Risk Management Framework The Board recognises that an effective risk management framework will allow the Group to identify, evaluate and manage risks that affect the achievement of the Group’s business objectives within defined risk parameters in a timely and effective manner. The Group is exposed to operational risks and various financial risks as follows: Statement On Risk Management and Internal Control Operational risks arise from the execution of the Group core businesses (i.e. property development and construction, plantation, investment property and hotel and trading) and competencies of the management in managing the risks relating to health and safety, quality, inadequate skilled workforce and adverse climatic conditions. The management is guided by approved standard operating procedures and quality controls to ensure that all business units are functional. The Group continue to offer competitive compensation that is benchmarked against well performing companies in the same industry and rewards framework that is closely linked to employees’ performance to attract and retain skilled workforce to meet existing and future needs. The plantation division emphasise on good agricultural practices to ensure high production yields of fresh fruit bunches. (i) Credit and liquidity risks arise from the inability to recover debts in a timely manner which may adversely affect the Group’s profitability, cash flow and funding. In order to minimise such exposures, tightening of credit control, close monitoring of collections and overdue debts were carried out. (ii) Interest rate risk arise mainly from the Group’s borrowings in the form of term loan, overdraft and revolving credit facilities to meet capital expenditures and working capital requirements. (iii) Commodity risk arises from the volatility of commodity prices such as crude palm oil (CPO) and palm kernel which are affected by factors such as weather, government policies, supply and demand and competition from substitution products as well as currency fluctuation. (iv) Foreign exchange risk arises from movements in foreign currency exchange rates. The Group’s reporting currency is Malaysian Ringgit (RM). The majority of MKHOP’s expenses is denominated in Indonesian Rupiah (IDR) and sale of CPO and palm kernel is denominated in IDR and hence there is a natural hedge. Operational Risks Financial Risks MKH BERHAD ANNUAL REPORT 2024 Laying The Foundation of Excellence Where People Matter Guided by Leadership, Inspired by People Delivering Value That Matters to People PG. 144
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