SECTION 07 pg. 198 AL-SALĀM REIT PROCESS FOR IDENTIFYING, ASSESSING AND PRIORITISING RISKS The risk assessment process provides a structured approach for identifying, analysing and prioritising the risks that may affect Al-Salām REIT’s strategic, operational, financial, compliance and sustainability objectives. Al-Salām adopts a disciplined risk appetite, accepting moderate strategic and financial risks that support long-term value creation while maintaining low tolerance for risks that could compromise income stability, financial integrity, regulatory compliance or reputation. Risk Objectives and Risk Appetite Category Risk Appetite Statement Tolerance Level Strategic Optimise long-term portfolio value and income sustainability through active management of retail malls and office towers, disciplined tenant mix optimisation and selective acquisitions or disposals aligned with market demand and Shariah principles. • Moderate appetite for value-accretive growth, repositioning and asset-enhancement initiatives; • Low tolerance for execution delays, prolonged vacancies, excessive concentration in any single asset class or tenant segment (including F&B), or value-dilutive transactions. Financial Maintain financial resilience and stable distributions through prudent capital management and proactive management of gearing, liquidity and refinancing risks, while ensuring income streams remain Shariah compliant. • Prudent appetite; • Low tolerance for refinancing uncertainty, covenant pressure, liquidity stress, material volatility in distributable income or financial exposure arising from Shariah non-compliance. Operational / ESG Ensure safe, efficient and reliable operations across malls and office towers while enhancing ESG performance, including energy efficiency, waste and water management, operational oversight relating to F&B tenant activities and climate resilience. • Moderate appetite for operational variability inherent in retail, F&B and office operations; • Minimal tolerance for safety incidents, critical building system failures (e.g. HVAC, lifts), foodrelated incidents, major service disruptions or delays in ESG and asset-improvement initiatives. Market Risk Monitor and respond to macroeconomic conditions, consumer spending trends, office market dynamics, interest rate movements and regulatory changes affecting asset valuations, occupancy and funding costs. • Moderate appetite for market-driven volatility; • Low tolerance for unmanaged interest-rate exposure, structural decline in retail or office demand or adverse market cycles that materially impair income stability or asset values. Business Partnership/ Strategic Alliances Maintain strong and reliable relationships with mall operators, office tenants, F&B operators and key service providers to support operational continuity, asset performance and rental sustainability. • Low appetite for counterparty and partnership risk; • Low tolerance for tenant distress, rental arrears, F&B compliance failures, partnership disputes, contractor underperformance or service failures that disrupt operations or cash flows. Reputational Preserve stakeholder confidence and safeguard Al-Salām REIT’s reputation as a well-governed, Shariah-compliant retail and office REIT through transparent disclosures and consistent performance. • Very Low appetite for reputational risk; • Very Low tolerance for governance failures, Shariah breaches, health and safety incidents, adverse regulatory findings, negative media exposure or prolonged DPU underperformance. STATEMENT ON RISK MANAGEMENT & INTERNAL CONTROL
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