leadership pipeline and strong management bench strength through annual talent review, where
succession plans for key management positions are reviewed and high potential employees are
identified for leadership development.
Information Technology Risk
IT risk comprises information security risk, business interruption risk and IT procurement risk. The
outsourced IT team has put in place policies and procedures to manage IT risks. The policies and
procedures govern vendor selection, IT security, access controls and data security. Disaster
recovery testing is conducted regularly to validate the system continuity plan that is put in place. In
addition, network penetration testing is also conducted regularly to check for potential security gaps.
Interest Rate Risk
CMT Group’s exposure to fluctuations in interest rates relates primarily to interest-bearing financial
liabilities. Interest rate risk is managed on an on-going basis, and with the primary objective of
minimising the impact on net interest expense that is caused by adverse movements in interest rates.
Hence, the Manager proactively seeks to minimise the level of interest rate risk by locking in most of
the borrowings of the CMT Group at fixed interest rates.
Investment Risk
The main sources of growth for CMT Group are asset enhancement initiatives (AEI), acquisition of
properties as well as investment in greenfield developments. The risks involved in such investment
activities are managed through a rigorous set of investment criteria which includes potential for
growth in yield, rental sustainability and potential for value creation. Also, key financial projection
assumptions are reviewed and sensitivity analysis performed on key variables. The potential risks
associated with proposed projects and the issues that may prevent their smooth implementation or
attainment of projected outcomes are identified at the evaluation stage. This is to enable the Manager
to devise action plans to mitigate such risks as early as possible.
Liquidity Risk
The Manager actively monitors the cash flow position of CMT Group to ensure that there are sufficient
liquid reserves, in the form of cash and banking facilities, to finance CMT Group’s operations and AEI.
Given CMT Group’s reliance on external sources of funding, the health of the debt markets directly
affects CMT Group. Different funding strategies are used to minimise over-reliance on a single source
of funds for any funding or refinancing requirements. Other than Multicurrency Medium Term Note
Programme and Euro-Medium Term Note Programme, CMT is also one of the first real estate
investment trusts to set up a retail bond programme. CMT Group has also tapped into the convertible
bonds and commercial mortgage backed securities markets for funds. In addition, CMT Group has
banking facilities as a source of back-up. The Manager will continue to proactively manage the
capital structure of CMT Group by ensuring its debt maturity profile is spread out without major
concentration of debts maturing in a single year, and maintaining an optimal aggregate leverage. The
Manager also monitors covenants closely to ensure compliance.
Project Management Risk
To manage project management risk, the outsourced Project Management team from CapitaLand
adopts a rigorous project management process to ensure that project cost, quality and time
objectives are met. There are stringent pre-qualification procedures to appoint well-qualified vendors
for projects where key criteria such as vendors’ track records and financial performance are
assessed. Regular site visits are conducted to closely monitor the projects’ progress so as to manage
potential risk of delays, poor workmanship and cost overruns. In-house teams consisting of
experienced technical staff provide guidance and independent audit checks on quality in
architectural design, mechanical and engineering detailing, and safety as part of the process.
Enterprise Risk Management
56 | CapitaMall Trust Annual Report 2014
