AL-SALAM REIT ANNUAL REPORT 2018

AL-SALĀM REIT ANNUAL REPORT 2018 45 The Manager is committed to establishing a sound system of risk oversight and management and internal control to identify, analyze and control risk to maximize the risk-adjusted return potential of Al-Salām’s portfolio, whilst seeking to identify assets that would decrease the volatility of the portfolio and structuring a REIT portfolio is about identifying risk and hedging it in the best possibleway. This will be undertaken by: • Implementing a comprehensive and systematic risk assessment and reporting process across the organisation; • Integrating the outputs of risk specialist functions to provide a holistic viewof the risks associatedwith our business activities; and • Innovation, with corporate governance being exercised through the regular measurement and reporting of our riskmanagement processes. The tops risks faced by the Fund and the mitigation plan are speciied as below: Risk Management Risk Acquisition & Investment Risk Competition Risk Tenancy Risk Financing Risk Tenant Concentration Risk Compliance Risk Cyber Security Risk Risk Description Risk that assets to be acquired are not yield-accretive andmixedwith problems whichmay aect the commercial potential. The properties under the portfolio may face increased competition from other existing properties as well as upcoming properties in the surrounding area. Risk that tenants might not be able to fulfil its rental obligation as well as non-renewal of expiring tenancies. Currently, the financing is on a floating basis and as such, Al-Salām REITwill be aected by any significant adverse movement in the interest rate in the mark. Risk that revenue of Al-Salām REIT is dependent on anchor tenants. Termination or non-renewal of tenancy by the anchor tenants will negatively impact the performance of the properties. Risk that Al-Salām REIT fails to comply with applicable laws and regulations. Risk to data breaches and loss o critical data Mitigation Plan • Appointment of advisers and third party service providers to do a thorough assessments of the project viability and suciently assess the risk profile of the project to ensure that risks are properly addressed and mitigated according to the action plan. • To minimize the impact of changing market conditions and industrial competitiveness through constant monitoring of the changes, address the issues that arise and undertake proper action plan to address the issues. • To conduct due diligence exercise as part of the SOP to ensure proper and reasonable care is in place for any acquisition of assets, which include undertaking thorough due financial, legal as well as building due diligence in ascertaining the viability of the assets to be acquired. The Manager will undertake active asset management strategies byworking together with the Property Manager, which include, amongst others, to maximize occupancy rate, rental rates and net lettable area. 1. The Manager together with the Property Manager will ensure that the rental collection is in order and to negotiate earlywith the tenants of expiring tenancies. 2. To undertake an aggressive rental collection eorts on overdue rental payments. 3. Ensure there are ongoing strong marketing & promotional campaigns that will drive visitors to our mall and to work with key anchor tenants to promote their business and strengths. The Manager plans to embark on a combination of fixed and floating financing via implementation of Interest Profit Rate Swap in 2019. The major tenant of Al-Salām REIT properties is QSR Group. The Manager does not foresee any non-renewal of tenancies for QSR Group as the properties were owned and occupied by them prior to injection into Al-Salām REIT. The Manager has a designated compliance of ocer who is responsible for ensuring that all relevant laws guidelines and regulations especially relating to the Main Market Listing Requirements, REIT Guidelines and the Trust Deed. The Manager is drafting a Disaster Recovery Plan as part of Cyber Security Plan to mitigate the risk