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Principle 11: Risk Management and Internal Controls
The H-REIT Manager Board and the HBT Trustee-Manager Board recognise that they have overall
responsibility to ensure proper financial reporting for the H-REIT Group, the HBT Group and the
Stapled Group and effectiveness of H-REIT’s and HBT’s system of internal controls, including
financial, operational, compliance and information technology controls and risk management
policies and systems.
Risk Management
The H-REIT Manager Board and HBT Trustee-Manager Board had each established a RMC which
comprises three members, the majority of whom were independent, including the chairman of
the RMC and another member who was the chairman of the AC.
The objective of the RMCs was to assist the H-REIT Manager Board and HBT Trustee-Manager
Board in the discharge of their duties to maintain an effective control environment that reflects
both the established risk appetite and the business objectives. On 29 December 2015, the RMCs
were dissolved and the function and responsibilities of the RMCs are now undertaken by the ARC.
During the financial year under review, the RMCs reported to their respective Boards on the
nature and extent of the functions performed by them and made recommendations to the Boards
on matters within their scope of duties. The RMCs’ other duties within their written terms of
reference included:
• providing oversight of the risk management framework designed, established and
implemented by the Management for the identification, assessment, management and
monitoring of risks, and with the objective of embedding risk management into existing
management processes;
• reviewing the overall risk appetite and tolerance as determined using the risk limits and/or
parameters established by the Management and approved by the RMC, which limits and/
or parameters are to be reviewed from time to time;
• keeping under review the key strategic risks (and gaps) identified by the Management and
discuss with Management the risk acceptance and/or risk mitigation strategies taken in
respect of such risks;
• reviewing H-REIT’s and HBT’s risk profile periodically and assist the Board in the review of
H-REIT’s and HBT’s risk strategy and key risk policies;
• ensuring that Management puts in place procedures for accurate and timely monitoring
of large exposures and critical risks so that H-REIT and HBT is capable of responding to
current and prospective changes within both H-REIT’s and HBT’s business and industry and
the macroeconomic and financial environment;
•
reviewing reports on material breaches of risk limits and the adequacy of the proposed
actions taken to rectify such breaches; and
•
reviewing, assessing and reporting to the Boards annually on the adequacy and effectiveness
of the established risk management framework, especially to address H-REIT’s and HBT’s
financial, operational, compliance and information technology risks (which review may be
carried out internally or with the assistance of competent third parties).
For the financial year under review, the RMCs each conducted an assessment of its effectiveness
based on a self-assessment checklist ("
RMC Self-Assessment Checklist
"). The RMC Self-
Assessment Checklist covered
inter alia
, the responsibilities of each of the RMC under its terms
of reference.
Based on the self-assessment, the RMCs have agreed that the RMCs have fulfilled their
responsibilities and discharged their duties as set out in their respective terms of reference.
CORPORATE GOVERNANCE
