Material Risks Key Mitigating Actions Funding & Liquidity » Poor management of cash flows can result in funding gaps, which may lead to financial losses and defaults, delays in project completion, and negative reputational impact. » Actively monitor CLCT Group’s debt maturity profile, operating cash flows and the availability of funding including committed and uncommitted lines to ensure that there are sufficient liquid reserves, in the form of cash and banking facilities, to finance CLCT Group’s working capital obligations, operating needs and investment opportunities. » Diversification of funding sources from both banks and capital markets to minimise over- reliance on a single source of funds for any funding or refinancing requirement. Interest Rate » Exposed to interest rate volatility on some debts which are on floating basis. » Actively review and maintain an optimal mix of fixed and floating interest rate borrowings by adopting a prudent and balanced interest risk profile. » Adopt a policy that requires the majority of CLCT Group debts’ interest rate to be on fixed basis. This is managed through borrowing at a fixed rate or the use of hedging instruments, such as interest rate swaps, to partially mitigate the risk of interest rate fluctuations. Investment & Divestment » Deployment of capital into lossmaking or belowtarget return investments due to wrong underwriting assumptions or poor execution. » Inadequate planning to identify suitable divestment opportunities. » Hurdle rates and weighted average cost of capital based on relevant riskadjusted input parameters, used as investment benchmarks, are reviewed/ updated annually, and adjusted accordingly where necessary. » The Board reviews and approves all major investment and divestment decisions. » All investment proposals are subject to a robust investment approval process and undergo comprehensive due diligence by engaging the support of an interdisciplinary internal team, and/or local independent consultants to advise on legal, tax, building design, quality, environmental, health & safety and security, and compliance with local laws and regulations. Political & Policy » Exposed to political leadership uncertainty, inconsistent public policies, social unrest, change in real estate related regulations and other events. » Such risks may have a direct impact on the economic and sociopolitical environment, which may in turn affect the financial viability of CLCT Group’s investments. » Keeping abreast of economic and political developments, regulatory and policy changes. » CLCT Group’s properties are operated by experienced management teams, who are familiar with the local cultures and environment. RISK MANAGEMENT 108 CAPITALAND CHINA TRUST
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