Al-`Aqar Healthcare REIT Annual Report 2020

Governance Structure 83 PRINCIPLE A: BOARD LEADERSHIP AND EFFECTIVENESS (CONT’D) REMUNERATION (CONT’D) Nomination and Remuneration Committee (NRC) The NRC is the Board’s committee that implements policies and procedures on remuneration including reviewing and recommending matters relating to the remuneration of Board members and senior Management. Currently, the NRC comprises three members who are all an Independent Non-Executive Directors. The Executive Director may be invited to participate in certain meetings of the NRC to provide insights, particularly on considerations relating to the performance of the Company but he will not be involved in deciding his own remuneration. The NRC is guided by its Term of Reference which is available at the Fund’s website at www.alaqar.com.my. PRINCIPLE B: EFFECTIVE AUDIT AND RISK MANAGEMENT Risk Management and Internal Control Framework Informed Decisions on Level of Risks and Implementation of Controls The Board has the oversight responsibility of the adequacy and effectiveness of the Manager’s system of internal controls which comprises the governance, risks and controls aspects. The Board believes that effective maintenance of the system is important to help the Fund to achieve its various objectives at many levels and having considered the risks that the Fund faces whilst balancing out the interest of its many stakeholders and protecting the assets and investments. The Board fulfils its oversight function of risk management and internal control system via the Board Audit and Risk Committee (BARC). An approved Enterprise Risk Management (“ERM”) Framework which was developed based on ISO31000:2017 is in place and provides guidance to both the Board and Management on the risk management reporting structure and governance, processes, assessment methodologies and tools. The Management of key operating companies adopt and apply the prescribed methodologies to identify, evaluate, treat, control, track and report the Strategic and Business, Financial, Compliance and Operational Risks based on the risk appetite set. In addition to the ERM Framework, the Manager has in place an approved Compliance Framework for management of Compliance Risks which are recognised as part of Operational Risks under the ERM Framework. The Internal Audit Function which was outsourced to Crowe Governance Sdn Bhd assesses and reports the adequacy and effectiveness of the governance, risk management and internal control system whilst provide confirmation of the effectiveness of internal control and risk assessment process by the heads of departments. An overview of the Board’s responsibility and descriptions of the key components of system of internal control which include the conduct of reviews by the Internal Audit Function, risk management and compliance management is set out in the Statement on Risk Management and Internal Control on pages 90 to 93 of this Annual Report. Effectiveness of Governance, Risk Management and Internal Control System The Board has established an Internal Audit Function to provide assurance on the effectiveness of risk, control and governance processes. Oversight of the Internal Audit Function is delegated to the BARC to ensure that there are sufficient resources and internal audits are carried out objectively, effectively and independently. The Internal Audit Function is outsourced to a team of competent and qualified auditors at Crowe Governance Sdn Bhd, who reports directly to the BARC. The Internal Auditors attend all meetings of the BARC. The BARC’s review of the scope of work and reports by the Internal Audit Function and the detailed description of the Internal Audit Function are provided in the BARC Report on pages 86 to 89 of this Annual Report. The Internal Audit Function discharges its duties in accordance with internationally recognised framework and guidelines as described on page 93 in the Statement on Risk Management and Internal Control and page 88 in the BARC Report of this Annual Report, respectively. Corporate Governance Statement