MISC Annual Report 2019

VISION & MISSION GOVERNANCE Overview EMRAN OTHMAN Vice President, Corporate Planning We believe that more can be achieved by working together as a unified team, clearing away the silos that may hold us back from our growth journey As the custodian of the Group’s planning and risk management functions, Corporate Planning’s role is to facilitate the growth of the Group by providing strategic perspectives to various business units when they pursue growth opportunities. There were certainly many such opportunities in 2019. During the year, the Group bid for projects with over USD3.9 billion in capital expenditure value, out of which we secured above USD800 million, with some bids still pending decision from our clients. While we can be proud of the projects we won, our fundamental belief when it comes to the measurement of success is not primarily about securing projects today, but rather about the ability to sustain positive returns in the long term. This is especially true considering that the investments we make are very high in value with a relatively long payback period. There are a lot of uncertainties to be considered and mitigation plans to be mapped out before a conscious decision can be made. Therefore, it is crucial that we have in place a robust and rigorous risk assessment process, before any investment proposal is presented to the Board. We in Corporate Planning engage closely with the business units to facilitate this process which would require us to play the role of devil’s advocate. In doing so, we must be impartial and objective as part of a constructive review process because as much as we want to grow, we also need to be mindful of the risks along the journey. After all, it is never our intention to fail a project, but it is always our intention to make sure that the project is successful because winning a project today does not mean anything to the Group if it is causing problems a few years down the road. In the area of sustainability, I am pleased that MISC continues to be a constituent of the FTSE4Good Bursa Malaysia Index since 2014 through our efforts in championing the sustainable development agenda. This recognition further strengthens our leading position as one of the role models within the Malaysian market in managing our environmental, social and governance risks. The next few years will certainly be an exciting period and we are looking at the bigger picture of what MISC needs to do as a group as well as how we can succeed together not just today but in the years ahead. When we talk about success, one of the principles of our Cultural Beliefs is Shared Success, and this guides us as a team to collaborate for the greater good of the Group. This includes identifying opportunities for cross-collaboration and synchronisation wherever possible. We believe that more can be achieved by working together as a unified team, clearing away the silos that may hold us back from our growth journey. With the right people, attitude and behaviour there is every possibility for us to reach higher altitudes and achieve greater accomplishments. Ultimately, People, Passion, Possibilities is a theme that will be relevant to the company for a long time and it is through our people that we will define, drive and realise the Group’s aspirations. EMRAN OTHMAN Vice President, Corporate Planning Our Value Creation Model MISC’s value creation model as presented below shows how we use various resources to create value for our capital providers and other stakeholders. These resources – the ‘inputs’ – are in the form of six capitals. The capitals that we use comprise financial, physical, intellectual, human, social and relationship, and natural capitals. Under our business model, we take in these inputs and through our business activities, we convert them into ‘outputs’ – the services that we render to our customers. This in turn leads to various outcomes in terms of their effects on our stakeholders and on the capitals. For example, when we draw on our cash reserves and new loans to construct an LNG carrier, we initially use up financial capital and increase our physical capital. Once the vessel is completed, it will be used to generate profit which would increase our stock of financial capital over Our Strategy The Group’s strategy encapsulates our commitment to ensure sustainable growth and meaningful value creation for our stakeholders. Value creation is a continuous process which involves understanding the needs of customer and other stakeholders, reinforcing our value proposition, anticipating and mitigating risks, and ensuring excellence in delivering our services and solutions. To reinforce and sustain MISC’s position as a leading provider of energy related maritime solutions and services, we had developed our MISC2020 five-year strategic plan (2016-2020). MISC2020 will enable the Group to ensure sustainable value creation for our stakeholders through achieving a sustainable level of secured profit and utilising the Group’s capital efficiently so as to generate a sustainable and fair return for our shareholders. To recap, in order to achieve a sustainable level of secured profit, MISC must work over the five-year timeframe to be able to absorb all fixed costs and overheads as well as absorbing losses from our cyclical business segments during the worst of cycles. This is to ensure that we never fall into the red in the worst of times. Subsequently, in order to be more efficient in the utilisation of the Group’s capital, MISC will continue to focus on instilling the discipline to spend wisely and make the right investment decisions. At MISC, we recognise that sustainability is an integral component of our operations, from the way we conduct our business to the way we create positive impact for the local communities. In this regard, we have formalised the concept of sustainability so that it clearly permeates our decisions on both the financial and non-financial aspects of the group. As a result, we have a five-year sustainability strategy running in parallel with our MISC2020 corporate strategy. Our Sustainability Strategy covers how we deliver sustainable returns to our shareholders, strive to exceed the expectations of our customers, engage with our employees, business partners and communities, conduct our business ethically, and interact with the environment. You can read more about our strategy and the elements of our value creation model in the following pages 54 to 75. Value creation impact on MISC and other stakeholders Effects on the six capitals time to benefit us and our lenders and shareholders. These outcomes therefore represent the value that we create for our stakeholders in the short, medium and long term. Our business strategy sets out the direction we take and the resources we allocate to our portfolio of businesses. The formulation of our strategy draws on our analysis of the environment in which we operate. This includes economic, societal, political, regulatory, technological, environmental factors, and industry dynamics, as well as long-term trends impacting the landscape. We identify the opportunities and risks arising and assess the outlook for our industry and business. Very importantly, we also consider the needs of our stakeholders and the ‘material matters’ – those matters that substantively affect MISC’s ability to create value. BUSINESS ACTIVITIES Financial capital Physical capital Intellectual capital Human capital Social & relationship capital Natural capital INPUTS CAPITALS OUTCOMES Identification and assessment of EXTERNAL ENVIRONMENT • RISKS AND OPPORTUNITIES • OUTLOOK • STAKEHOLDERS • MATERIAL MATTERS OUTPUTS Effect on capitals (e.g. increased/enhanced or reduced stock of capital) Feedback loop LONG-TERM TRENDS STRATEGY BUSINESS MODEL V I C E P R E S I D E N T ’ S R E M A R K S 53 52 OUR VALUE CREATION STORY MISC BERHAD PEOPLE. PASSION. POSSIBILITIES ANNUAL REPORT 2019

RkJQdWJsaXNoZXIy NDgzMzc=