C O R P O R A T E G O V E R N A N C E
Principle 11:
Risk Management and Internal Controls
Risk Management
The Board recognises its responsibility for the governance of risks and has set in place procedures for ensuring a sound system
of risk management and internal controls. These procedures include having a structured Enterprise Risk Management (“ERM”)
framework for A-REIT and its subsidiaries (“Group”), Management and Board reviews of key transactions, and the assistance of
independent consultants such as the Group’s external and internal auditors to review financial statements and internal controls
covering key risk areas.
The AC reviews and guides Management in the formulation of risk policies and processes to effectively identify, evaluate and
manage any material risk and ensure that a robust risk management and internal control system is maintained.
In addition, the Operational Risk Management Committee (“ORMC”) was set up in September 2012 to assist both the AC and
the Board on matters relating to the operational aspects of risk management. The main duties of the ORMC are (i) overseeing
the adequacy and effectiveness of the operational aspects of risk management; (ii) monitoring the effectiveness of the Group
and its out-sourced Property Manager’s risk management system to ensure that a sound and robust risk management system is
maintained; (iii) evaluating the adequacy of the effectiveness of the Group’s disclosure controls and procedures; and (iv) assessing
the materiality of specific events, developments and risks to the Group and the impact on the unit price of A-REIT.
Ownership of risks lies with the CEO and function heads of the Manager with overall oversight by the Board. The nature and extent
of risks are assessed regularly and the Manager maintains a risk register which identifies risks and the internal controls in place to
mitigate those risks. The risk register is reviewed and updated regularly by the CEO and function heads of the Manager and this is
submitted to the AC, the ORMC and the Board on a quarterly basis. The AC and the ORMC report to the Board on material findings
and make recommendations in respect of any material risk issues. The risk reports will be relied upon as part of the basis for the
Board and the AC to assess the adequacy and effectiveness of the risk management and internal control systems.
Internal Controls
The Group-wide system of internal controls, which includes a code of conduct, documented policies and procedures, proper
segregation of duties, approval procedures and authorities, as well as checks-and-balances built into the business processes,
constitute an important part of the ERM system.
The Manager has in place, a control self-assessment programme whereby process owners will self-assess their respective internal
controls via self-assessment questionnaires on an annual basis. Action plans are then drawn up to mitigate the control gaps. The
self-assessment exercise is subsequently validated by A-REITs internal auditors.
To ensure that internal controls and risk management processes are adequate and effective, besides control activities and reviews
performed by management, the AC is assisted by various independent professional service providers. The assistance of the internal
and external auditors enabled the AC to carry out assessments of the effectiveness of key internal controls during the year.
Any material non-compliance or weaknesses in internal controls or recommendations from the internal and external auditors to
further improve the internal controls were reported to the AC. The AC will also follow up on the actions taken by the Management
on the recommendations made by the internal and external auditors. Based on the reports submitted by the internal and external
auditors received by the AC and the Board, nothing material has come to the attention of the AC and the Board to cause the AC
and the Board to believe that the internal controls and risk management processes are not satisfactory.
There are documented procedures in place that cover financial reporting, new investments, project appraisal, valuation of
properties, equity fund raising, borrowings through banks, compliance and other risk management issues. The Group also has both
a comprehensive insurance coverage and a business continuity plan.
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