KENANGA INVESTMENT BANK BERHAD INTEGRATED ANNUAL REPORT 2024 WE ARE KENANGA OUR SUSTAINABILITY APPROACH LEADERSHIP STATEMENT HOW WE ARE GOVERNED OUR VALUE CREATION APPROACH FINANCIAL STATEMENTS SHAREHOLDERS’ INFORMATION ADDITIONAL INFORMATION 31 30 Climate risk is an indirect risk that refers to the potential losses or disruptions resulting from climate change. A risk of change in the climate can potentially have a negative impact to credit, market, operational and reputational risk of the Group if the risk if not appropriately managed. Climate risk refers to the potential impacts arising from both our direct exposure to climate-related events and the risks embedded within our financing and investment activities. These risks can be categorised into physical risk such as effects of extreme weather events, and transition risks relating to the global shift toward a lower-carbon economy and changing regulatory frameworks. Climate Risk Impact to Kenanga Financial institutions that fail to manage climate risks appropriately would risk regulatory sanctions, reputational damage and potential impact on lending, financing and investment portfolio. There are two (2) key areas, in particular, that climate change impact may affect the Group: 1. Reputational risk: Failure to act responsibly and manage climate related risks could damage the Group’s public image and erode customer and investor trust. 2. Potential financial loss: Climate risks including physical and transition risks could result in substantial losses in lending and investment portfolios if risks are not managed well, especially for clients within climate vulnerable sectors. Opportunities • Generation of new business opportunity by leveraging on climate risk sectorial profile and where appropriate, offers sustainability or climate friendly and supportive products to promote and facilitate client’s transition journey. • Strengthen relationships with clients by supporting clients on their transition journey. • Enhance the Group’s reputation as a responsible and respected financial institution with our business level and enterprise climate risk management. Mitigation Measures • Established a robust climate risk governance structure to oversee climate-related matters, integrating climate risk into key risk management frameworks and decision-making processes. • Enhanced Climate Change Risk Management Framework to integrate climate considerations into governance, strategy, operations, reporting and risk management. • Climate risk assessment and client engagement through internal Climate Change and Principle-based Taxonomy classification assessment. • Developed tools such as the Climate Change Risk Assessment Checklist, Enhanced Due Diligence and the Climate Risk Assessment Template to guide risk identification and classification. • Established monitoring, reporting and stress testing for climate risk. Conduct climate risk stress testing and scenario analysis per Bank Negara Malaysia guidelines to assess portfolio- and sector-level risks and develop mitigation strategies. • Quantified financed emissions by sector (Scope 3) to support development of risk metrics and mitigation measures. • Incorporated climate risk in outsourcing and procurement frameworks to assess third-party service providers’ environmental and climate risk profiles. • Integrated physical climate risk assessment for HQ and branches into operational risk management self-assessment and business continuity management evaluations. Technology risk refers to any risks emanating from information technology and cyber threats. Technology and cyber risks are critical threats to the financial industry, with evolving cyber-attacks and system vulnerabilities posing significant challenges. Technology Risk Impact to Kenanga Technology and cyber risks can significantly impact the Group by damaging its reputation, disrupting operations, and leading to regulatory penalties, financial losses, and increased costs. Cyber-attacks or breaches can erode customer trust, resulting in lost clients and decreased market value, while operational disruptions and system failures can cause downtime and missed opportunities. Non-compliance with cybersecurity regulations could result in fines, and vulnerabilities may hinder the Group’s ability to stay competitive in digital services. Opportunities • Strengthening Client Relationships Through Trust and Security: With a robust strategic technology and cyber risk oversight model, the Group can differentiate itself as a trusted partner in the financial services industry. By prioritising cybersecurity and ensuring business continuity, the Group can build a stronger, more loyal relationships with clients, fostering trust and confidence in its digital and financial services. • Enhanced Customer Confidence: A strong cybersecurity posture can be a competitive advantage, attracting customers who value security and reliability. • Partnerships with Fintech: Collaborations with fintech companies can enhance the Group’s technological capabilities and accelerate digital transformation. • Market Leadership: Proactive investments in technology risk management can position the Group as a leader in secure financial services, setting industry benchmarks. Mitigation Measures • Well-established strategic technology and cyber risk oversight model. The Group has crafted a cutting-edge, industry-leading framework designed to proactively manage technology and cyber risks. This holistic approach empowers anticipation, detection and swift response to emerging threats, while ensuring rapid recovery and continuous operational resilience. • In respect of regulatory excellence, the Group is committed to upholding the highest regulatory standards, including compliance with policy document of Bank Negara Malaysia such as Risk Management in Technology and Securities Commission Malaysia’s Guidelines on Technology Risk Management as well as other relevant regulatory requirements. • Embrace in empowering our people. We prioritise building a cyber-aware workforce by conducting ongoing training and awareness programs. • Enhanced cybersecurity measures. The Group leverages state-of-the-art technology to safeguard against evolving cyber threats. R5 R6 Our Approach The Group recognises the importance of safeguarding sensitive client information and maintaining operational integrity. Our advanced cybersecurity measures and proactive risk management ensure resilience against these threats, protecting both our reputation and our clients. In a rapidly changing digital landscape, the Group is committed to staying ahead of these risks, ensuring secure, uninterrupted service and driving forward our digital transformation journey. Our Approach A proactive approach to climate risk management at business and enterprise level to support the climate transition journey of our customers and help safeguard the long-term sustainability of the Group. This also ensures that we remain aligned with the evolving market expectations and regulatory requirements. KEY RISKS AND MITIGATION KEY RISKS AND MITIGATION
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