142 YINSON HOLDINGS BERHAD OUR CAPITALS MANUFACTURED CAPITAL MATERIAL TOPIC: BUSINESS MODEL INNOVATION DEFINITION OF MATERIAL TOPIC Improve business resilience against external pressures, market signals and trends through offering of innovative products and services. IMPACTS S1 S2 S3 S4 S5 S6 S7 S9 S10 GS1 GS2 WHY IS THIS TOPIC MATERIAL TO YINSON The inherent uncertainties of the global market have demonstrated that businesses need to be resilient, innovative and forward-looking. We believe that oil & gas will remain essential in the global energy mix and will reach peak demand in the coming decade. With our core business related to oil & gas production, Yinson understands the need for adapting our business model in order to maintain long-term value creation and competitiveness. A key way we are adapting our business model is by diversifying our business interests through investments in renewables and green technology-based solutions. We have also embarked on a strategic review of our FPSO business and a GSR to make the right decisions for our growth and long-term sustainability. Even as we adapt our business model for the future, we are cognisant that managing our current assets and businesses well is of paramount importance, as it builds our track record as a reliable partner who delivers on our commitments. This provides assurance of our capabilities to carry out our growth plans, and the financial capability to do so. RISKS • Lack of thoughtful business model innovation could cause businesses to miss out on potential new growth areas. • Hasty entry into new business streams and technologies without the requisite experience and due diligence may lead to a high failure rate. • The growth of new businesses may outpace that of existing talent skillsets, leading to increased employee attrition. • Significant resource outlay into new projects without an adequate understanding of the risks may impact the stability of the existing business model. • Failure to meet commitments on asset delivery or operations could affect track record, and in turn lower stakeholder confidence. OPPORTUNITIES • The ability to innovate and adapt business models to capture opportunities in the transitionary business landscape can assure the sustainability of the business. • Nimbleness in comparison to peers on identifying and investing in suitable new business segments could lead to a first-mover advantage. • Companies that are able to clearly communicate their business model and plans for business transition can gain investor confidence and support. • A strong track record on asset delivery and operations provides an edge over competitors for new project bids and ventures. Management approach Growing a strong portfolio of strategic assets Yinson’s investment decisions for potential new assets and projects are guided by our Group Investment Policies, which outline the target of minimum returns on investments. Under the framework, returns are correlated to a project’s risk factors such as counterparty, contractual legal terms, technical requirements, operational requirements, political environment, tax, ESG considerations, project partners involved and strategic considerations. Additionally, any project-specific risk factors are also discussed by Yinson’s MC when making investment decisions. The updated framework allows a balance to be achieved between the commercial expectations from an investment and Yinson’s strategic goal of achieving sustainable growth. Separate policies were adopted for Yinson Production, Yinson Renewables and Yinson GreenTech to take into account that the value chains of these businesses are significantly different. The Board and Management will continually review the policies to keep up to date with best practices. The strategies for each business division are elaborated within the respective business reviews and summarised as below: Yinson Production • Build a sustainable pipeline of conversion and redeployment projects in the world’s most active offshore production regions. • Build our track record in low emission design, execution and operation. Yinson Renewables • Participate in the full renewables value chain. • Market selection based on strong market fundamentals and potential, scalability, good and reliable counterparties, quality projects, and risk and reward balance. • Project selection is based on resource and partner quality and the ability to deliver value through the value chain. MM1
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