2 Description • Increasing environmental awareness causing investors and financiers to move away from the oil and gas industry • Shift in customer’s preferences for low-carbon and environmentalfriendly solutions Implications • Asset obsolescence/ reduced demand for assets due to a stronger push to transition to renewable energy and solutions • Access to funding is conditional upon compliance with IMO’s GHG strategy • Higher cost of borrowing Mitigation/Response • The Castor Initiative aims to develop ZEVs • Explore and develop low-carbon services and opportunities progressively as new income streams that will support both the circular and net-zero economy as per our MISC 2050 Framework Trend Upward SHIFT IN STAKEHOLDER’S PREFERENCE TOWARDS LOW CARBON SOLUTIONS 3 Description Inability to keep up with the acceleration of new technologies on low-carbon solutions, automation and digitalisation in the maritime industry which may result in the Group losing its competitive advantage. Implications • Higher CAPEX and OPEX required for implementing low carbon new technologies in our assets • Premature obsolescence of technology in existing assets • Unpreparedness of the workforce to adapt to the new technologies Mitigation/Response • Direct adequate capital and resource investments into digitalisation upgrades and initiatives for assets • Adopting latest available technology on board our newbuilds/ new assets • Transformation of internal processes and systems for better synergies within the organisation • Continuously retooling and reskilling the workforce to adapt to changes in operational requirements and processes in relation to new technologies Trend Upward TECHNOLOGY DEVELOPMENTS Material Matters Capitals Affected Material Matters OUR RISKS AND MITIGATION STRATEGIES 4 Description • General geopolitical instability in China and the Russia-Ukraine war reverberated throughout the year causing financial sanctions, rising commodity prices and supply chain disruptions • Tensions among countries in the form of war, sanctions, terrorism, trade wars, territorial disputes and piracy Implications • Impacts on new business opportunities, operational safety and adverse commercial outcome on existing contracts • Cost escalation in materials and services impacting operations and project execution • Delay in completion of projects and asset downtime Mitigation/Response • Conducting comprehensive and holistic risk assessment on the exposures of each project and business opportunities • Performing detailed background checks on partners and clients to avoid dealing with sanctioned countries/ persons • Increasing operating controls on existing projects and tightening security of assets Trend Neutral GEOPOLITICAL INSTABILITY 5 Description Poor project planning and execution can potentially impact successful completion of our projects. Key projects undertaken include new shipbuilding, asset construction and floater conversions among others. Implications • Ineffective project management may lead to delays in project completion, cost overruns and quality deficiencies • Erosion of project returns • Possibility of increased variation orders Mitigation/Response • Establishing dedicated project management teams to ensure projects are executed efficiently • Adherence to the project management guideline and timely closure of risks identified via Project Risk Assessment Framework Trend Neutral PROJECT MANAGEMENT Material Matters Capitals Affected Material Matters Capitals Affected Climate Change Financial Performance Financial Physical Natural Capitals Affected Natural Intellectual Social & Relationship Financial Physical Climate Change Financial Performance Digitalisation Human Social & Relationship Physical Financial Human Social & Relationship Intellectual Physical Financial Financial Performance Financial Performance Business Knowledge Strategic Review Strategic Review 73 72 MISC Berhad Integrated Annual Report 2022
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