65 VALUE CREATION AT YINSON | RISKS AND OPPORTUNITIES PROJECT DELAY DEFINITION AND IMPACT OF THE RISK ON YINSON In the FPSO segment, the entire project phase, starting from approval of the Front-End Engineering Design, preparation and review of procurement schedule and project budget, contract review and signing, and finally the construction and commissioning; are required to progress according to the project timeline which has been committed to the client. A delay of more than 30% of the project timeline is considered an extreme delay and may pose significant consequences to Yinson. Inability to perform the required deliverables as per the stipulated timeline may lead to penalties, Liquidated Ascertained Damages (LAD) charges or potential contract termination which could further cause reputational damage to Yinson. HOW WE MANAGE OR MITIGATE THE RISK • Adoption of quantitative risk analysis to identify potential risks that may impact project delivery timeline as well as the potential magnitude of delay to drive targeted mitigation strategies. • Establish a Responsibility Assignment matrix which is the Responsible, Accountable, Consulted, and Informed (RACI) matrix for each department within the projects which outlines tasks, milestones, key decisions and roles to efficiently drive progress towards completion. • A robust progress reporting system that allows for transparency and a deep dive into contractor/ supplier progress. This allows for early intervention on potential delays by contractors/suppliers. MOVING FORWARD (OPPORTUNITIES) • Establish potential frame agreements with major suppliers to achieve better delivery lead time. • Establish technical optimisation to reduce delivery lead time. CORPORATE FUNDING RISK DEFINITION AND IMPACT OF THE RISK ON YINSON Corporate funding risk refers to the risk that the Group may not be able to source sufficient funds (i.e. through equity, right issues, debt funding, etc.) to cover working capital and capital expenditure. Availability of funding is important to ensure sustainable growth for Yinson in which the funds received from internally generated or externally sourced financing are utilised to cover working capital costs, equity injection or on-lending as intercompany loans to subsidiaries, debt servicing as well as refinancing of debt and quasi-equity facilities. Funding constraints which might be caused by liquidity squeeze, limited confidence by financing facilities on the outlook of the oil & gas industry, and deterioration in Yinson’s credit rating may lead to defaults on debt obligations, failure to meet repayment schedules, suspended growth and disrupted operations. HOW WE MANAGE OR MITIGATE THE RISK • A more robust cash flow forecasting and scenario analysis to drive better budgeting processes, funding requirements, and reserve management across the organisation. • Focused collaboration between corporate finance teams led by the respective business CFOs tasked with the funding activities as well as financing gap projections for respective businesses across the Group. • Securing loan financing or any other funding mechanism to fund existing and future projects through engagement with various financial institutions. MOVING FORWARD (OPPORTUNITIES) • Opportunity to source for funding through government grants, national or international incentive mechanisms, green loans, and sustainable-linked funds. • Renewables and Greentech provide secondary market capital investment and support capital recycling, hence developing the potential of new pockets of capital. • Invest in carbon management companies, which provides access to low-carbon markets and attracts new opportunities within the carbon management value chain.
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