Yinson Annual Report 2019

RISK DESCRIPTION MITIGATION Project Cost Overrun Risk As FPSO projects are typically long term in nature, project execution involves risks such as project cost overruns which would have a negative impact on project profit margins and affect the cash flows of the Group. The Group is continuously reviewing and improving its project cost management to ensure that all ongoing and future projects are executed within budget. Action plans on the enhancement of project management in the area of vendor management were put in place with the introduction of the Vendor Registration Portal. Investment Evaluation Risk Ineffective evaluation on potential investments could lead to poor investment decisions which may in turn negatively affect investment returns. The Investment Policy has been established and approved by the Board to ensure that the investment evaluation process is effectively managed within a structured assessment process. The Policy serves as a guidance for the project evaluation and assessment processes. Corporate Funding Risk Corporate funding is necessary to cover the working capital costs, equity injection and debt servicing of the Group. Inability to secure the necessary funding may lead to the Group defaulting on its debt obligations or failure to meet its repayment schedules. The Corporate Funding Policy has been established and approved by the Board. With guidance from the Policy, the Group will continue to explore various avenues and strategies to raise funds for its business operations and financial obligations. 2. INTERNAL CONTROL STRUCTURE The key elements of the Group’s internal control structure are described as below: • Documented Policies and Procedures Internal policies and procedures are established and documented in manuals, which are reviewed and revised periodically to meet changes in business, operational and mandatory requirements. Prior to the implementation of internal policies and procedures throughout the Group, such documents were tabled to the MC for the first review. Upon approval by the MC, the same will be tabled to the Audit Committee, together with the Board, for final review and approval. During the financial year under review, the Standard Operating Procedures for the departments in Kuala Lumpur Corporate Office were reviewed, enhanced and approved by the GCEO. • Line of Reporting and Responsibility The organisation structure includes defined lines of reporting and delegation of authority (including limits of authority), responsibility and accountability to the Board Committees (including the Audit Committee) and the business units. Apart from the established Board Committees, the Board is supported operationally by the MC which consists of senior members of the organisation including the Group Chief Executive Officer and Group Chief Strategy Officer. • ExperiencedManagement Team The Board relies on the Executive Management team, which sits within the MC, to lead and manage the business of the Group on an overall basis. The MC andManagement team actively participate in the day-to-day tasks to plan, operate and manage the operations and strategy of the Group in achieving its objectives within the boundaries of the Group’s risk register and risk matrix. The scope of responsibilities, duties and authorities of the MC are defined within its Terms of Reference, as approved by the Board. • Review andMonitoring Process The MC conducts a quarterly monitoring and review of the Group’s operations and performance, including financial results and forecasts for all business operations within the Group. From the monitoring and review process, the MC provides updates to the Board and Audit Committee for their deliberation. Statement on Risk Management and Internal Control Yinson Holdings Berhad ANNUAL REPORT 2019 94