pg. 207 Corporate Governance Report Integrated Annual Report 2025 # Risk Risk Rating Mitigation Effectiveness Effectiveness Summary 9 Climate & Physical Environmental Risk (Moderate) Baseline climate controls are implemented; physical adaptation and long-term resilience measures are progressively being enhanced. 10 Regulatory, Shariah & Compliance Risk (Strong) Strong governance, compliance monitoring and Shariah oversight; minor residual exposure remains due to regulatory changes and tenant activities. Al-Salām REIT’s Top 10 risks are largely driven by market demand, tenant performance and asset valuation, which remain sensitive to external conditions and require ongoing Board oversight. Financial risks are manageable but exposed to interest rate movements, while operational, regulatory and Shariah risks are generally well controlled. Climate-related risks, although currently moderate, are expected to become increasingly relevant and will continue to be monitored. Overall, the Board is satisfied that risks remain within the REIT’s approved risk appetite. Summary of Key Risk Movements (Q1 → Q4) Q1 → Q2 (Improvement Phase) Residual impact reduced across several strategic and operational risks, reflecting early progress in yield enhancement initiatives, tighter execution oversight, and stable operating conditions. Certain legacy risks showed reduced likelihood following management intervention and clearer action plans. Financial risks remained elevated but contained, largely driven by external capital market conditions rather than internal control gaps. Overall, the REIT recorded a more disciplined and improved risk posture compared with Q1. Q2 → Q3 (Stabilisation with Selective Re-Emergence) Q3 marked a plateau in risk reduction, with most risks recording no material change, indicating that mitigation measures remained effective. However, selective risks experienced upward movement from Low to Medium, driven by: • execution timing dependencies, • reliance on third parties and market conditions, and • increasing complexity of asset and ESG-related initiatives. Strategic and financial risks particularly those linked to capital access, transaction execution, and tenant concentration continued to anchor the overall residual risk profile at Medium to High, despite the absence of systemic deterioration. Q3 → Q4 (Consolidation & Risk Sustainability Phase) In Q4, the risk profile demonstrated broad stabilisation, with no significant expansion of the risk universe. Several operational and ESG-related risks showed improved control effectiveness, reflecting progress in project governance, clearer timelines, and better coordination with stakeholders. Notwithstanding these improvements, key strategic and financial risks remained structurally elevated, particularly: • capital raising and refinancing sensitivity, • acquisition and divestment execution risk, • valuation and concentration exposure. These risks did not materially worsen in Q4, but their persistence underscores continued dependence on external market conditions and transaction outcomes, rather than further internal mitigation alone. Overall Risk Posture (Q1 → Q4) Across the four quarters, the REIT’s risk profile reflects a transition from risk reduction (Q1–Q2) to risk containment and sustainability (Q3–Q4). Early mitigation actions successfully arrested escalation and reduced selected exposures; however, residual strategic and financial risks remain elevated due to their inherent nature. Importantly, Q4 confirms that: • controls are operating as intended, • risks are being monitored and reassessed conservatively, and • no latent or emerging risks have crystallised unexpectedly. STATEMENT ON RISK MANAGEMENT & INTERNAL CONTROL
RkJQdWJsaXNoZXIy NDgzMzc=