| Enterprise
Risk Management
Risk
management and oversight is under the purview of SembCorp Industries’
Board of Directors. In August 2003, the Board Risk Committee (BRC)
was formed to assist the Board of Directors to review and enhance
the effectiveness of the risk management plans, systems, processes
and procedures of the Group. The BRC also reviews the Group-wide
risk policies, guidelines and limits, as well as the risk portfolio
and treatment plans.
Supported by Group Risk Management, a Senior-Management level Risk
Review Committee at the Company is responsible to drive the development
and implementation of the Enterprise Risk Management (ERM) framework
throughout the Group. This management committee also initiates the
review of Group-wide risk profiles, risk management policies, practices
and capabilities in its effort to create a strong risk management
culture within the Group.
ERM Oversight Structure
The ERM oversight structure established by SembCorp Industries is
illustrated below:
The ERM oversight structure at each of the Group’s
Strategic Business Units (SBUs) is generally aligned to that of
SembCorp Industries’.
ERM Framework
In 2004, as part of the plan to deliver sustainable value, a high-priority
initiative to implement a coherent ERM framework throughout the
Group was carried out. This ERM framework provides an integrated
and systematic approach to addressing and managing the business
risks that might affect the achievement of the business objectives.
Making risk management a strategic priority enables the Group to
strike the right balance between risk and reward, which is fundamental
to profitable growth.
Risk Management Process
A systematic and on-going process for identifying, evaluating, controlling
and reporting risks was adopted, consisting of the following steps:
| a) |
Assessment of business risks;
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| b) |
Formulation of risk management strategies;
|
| c) |
Design and implemention of risk management action plans to
execute risk management strategies;
|
| d) |
Monitoring and reporting the risk management performance of
the business process and risk levels; and
|
| e) |
Continuous improvement of risk management action plans and
capabilities.
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The SBUs are individually responsible to identify and evaluate the
relevant risks associated within their respective business operations
and processes. They also ensure that such risks are effectively
managed through appropriate actions and management reports. To this end, the SBUs have set up their respective Board and Management Risk Committees to provide the necessary oversight and to implement
appropriate risk mitigation measures.
Major ERM Initiatives
During the course of 2004, SembCorp Industries, in collaboration
with its SBUs, implemented the following major ERM initiatives across
the Group:
| a) |
Created platforms for raising awareness and sharing
knowledge through |
| |
– |
Group-wide Chief Risk Officers Forum |
| |
– |
Risk Workshops and Risk Roundtables; |
| b) |
Embedded risk management practices into business
operations and processes, such as |
| |
– |
Business development and new investment proposals |
| |
– |
Business reporting; |
| c) |
Reviewed risk management policies, procedures,
limits and capabilities; and |
| d) |
Reviewed critical business processes and controls
across the Group with respect to |
| |
– |
Worksite safety |
| |
– |
Engineering, Procurement, Construction and Commissioning (EPCC)
project works. |
For these important areas, the BRC directed Senior Management to
conduct a review of worksite safety and project risk management
across the Group, to ensure that a sound system of internal controls
and robust risk management process exists. A task force in SembCorp
Industries worked closely with the SBUs’ line management and
Chief Risk Officers to collate and review existing practices and
controls for worksite safety and EPCC projects. Meetings were then
held for SembCorp Industries’ Management Risk Review Committee
and thereafter, the BRC, to provide inputs to further strengthen
the existing policies, processes and controls. Following this, the
risk management guidelines were then formalised at the respective
SBUs.
SembCorp Industries remains fully committed to dedicating time,
funds and resources to building and strengthening our risk management
processes and practices. With this constant push, our managers and
employees will be well poised to anticipate the level of risks that
our businesses are facing in times of uncertainties and be able
to respond to external environmental changes in a timely and effective
manner.
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