POTENTIAL IMPACTS Risks: • Dampening sentiment for investment among business owners and governments • Continued inflationary pressure, leading to erosion of margins • Inability to renew existing contracts and secure new projects Opportunities: • U tilising our cost advantage and agility to secure new contracts in international markets • D ifferentiating ourselves through technology and sustainability-based asset management solutions that drive cost savings and efficiency Driven by geopolitical instability and widespread inflation, the growth of the world economy is expected to slow from 3.4% in 2022 to 2.9% in 2023, representing its weakest growth profile since 2001 (with the exception of the global financial crisis and the earliest stages of the pandemic). This economic slowdown is expected to be most pronounced in the world’s largest economies – including the USA, the Eurozone and China – with far-reaching consequences for businesses across the globe. • A ccelerated our digitalisation, automation and mechanisation efforts to drive cost optimisation • C ommercialised proprietary technology solutions under Edgenta NXT as our unique selling proposition in the asset management market • Pursued partnerships with global technology leaders to enhance our suite of technologybased solutions • Entered the high growth market of KSA to access opportunities for mega projects under Saudi Vision 2030 • D iversified into high growth and adjacent markets sectors that offer good earnings quality, such as manufacturing and hospitality • Secured new infrastructure-based business in East Malaysia and Indonesia HOW WE RESPONDED We will continue to harness cost efficiency across our business divisions in alignment with our Edgenta of the Future (“EoTF2025”) vision while pursuing our diversification strategy to access high growth markets and quality earnings sectors, thereby mitigating against the potential impact of global economic headwinds. OUTLOOK LINK TO Capitals Material Matters Risks Stakeholders MACROECONOMIC CHALLENGES The post-pandemic environment presents us with a variety of challenges and avenues for growth. With the acceleration of digitalisation and increasing importance placed on sustainability, we have the opportunity to position ourselves as a progressive and future-oriented company. At the same time, we must remain attuned to the evolving expectations of employees and maintain cost excellence to mitigate against global economic headwinds. These key market trends and our response to them are outlined below. M3 M2 S2 S3 R1 R3 With the urgency of climate change now firmly embedded in our collective psyche, the sustainability and environmental impact of corporate players has become a key consideration for clients, governments and investors alike. Further to this, companies in Malaysia are expected to adopt net zero targets and contribute to the government’s drive to cut carbon intensity against gross domestic product (“GDP”) (by 45% by 2023 compared to 2005 levels). • Launched our two-year sustainability roadmap with tangible targets across six sustainability pillars • Delivered strong performance across our sustainability material matters, leading to a commendable improvement in our FTSE4Good rating from 2.5 to 3.1 • Took a leading role as a member of Climate Governance Malaysia and the CEO Action Network (“CAN”) • Deepened our action in waste management, material utilisation and water consumption, including by installing a reverse-vending machine and initiating a recycling campaign with our client, PLUS Malaysia Berhad • Supported our clients’ sustainability journeys through EPC services and green building certification solutions, amongst other solutions HOW WE RESPONDED POTENTIAL IMPACTS Bolstered by our sustainability roadmap, we intend to accelerate our climate action journey in the coming years, including via the setting of net zero targets in 2023. This journey will be assisted by continued capacity-building across our workforce and improved data collection methodologies. OUTLOOK Risks Risks: Non-compliance with environmental regulations or failure to meet globally-accepted environmental standards could lead to: • Loss of access to international markets • Difficulty in securing renewal of existing contracts and winning new projects • Diminished reputation amongst clients, investors and governments, leading to significant financial impact Opportunities: • Accelerating our growth by establishing ourselves as an industry leader in sustainability • I ntroducing technology and sustainability-based solutions that drive improvement in our clients’ sustainability performance TRANSITION TO LOW-CARBON ECONOMY LINK TO Capitals Material Matters Stakeholders M5 M6 S4 S2 S5 S7 S3 R5 OUR OPERATING ENVIRONMENT AND MARKET TRENDS OUR OPERATING ENVIRONMENT AND MARKET TRENDS p.66 p.67 UEM EDGENTA BERHAD INTEGRATED ANNUAL REPORT 2022 1 2 3 4 5 6 7 8 9 MANAGEMENT DISCUSSION & ANALYSIS
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