STATEMENT ON RISK MANAGEMENT AND INTERNAL CONTROL (ii) Evaluates the effectiveness of the risk management processes and support system to identify, assess, monitor and manage the Group’s key risks; (iii) Meets with senior management on a semi-annual basis to discuss and deliberate on the significant risks affecting the Group within the context of the business objectives and strategy; (iv)Establish Group risk management guidelines and policies and ensure implementation of the objectives outlined therein and compliance thereto; (v) Recommends for the Board’s approval, the Group risk management policies, strategies and risk tolerance levels, and any proposed changes thereto; and (vi)Reviews significant investment proposals. A risk management report is tabled for review and acceptance by the AC and Board annually or at shorter intervals where necessary. The report identifies principal risks affecting or are likely to affect the Group, and the appropriate systems and/or actions to manage the risks. The key risks and some of the control measures taken to mitigate the risks for FY2021 are set out below: Risk area Control measures taken to mitigate the risks Business continuity • The Group is exposed to the risk of inability to sustain operations, provide products and services, or recover operating costs as a result of the COVID-19 pandemic • Implement the necessary precautionary and safetymeasures in accordancewith guidelines from health authorities and government bodies. • Frequent senior management virtual operational meetings to strategize, identify and solve operational issues. • Communicatewith suppliers on their stocks readiness and procure for alternative suppliers/supplies to improve supply chain lead times where necessary. • Apply for extension of time for completion of our construction projects relying on the forcemajeure clause in our contracts, aswell as the provisions in theCOVID-19 Bill 2020. • Work closely with customers for delivery of our products ahead of schedule, whenever the customer’s job site is able to accept delivery. • Negotiate with bankers on terms of credit facilities, e.g. extension of period of financing of banker acceptance, and application for additional working capital credit facilities for contingency needs. Operational risks • As in any business, the Group is subject to operational risks which are inherent in the industry which the Group is operating such as delay in progress of construction leading to Liquidated Ascertained Damages, cost overrun, etc. • Organisation structure outlining the lines of responsibilities and authorities for planning, executing, controlling and monitoring the business operations. • Periodic operational reviewmeetings attended by the Executive Directors, heads of departments and key management staff to consider financial and operational risks and issues of the Group as well as any management proposal. • Monitoring of actual performance against annual budget by the Board. • Relocate loyal and experienced employees to lead branches’ operations. • Engagement of specialist to provide consultancy services for technically complicated works. • Formalised whistleblowing policy, code of conduct and written policies and procedures onmajor processes toensurecompliancewith internal control systems and relevant laws and regulations. • Appointment of staff based on the required level of qualification, experience and competency. Credit, financial and liquidity risks • The Group faces the threat of delays in payment by customers for work done which will eventually affect the Group’s cash flow, and heighten the risks of debts becoming unrecoverable. • Background check of prospective customers prior to accepting any engagement from such parties. • Closemonitoring of collection by the finance department withweekly updates to the senior management as to collection received and incidence of delay. • Timely follow up with the customers on overdue payment and retention sum. • In situationswherecustomer is unable toadhere to theagreedcredit terms, reasons for the delay will be examined. If there are sufficient commercial justifications, settlement which include an extension of the time for payments or accepting tangible assets such as properties in lieu of cash payment will be negotiatedwhen recovery of debt in cash in remote. K imlun Corporat ion Berhad Regi s t rat ion No. 200901023978 (867077-X) 55
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