CapitaLand Integrated Commercial Trust - Annual Report 2021

Material Risks Risk Details Opportunities Key Mitigating Actions Economic • Exposure to event risks, such as pandemics, political leadership uncertainties/changes, trade wars, economic downturns and sudden changes in real estate related regulations in major economies as well as key financial and property markets. • Access investment opportunities globally to enhance portfolio diversification. • Actively monitor macroeconomic trends, policies and regulatory changes in key markets. • Disciplined approach to financial management and a well-balanced portfolio. • Diversify our portfolio across asset classes and geographies in accordance with Board- approved country limits. • Focus on markets where the Group has operational scale and the underlying economic fundamentals are more robust. Financial • Poor management of cash flows can result in funding gaps which may lead to financial losses and defaults, delays in project completion and negative reputational impact. • Exposure to interest rate volatility from floating rate debts. • Exposure to foreign exchange volatility for bonds issued in foreign currencies. • Managing the funding and liquidity risk well gives confidence to investors. • Actively monitor CICT Group’s debt maturity profile, operating cash flows and the availability of funding to ensure that there are sufficient liquid reserves, in the form of cash and banking facilities, to finance CICT Group’s operations and asset enhancement initiatives (AEIs). • Access to various sources of funds from both banks and capital markets to minimise over-reliance on single source of funds for any funding or refinancing requirements. • Actively review and maintain an optimal mix of fixed and floating rate borrowings. • Seek to minimise the level of interest rate risk by borrowing at fixed rate or hedging through interest rate swaps. • Seek to minimise foreign currency risks by entering into cross currency swaps to hedge the foreign currency denominated bonds into SGD for both the principal amount and the periodic interest payments. • Adopt natural hedging where possible, by borrowing in the same currency as the revenue stream generated from our investments. Investment & Divestment • Deployment of capital into loss-making or below-target return investments due to wrong underwriting assumptions or poor execution. • Inadequate planning to identify suitable divestment opportunities. • Tap on strong experience and track record in multi-sector asset and portfolio manager. • Evaluate all investments against a rigorous set of investment criteria which includes potential for growth in yield, rental sustainability and potential for value creation. • Board reviews and approves all major investment and divestment decisions. • Conduct rigorous due diligence reviews on all investment and divestment proposals where key financial assumptions are reviewed, and sensitivity analysis are performed on key variables. • Identify potential risks associated with proposed projects and issues that may affect smooth implementation or attainment of projected outcomes at the evaluation stage and devise action plans to mitigate such risks as early as possible. • Integrate sustainability in real estate life cycle from the earliest stage of our investment, redevelopment and divestment processes. CapitaLand Integrated Commercial Trust 48 Risk Management