INTEGRATED ANNUAL REPORT 2024 66 67 SECTION 6: STRATEGIC REVIEW www.miscgroup.com MISC BERHAD Our Risks and Mitigation Strategies Our Risks and Mitigation Strategies Exposure to a wide range of health, safety, security and environmental hazards Risk Movement This continues to be high priority with increased effort to raise safety awareness across the Group Impact on Value • Disruptions to businesses and operations • Financial and commercial losses due to penalties, clean-up costs and potential loss of clients • Unsafe work environment for personnel/workforce • Major reputational damage to the Group Mitigation Strategies • Strengthen HSSE governance with rigorous policy adoption, integration and enforcement • Implement Generative HSSE Culture Awareness programme • Closely monitor and manage all HSSE-related risks HEALTH, SAFETY, SECURITY AND ENVIRONMENT RISK Key Capitals F H N P Material Matters Health and Safety Ocean Health Security Human Rights Waste Management Effective maintenance and operational excellence are crucial to avoid unplanned disruptions, ensure client acceptance of vessels and production uptime for floating assets are maintained Risk Movement The implementation of strategic and focused mitigations on identified assets across the Group have shown improvements with declining off-hire incidents, while maintaining production uptime for floating assets Impact on Value • Losses from vessel offhire and floating asset downtime • Inability to meet asset performance targets and requirements may impede vessel tradability and lead to idle assets • Penalties, fines, detentions and reputational damage Mitigation Strategies • Establish and implement effective asset maintenance regime and dry docking specification based on assessment of vessels • Ensure continuous development of highly skilled and trained personnel to operate assets at optimal levels • Ensure strict adherence to Health, Safety, Quality, Environment and Energy (HSQE-En) and Security Policy ASSET INTEGRITY AND PERFORMANCE RISK Key Capitals F P Material Matters Financial Performance Health and Safety Security Digitalisation Exposure to softer spot environment in LNGC due to increased vessel availability from expiring long-term charters and a surge in newbuild deliveries, as well as increased volatility due to geopolitical impacts in the tanker sector Impact on Value • Spot market exposure may increase as long-term contracts expire, impacting revenue • Stiff competition with more efficient vessels in the market • Increased operating cost as a result of underutilised carriers Mitigation Strategies • Continue seeking opportunities to optimise fleet deployment and utilisation to maximise efficiency, including options such as long-term charters and conversions • Engage in fleet rationalisation by exploring opportunities for the early disposal or scrapping of older vessels Risk Movement LNGC shipping spot rates affected by oversupply due to increased newbuilds and fewer demolitions, whereas the crude tanker market volatility were caused by disruptions in major trade route and sanctions activity MARKET RISK Key Capitals P Material Matter Financial Performance Effective management and completion of key projects, including shipbuilding, asset construction and floater conversion on time, within budget and according to specifications, remain a top priority, all while maintaining safety standards Risk Movement Delivering our key projects effectively and efficiently will remain our prime focus while we navigate the effects of external factors, such as inflation and supply chain constraints Impact on Value • Delay in project completion • Cost overruns • Quality deficiencies • Erosion of project returns • Potential imposition of Liquidated Damages (LD) from clients Mitigation Strategies • Adhere strictly to project management guidelines • Assign relevant expertise and resources within the project management team to ensure efficient project execution and close monitoring throughout the project lifecycle • Implement a robust project risk management process covering risk assessments and the implementation of mitigation action plans throughout the project lifecycle, from pre-bid submissions to during and post-project phases F I Key Capitals I P F H Material Matters Financial Performance Values, Governance and Business Ethics Sustainable Supply Chain Health and Safety Human Rights PROJECT DELIVERY RISK Business exposure to high interest rates, group gearing and cash position Risk Movement Strategic actions have been implemented to manage the Group’s liquidity position, debt levels and financing costs with continuous monitoring and management of our financial and cash position Impact on Value • Inability to achieve optimal gearing to meet financial return targets • Higher cost of financing for new projects • Inability to maintain Group’s credit rating and investor risk perception • Inability to achieve growth targets under MISC 2030 Ambition Mitigation Strategies • Implement phased interest rate hedging to mitigate the volatility in the interest rate environment • Strengthen and maintain a robust liquidity position by optimising working capital and managing lines of credit in a structured manner • Selective capital investment projects • Assess opportunities to secure long-term charters for capital intensive assets FINANCIAL RISK Key Capitals F I P Material Matter Financial Performance As the Group expands its technology and digital footprint, it may expose the business to increasing cybersecurity risk, as cybersecurity threats continue to trend upwards globally Risk Movement Though there is a notable increase in the frequency and sophistication of cybersecurity attacks, continuous monitoring and investment in appropriate tools to manage and mitigate the risks are being undertaken to safeguard the Group’s digital landscape and parameters Impact on Value • Disruptions to businesses and operations • Loss of critical data and information • Potential litigation exposure and financial losses • Major reputational damage and loss of trust among stakeholders Mitigation Strategies • Implement industry standards, best practices and updated security controls to ensure good governance and management of cybersecurity risks • Continuous cybersecurity assessments and monitoring to identify potential vulnerabilities and weaknesses • Continuously conduct cybersecurity awareness programmes CYBERSECURITY RISK Key Capitals F H I P Material Matters Values, Governance and Business Ethics Security Digitalisation Cybersecurity H I
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