STATEMENT ON RISK MANAGEMENT AND INTERNAL CONTROL Risk area Control measures taken to mitigate the risks Market risks • The Group operates in a competitive environment and failure to compete effectively against its existing competitors and new market entrants will affect its performance. • Establish quality control procedures and project tendering guidelines to ensure both quality and cost efficiencies are maintained. • Nurture close relationship with customers, sub-contractors and suppliers. • Establish wide range of services and products to diversify product risks and reduce reliance on any particular service or product. • Focus more on technical demanding products and services to create a market niche or speciality. • Pursue joint ventures and development projects with partners whose strengths complement the Group’s capabilities. • Diversify base of customers, sub-contractors and suppliers. • Maintain an in-house IBS design team with the ability to advise and work with clients from the early stage of their projects, i.e. design stage. • Maintain a well-equipped lab to perform the necessary test on raw materials on a timely manner and perform incidental lab test required by clients at minimal charges. Corruption risks • Corruption risks exist across all business sectors, in one form or another, from bribery to extortion and embezzlement to cronyism. Corruption can have serious consequences for businesses’ financial health and reputations, impact the quality of goods and services and it can prevent businesses from achieving maximum efficiency and profitability. The Group is not spared from corruption risks. • Implemented ABAC Policy which sets out the responsibilities of the Group to comply with laws on bribery and corruption and provide guidance to the Directors, employees and business associates on the standard of behaviour to which they must adhere and how to recognise and deal with bribery and corruption issues. • Implemented the Code and Whistle Blowing Policy. • Declaration of actual or potential conflict of interest situation by key senior management and tender award committee. Such personnel shall abstain from decision making where there is actual or potential conflict of interest. • Adopts segregation of duties for job functions. Designated personnel for preparing, verifying and approving each transaction/activity is documented in written procedures. • Provide training on anti-bribery and anti-corruption to Personnel and conduct due diligence procedures on customers, vendors, and employees. INTERNAL CONTROL The Group has established an organisation structure outlining the lines of responsibilities and authorities for planning, executing, controlling and monitoring the business operations aligned to business and operations requirements which supports the maintenance of a strong control environment. It has extended the responsibilities of the ARMC and of the Board to include the assessment of internal controls through the internal audit function. Other key elements of the system of internal control of the Group are as follows:- • The Board established a hierarchical organisation structure with proper segregation of duties for key functions of the Group’s operations; • Delegation of authority including authorisation limits at various levels of management and those requiring the Board’s approval are clearly defined to ensure accountability and responsibility; • Standard operating procedure manuals set out the policies and procedures for day-to-day operations. Reviews are performed to ensure that the manuals remain current, relevant and aligned with evolving business and operational needs; • Formation of committee to evaluate and approve related party project tenders; • Appointment of staff based on the required level of qualification, experience and competency of the relevant position. Training and development programmes are carried out to ensure that staff are kept up to date with the necessary competencies and knowledge to carry out their responsibilities towards achieving the Group’s objectives; • Review of actual performance against annual budget by the Board; • Regular provision of comprehensive information to the Board for monitoring and tracking of performance of the Group; • Periodic operational review meetings are held and attended by the Executive Directors, heads of department and key management staff to consider financial and operational issues of the Group as well as any management proposal; 072
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