2019 UEM Edgenta Annual Report

119 UEM Edgenta Berhad UEM EDGENTA AT A GLANCE MESSAGE FROM OUR LEADERSHIP STRATEGIC FOCUS OPERATIONAL REVIEW SUSTAINABILITY EFFORTS CORPORATE GOVERNANCE INTRODUCTION FINANCIAL REVIEW ADDITIONAL INFORMATION Annual Report 2019 118 Statement on Risk Management and Internal Control Additional Compliance Information INTRODUCTION In accordance with the practice set out in the Malaysian Code on Corporate Governance 2017, a listed company should establish an effective risk management and internal control framework. The Board of Directors (“Board”) is pleased to provide this Statement on Risk Management and Internal Control pursuant to Paragraph 15.26(b) of the Main Market Listing Requirements of Bursa Malaysia Securities Berhad and as guided by The Statement on Risk Management and Internal Control: Guidelines for Directors of Listed Issuers. RESPONSIBILITY OF THE BOARD The Board acknowledges the importance of maintaining a sound framework in managing risks to safeguard the shareholders’ investments and the Group’s assets. The Board is constantly and actively identifying the Group’s level of risk tolerance, assessing and monitoring the key business risks. These include updating the internal control systems of the Group. The Board however, acknowledges that the system of internal control is designed to manage and reduce the risk of not achieving business objectives and only provide reasonable and not absolute assurance of effectiveness against material misstatement of management and financial information and records or against financial losses or fraud. MAIN FEATURES OF RISK MANAGEMENT AND INTERNAL CONTROL SYSTEM The Board recognises the importance of key risk management and internal control system that sets the tone for the Group. In recognising the importance of risk management and internal control system in the overall governance process, the Board of the Company has instituted the following: Board and Board Committee • For the financial year under review, there are ten (10) Directors on the Board comprising one (1) Managing Director/Chief Executive Officer, six (6) Independent Non-Executive Directors and three (3) Non-Independent Non-Executive Directors. The Board also consist of one (1) alternate director to a Non-Independent Non- Executive Director. However, he has since resigned effective from 28 February 2019. • The Board has established the Audit and Risk Committee (“ARC”), Nomination and Remuneration Committee (“NRC”) and Board Tender Committee (“BTC”) with specific Terms of Reference, which have the authority to examine all matters within its scope of responsibilities and report to the Board with its recommendations for the Board’s decision. • With effect from 1 January 2020, the ARC has been separated into Audit Committee and Risk Committee, and the Risk Committee has been renamed as Board Governance and Risk Committee (“BGRC”). • The responsibilities and functions of the Board, each of its committees and the individual directors are specified in its respective Terms of Reference and Board Charter. General Management Committee • The General Management Committee (“GMC”) is chaired by the Managing Director/ Chief Executive Officer and comprises the senior management team members from respective divisions. • The key role of GMC is to deliberate and resolve the Group’s key strategic and operational issues in a timely manner and keep track of key business developments. • The GMC also serves as a platform for members to report on their respective business and operation plans to the Managing Director/Chief Executive Officer and to address other matters as directed by the Board and / or the Managing Director/Chief Executive Officer. DIRECTORS’ RESPONSIBILITY STATEMENT IN RESPECT OF FINANCIAL STATEMENTS The Directors are required to prepare the financial statements for each financial year which give a true and fair view of the state of affairs of the Group and of the Company at the end of the financial year and of the results and cash flows of the Group and of the Company for the financial year then ended. The Directors consider that, in preparing the financial statements for the financial year ended 31 December 2019, the Group has used appropriate accounting policies and applied them consistently and made judgements and estimates that are reasonable and prudent. The Directors also consider that all applicable Malaysian Financial Reporting Standards, International Financial Reporting Standards and the requirements of the Companies Act 2016 in Malaysia have been followed and confirm that the financial statements have been prepared on a going concern basis. The Directors are responsible for ensuring that the Group and the Company keep accounting records which disclose with reasonable accuracy at any time the financial position of the Group and of the Company and which enable them to ensure that the financial statements comply with the applicable Malaysian Financial Reporting Standards, International Financial Reporting Standards and the requirements of the Companies Act 2016 in Malaysia. The Board is satisfied that it has met its obligation to present a balanced and fair assessment of the Company’s position and prospects in the Directors’ Report on pages 131 - 135 and the Audited Financial Statements from pages 142 - 268 of this Annual Report. NON-AUDIT FEES Company RM’000 Group RM’000 Statutory audit fees paid/payable to external auditor 148 1,247 Non-audit fees paid/payable to external auditors 37 1,055 The Company engaged the external auditor for the following non-audit works: • Review of Statement on Risk Management and Internal Control • Tax compliance services • Consultancy services on overseas market assessment • Project management support for intra-group restructuring exercise MATERIAL CONTRACTS Other than those disclosed in the financial statements and the recurrent related party transaction section in this Annual Report, there were no material contracts including contracts to any loans entered into by the Company and its subsidiaries involving Directors’ and major shareholders’ interests. UTILISATION OF PROCEEDS In 2017, the Company had established the Islamic Commercial Papers (“ICPs”) and Islamic Medium Term Notes (“IMTNs”) under an Islamic Commercial Papers programme (“ICP Programme”) and Islamic Medium Term Notes Programme (“IMTN Programme”) respectively, which have a combined aggregate limit up to RM1,000.0 million in nominal value and sub-limit of RM300.0 million in nominal value for ICP Programme under the Shariah Principle of Murabahah via a Tawarruq Arrangement. On 26 April 2019, the Company completed the issuance of RM50.0 million in nominal value of ICP with a tenor of 12 months under the ICP Programme. The proceeds raised was utilised to redeem the outstanding ICPs amounting to RM50.0 million on the said ICP Programme which was issued on 26 April 2018 and matured on 26 April 2019. A summary of the transactions and utilisation of the proceeds is outlined below: Issuance Date Type Maturity Date Nominal Value (RM million) Proceeds Utilisation 26 April 2019 ICPs April 2020 50 For Shariah- compliant general corporate purposes. 26 April 2018 ICPs April 2019 50 For Shariah- compliant general corporate purposes. 26 April 2017 IMTNs April 2022 250 For Shariah- compliant general corporate purposes. REVALUATION POLICY The Company has not adopted a regular revaluation policy on landed properties. RECURRENT RELATED PARTY TRANSACTIONS The Company proposes to seek approval of its shareholders for the renewal of mandate for recurrent related party transactions and the proposed new shareholders’ mandate for additional recurrent related party transactions of a revenue and trading nature which is in the ordinary course of business at the forthcoming Annual General Meeting of the Company to be held in 2020. Please refer to pages 273 - 286 of this Annual Report on the disclosure of the recurrent related party transactions conducted during the financial year ended 31 December 2019 pursuant to the shareholders’ mandate approved at the last Annual General Meeting.