2020 UEM Edgenta Annual Report

Our financial risk exposures: • Reduced margins & profitability amid higher competition and increase in operating costs • Delayed collection from customers for trade and other receivables which could impede cash management • Foreign exchange risk, i.e. risk that the fair value or future cash flow of a financial instrument will fluctuate due to changes in foreign exchange rates against the Malaysian Ringgit • A sizeable portion of our businesses are concessions, especially Healthcare Support and Infrastructure Services, and are subject to a broad range of rules and regulations • As a public listed company, we are also required to adhere to good corporate governance practices and to uphold integrity throughout our business undertakings and proceedings • Any adversity could result in the suspension of necessary authorisation, licence and/or rights. Lack of regulatory certainty impacts our operations, reputation, and investment decisions Context Context • We manage credit risk by conducting credit evaluations, monitoring recovery procedures by customers and receivables respectively. We keep the company’s balance sheet healthy with a low gross gearing ratio and strong net cash position • Focus on managing cost and preserving margin through tighter cost controls, leveraging technology and operational excellence to derive work and cost efficiencies • Leverage Enterprise Resource Planning (“ERP”) to streamline financial information and processes across our companies, improve spending and strategic sourcing analysis, as well as cost control and increase visibility of spending • In mitigating foreign exchange risk, we maintain a natural hedge by borrowing in the same currency as the future revenue stream to be generated from the overseas entities • We make a concerted effort to deliver quality service to our clients with strict adherence to service level agreements. We have dedicated functions such as Integrity & Compliance, HSSE, Quality Management Assurance and Secretarial to monitor regulatory and policy developments, and liaise with relevant governing authorities to stay abreast of regulatory changes and our obligations • Instil a culture of integrity & compliance within the organisation, with the enforcement of internal processes for operations • Maintain close collaboration with regulatory bodies on emerging legal & regulatory requirements and industry standards & practices • Have in place Whistleblowing channels as an avenue for employees of UEM Edgenta and members of the public to report any improper conduct Mitigation Mitigation FINANCIAL RISK COMPLIANCE/REGULATORY RISK Financial risks are those which relate directly to financial controls and performance. Compliance/regulatory risk is exposure to legal penalties, financial forfeiture and material loss due to failure to act in accordance with industry laws and regulations, internal policies or prescribed best practices. Risk Description Risk Description Capitals Impacted Transformation Pillars Transformation Pillars Capitals Impacted UEM EDGENTA BERHAD 62 Management Discussion & Analysis KEY RISKS AND MITIGATION A. STRATEGIC REVIEW