with disclosures required by paragraph 41 and 42 of the Statement on Risk Management and Internal Control: Guidelines for Directors of Listed Issuer, or that the statement is factually inaccurate. CONCLUSION For the financial year under review, based on enquiry, information and assurance provided, the Board is satisfied that the system of internal control was generally satisfactory. Measures would continuously be taken to ensure ongoing adequacy and effectiveness of internal controls, and to safeguard the Group’s assets and shareholders’ investment. This statement is made in accordance with the resolution of the Board of Directors dated 27 February 2019. HIGHLIGHTS OF THE YEAR OUR BUSINESS OUR LEADERSHIP OUR PERFORMANCE OUR COMMITMENT TO SUSTAINABILITY OUR GOVERNANCE FINANCIAL STATEMENTS OTHER INFORMATION 50 TH ANNUAL GENERAL MEETING 201 MISC BERHAD ANNUAL REPORT 2018 200