136 AL-SALAM REIT The risk owners are to monitor and timely update their risk profiles on an on-going basis. The update of the risk profiles includes changes to operational, financial and compliance risks and the identification of emerging risks arising from changing business conditions as well as the adequacy and effectiveness of the related controls. The ERM process evaluation are undertaken by the ERMC every quarterly to assess and evaluate risks that may impede the Group from achieving its strategic and operational objectives, as well as developing action plans to mitigate such risks and to monitor Mitigation Performance. The result of the risk updates was deliberated on the root cause causes, existing controls, severity, impact and action plans to address the top risk of the organisation. The updated risk profile was used as a basis to develop a risk-based internal audit plan for the financial year ended 31 December 2022. In ensuring that there is a consistency to the methods used in managing risks throughout the organisation, both at the strategic and operation level of risk appetites were pre-determined to ascertain that the risk management efforts are aligned with the REIT’s business objectives. The risk appetites also outline enhanced and explicit requirements for managing risks and assists in understanding the impact of uncertainties inherent in business decisions especially impacts relating to the post COVID-19 business sustainability and strategic direction. An expansion of risk appetite parameters was proposed at the BIC to further regulate future diversification exercises. STATEMENT ON RISK MANAGEMENT AND INTERNAL CONTROL Strategic Risks Any risk arises due to potential failures in strategic planning, which may lead to a company not achieving its objectives and goals. Financial Risks Any risk arises due to the potential loss incurred and will impact the cash flow, revenue, operating expenditure (OPEX) & capital expenditure (CAPEX) and profitability of the company. Operational Risks Any risk arises of loss resulting from ineffective or failed internal processes, people, systems, or external events that can disrupt or delay the business operation. Compliance & Legal Risks Any risk arises due to potential exposure to legal penalties, financial forfeiture and material loss, resulting from failure to act in accordance with industry laws and regulations, internal policies or prescribed best practices or contractual liability and requirements with third parties. ESG Risks Environmental, Social, and Governance materiality matters that affect the financial position or operating performance, and reputation of the organization. These include ensuring investments are not at risk of contributing to violations of the ESG regulations. Market Risks Risk arising from changes in the markets to which an organization has exposure. Market changes can impact capital values and future cashflows of the investment and ultimately returns overtime. The market risk can fluctuate from changes to supply and demand or other general shifts in the market cycle. Partnership Risks Risk arising from the potential that a partner will fail to deliver on their obligations to company resulting in losses and business disruptions and the unlimited liability of the partners involved, examples personal liability to creditors, lawsuits and debts.
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