29 / 136
28
FRONTKEN CORPORATION BERHAD
(651020-T)
ANNUAL REPORT
2015
Introduction
Paragraph 15.26 (b) of the Listing Requirements of Bursa Malaysia Securities Berhad (“Bursa”) stipulates that a listed issuer
must ensure that its board of directors makes a statement (“Internal Control Statement” or “Statement”) about the state of
internal control of the listed issuer as a group. The Statement is expected to include sufficient and meaningful information
needed by shareholders to make an informed assessment of the main features and adequacy of the organization’s risk
management and internal control system.
Accordingly, the Board of Directors (“Board”) is pleased to furnish the Internal Control Statement, which outlines the nature
and scope of the system of risk management and internal control in the Group (comprising the Company and its subsidiaries)
for the financial year ended 31 December 2015 and up to the date of approval of this Statement for inclusion in the Annual
Report of the Company. For the purpose of disclosure, this Statement has taken into consideration the “Statement on
Risk Management and Internal Control - Guidelines for Directors of Listed Issuers”, a publication of Bursa which provides
guidance to boards in formulating the Internal Control Statement.
Responsibility of the Board
The Board acknowledges its overall responsibility for the Group’s system of risk management and internal control to
safeguard shareholders’ investment and the Group’s assets as well as reviewing its adequacy and integrity in meeting the
Group’s business and corporate objectives. The Board is mindful of the need to establish clear roles and responsibilities in
discharging its fiduciary and leadership functions in line with Recommendation 1.2 (“Recommendation”) of the Malaysian
Code on Corporate Governance 2012 (“MCCG 2012”). As such, the Board is aware that its principal responsibilities, as
outlined in the Commentaries of the same Recommendation, include, inter-alia, the following:
•
to identify principal risks and ensure the implementation of appropriate controls and mitigation measures; and
•
to review the adequacy and integrity of the management information and internal control systems of the Group.
The Group’s risk management and internal control system addresses strategic, operational, financial and compliance risks
as well as the associated internal controls implemented by Management to mitigate the principal business risks as identified.
In view of the limitations inherent in any system of risk management and internal control (“system”), the system is designed
to manage, rather than eliminate, the risk of failure to achieve the Group’s business and corporate objectives. The system
can therefore only provide reasonable, but not absolute, assurance against any material misstatement, financial loss or
fraudulent activities.
In embracing Recommendation 6.1 of the MCCG 2012, the Board has formalized an Enterprise Risk Management framework
(“ERM framework” or “framework”) that sets out pertinent policies and guidelines to streamline the Group’s risk management
initiatives and activities in a structured and holistic manner to safeguard shareholders’ investment and the Group’s assets.
Based on this framework, the Board has established an on-going process to identify, evaluate, control, report and monitor
significant business risks faced by the Group. The Board, through its Audit Committee, reviews the results of this process,
including mitigating measures implemented by Management to address the key risks as identified. This process has been in
place for the financial year under review and up to the date of approval of this Statement for inclusion in the Annual Report
of the Company.
Risk Management Framework
Risk management is embedded in the Group’s key business processes through its ERM framework, which provides, amongst
others, an easy-to-understand step by step approach to identify and evaluate risks faced by the business units and, by
extension, the Group. To further streamline risk management processes and activities, the Board has formalized in writing
pertinent risk management policies and guidelines for adherence by business units across the Group. The ERM framework
embodies a structured risk management process, which results in the compilation of specific risk profiles of key business
units and companies in the Group by Risk Management Units (“RMUs”), including the update of risk profiles to take into
account the vagaries of changing business environment as well as emerging risks.
The individual risks in the profile are scored for their likelihood of occurrence and the impact thereof based on risk parameters
established for each key business unit or company in the Group. The risk parameters comprise relevant financial and non-
financial metrics for risks to be evaluated in terms of likelihood of their occurrence and the impact thereof – this feature
essentially articulates the Board’s risk appetite, i.e. the extent of risk the Group is prepared to take or seek in achieving its
corporate objectives.
STATEMENT ON RISK MANAGEMENT
AND INTERNAL CONTROL