Management Discussion and Analysis KEY RISK FACTORS Al-Salām maintains a proactive and structured approach to risk management, integral to its overarching business strategy. The Manager has established a robust risk management framework designed to identify, assess, and mitigate risks that could materially impact the REIT's operations, financial performance, and liquidity. This framework is embedded within the organisation's culture and processes, ensuring responsiveness to the dynamic business environment. Through a series of prudent risk management measures, Al-Salām REIT demonstrates our commitment to maintaining a resilient and adaptive risk management system, positioning the Fund to navigate challenges effectively and capitalise on opportunities for sustainable growth. A summary of the significant risks of Al-Salam is as below: Anticipated and Known Risk Profiles Focus Area Mitigation Actions Asset and Property Risks Retail assets have become not yieldaccretive due to: • Assets are physically unattractive and deteriorating due to wear and tear • Tenants opted for a relocation of business, in favour of lower rentals at other new malls • Lower net property income due to higher operating and maintenance costs 1. Proactive Asset Management • Reposition or rebrand malls to adapt to changing consumer trends. 2. Strategic Capital Expenditure (Capex) • Undertaking refurbishments to modernise the property and improve connectivity. • Enhanced operational efficiency and customer experience. 3. Portfolio Rebalancing • Active portfolio review and asset recycling. 4. Tenant Diversification and Flexibility • Focus on tenant mix category that has competitive pricing and growth. 5. Sustainability and ESG Initiatives • Implement energy efficient technologies. Competition The prospects for the retail space sector, particularly in Johor Bahru, were challenging and competitive due to the significant amount of retail space. While occupancy rates of shopping malls in JBCC and surrounding malls are improving, it is still below pre-pandemic levels. 1. Strengthen of Tenant Relationships • Developing partnerships with anchor tenants and offer creative lease terms. 2. Improve Tenant and User Satisfaction • Enhance the mall experience with modern amenities. 1 ABOUT US 37 2 BUSINESS OVERVIEW 3 SUSTAINABILITY STATEMENT 4 CORPORATE GOVERNANCE 5 OTHER INFORMATION 6 FINANCIAL STATEMENTS
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