SECTION 07 pg. 212 AL-SALĀM REIT Regulatory and Compliance Requirement Changes The external regulatory landscape continues to evolve, with updates to the SC REIT Guidelines, Bursa Malaysia Listing Requirements, MCCG, tax regulations, Shariah standards, and the introduction of IFRS S1 and S2 for sustainability reporting. These developments require the Manager to reassess its compliance processes, disclosures, internal documentation, data collection systems, and governance frameworks. Non-compliance or delayed implementation may expose the Manager and the REITs to regulatory penalties, reputational risk, and inaccuracies in sustainability and financial reporting. Significant Change Risk Statement Mitigation Measures The SC has proposed a new fee structure for capital market intermediaries expected implementation on 1 January 2026 Higher licence and regulatory fees imposed by the SC and Bursa increase the Manager’s compliance cost base, potentially impacting management fee margins and placing pressure on overall cost efficiency The Manager monitors regulatory cost changes closely and incorporates them into annual budgeting, while pursuing cost optimisation measures to minimise impact on the REIT’s net returns. Enhanced SORMIC Guide 2025 The Enhanced SORMIC Guide 2025 introduces higher expectations on governance, risk management, and internal-control disclosures, increasing the compliance requirement and potentially exposing the Manager to regulatory gaps if processes are not updated in time. • Review and update governance, risk management, and internal-control processes to align with new SORMIC requirements. • Strengthen documentation, evidence, and reporting practices. • Provide training and awareness sessions to ensure full compliance. National Sustainability Reporting Framework (NSRF) requirement for Sustainability Statement aligned with IFRS S1 and IFRS S2 The introduction of the NSRF and mandatory IFRS S1/S2-aligned sustainability reporting increases the risk of non-compliance, incomplete disclosures, or data quality gaps if the Manager’s systems, processes, and governance are not adequately prepared • Strengthen ESG data governance and reporting processes. • Integrate sustainability and climate risks into ERM. • Conduct gap assessments and staff training on IFRS S1/S2. • Obtain internal or external assurance to validate compliance. Effectiveness of Risk Assessment The Board and BARC are satisfied that the risk assessment process remained effective in identifying, analysing and prioritising significant risks on a quarterly basis. The methodology was applied consistently across all risk categories, including strategic, financial, operational, ESG and emerging risks. The introduction of climate-related risk assessment further strengthened the REIT’s overall risk evaluation capability. Risk ratings were updated promptly to reflect changing conditions, and no material weaknesses were observed in the design or execution of the risk assessment process. The REIT’s risk management processes and internal control system operate in an integrated manner to ensure risks are identified, assessed and managed within the Board-approved Risk Appetite. While the risk management framework provides the structure for recognising and evaluating significant risks, the internal control system comprises the policies, procedures and control activities that address those risks in day-to-day operations. Together, they form a continuous process in which risk evaluation informs the design of controls, and control performance provides feedback for ongoing risk monitoring and escalation. STATEMENT ON RISK MANAGEMENT & INTERNAL CONTROL
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