50
CapitaLand Mall Trust
Annual Report 2015
Enterprise Risk Management
Increasing threats to information security such as
hacking and website defacement, may pose risk of
data leakage and damage to CMT Group’s reputation.
The outsourced IT team from CapitaLand has put
in place policies and procedures to manage IT
risks. Established policies and procedures govern
IT security, access controls and data security.
Disaster recovery testing is conducted regularly
to validate the system continuity plan. In addition,
network penetration testing is also conducted regularly
to check for potential security gaps.
Interest Rate Risk
Some of CMT Group’s existing debts carry floating
interest rates, and consequently, the interest cost for
such loans will be subject to fluctuations in interest
rates. Interest rate risk is managed on an ongoing
basis through regular reviews on the optimal mix of
fixed and floating rate borrowings, and with the primary
objective of minimising the impact on net interest
expenses that is caused by adverse movements in
interest rates. The Manager also proactively seeks
to minimise the level of interest rate risk by locking in
most of the borrowings of CMT Group at fixed interest
rates.
Investment Risk
The main sources of growth for CMT Group are
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
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.
Leasing Risk
Strong competition, poor economic and market
conditions are some of the key factors that could result
in key tenants not renewing their leases, and adversely
affecting the leasing performance of our properties.
The Manager establishes a diversified tenant base and
sustainable trade mix and has in place proactive tenant
management strategies which are in line with the malls’
positioning. It is also the Manager’s priority to closely
monitor tenants’ sales performance and maintain
positive relationships and rapport with retailers to build
loyalty with CMT Group’s malls.
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. 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. CMT Group’s ability to raise funds
from both banks and capital markets has enabled it to
minimise over-reliance on a single source of funds for
any funding or refinancing requirements. 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 which
comprises experienced staff with various expertise
in architectural design, mechanical and engineering
detailing and safety, 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. The Manager also conducts regular site
visits to closely monitor the progress of projects and
manage potential risks of delays, poor workmanship
and cost overruns.
Regulatory and Compliance Risk
Due to the nature of CMT Group’s business,
CMT Group is required to comply with the applicable
and relevant legislation and regulations that include
the Listing Manual of the Singapore Exchange
Securities Trading Limited, the Code on Collective
Investment Schemes issued by the Monetary Authority
of Singapore and the tax rulings issued by the
Inland Revenue Authority of Singapore. The Manager
has in place a robust framework that proactively
identifies applicable laws and regulatory obligations,
legal updates and embeds compliance into the
day-to-day operations.
