58 AL-SALAM REIT Focus Area Disclosures Outsourcing Arrangement Risk Rise in tenants’ number of complaints, failure in securing good tenants and providing good tenancy mix, inefficiencies property management, data errors in management reports and increase in the frequency of machinery/equipment breakdown are consequences of inadequate monitoring • Annual evaluation of outsourced service providers and tabling the evaluation report to the Board of Directors. • Compliance to establish standard operating procedures. • Internal audit report • Monitor the number of complaints and time taken to resolve issues. • Conduct tenants’ satisfaction survey. Credit Control Debtors ageing has exceeded the 90-days limit. Non-payment of rentals increases the risk of default whilst affecting the cash flow of the Fund The Manager has put in place a credit control policy and enforced its implementation. This includes: • Having a designated credit control unit • Credit control assessment prior to signing the lease agreement. • Securing a higher deposit, depending on asset type and credit control assessment report. • Issuance of reminder letters or letters of demand. • Continuous and close engagement with tenants to discuss proposed solutions, e.g., settlement plan. Cyber Security Risks Cyber security breaches, for example, can damage a company’s reputation, which is difficult to insure against. The Group implements the Business Continuity Management (“BCM”) drill or testing, which focuses on IT infrastructure. IT data recovery testing was carried out annually with respect to external cloud backup at the REIT Manager level. At the operational/ property level, BCM testing was carried out by the Service Manager/ lessee itself. Human Capital Risk Ineffective succession planning may affect Al-Salām REIT’s operations if a critical role becomes vacant and cannot be satisfactorily filled before the vacancy has an adverse impact on the organisation. There is also the risk that the Manager will be unable to attract and retain a competent staff force to manage its portfolio and to execute its strategies for sustainable growth. The Group has a succession planning framework in place, which includes the identification of future successors and leadership training for candidates for critical positions. Additionally, the strategic implementation of activities and processes is designed to decrease the likelihood of lengthy vacancies in critical roles and limit the impact of vacancies in critical roles when they do occur. The Manager also conducts climate surveys to gauge employees’ preferences, offers competitive rewards and compensation, promotes flexible working arrangements, establishes clear career paths, and encourages staff to explore other areas within the Group. MANAGEMENT DISCUSSION AND ANALYSIS
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