C A M B R I D G E I N D U S T R I A L T R U S T
A N N U A L R E P O R T 2 0 1 5
RISK MANAGEMENT
Interest Rate
CIT’s exposure to changes in interest rates relate primarily
to its interest-bearing financial liabilities. Interest rate risk is
managed by CITM on an ongoing basis with the primary
objective of limiting the extent to which net interest expense
could be affected by adverse movements in interest rates.
CIT adopts a policy of ensuring that the majority of its
exposures to changes in interest rates on borrowings is on
a fixed rate basis. This is achieved by entering into interest
rate swaps and fixed rate borrowings.
Currency Risk
At present, all material transactions involving the Group
are denominated in Singapore dollars and the Group faces
no currency risk. If this were to change in the future, CITM
would consider currency hedging to the extent appropriate.
Liquidity and Refinancing Risk
CITM monitors the liquidity risk of CIT and maintains a
level of cash and cash equivalents deemed adequate by
management to finance CIT’s operations. Typically, CIT
will ensure that it has sufficient cash on demand to meet
expected operational expenses for a reasonable period,
including the servicing of financial obligations; this excludes
the potential impact of extreme circumstances that cannot
be reasonably predicted, such as natural disasters. CITM
monitors and observes the CIS Code issued by the MAS
concerning limits on total borrowings.
Operational Risk
Guidelines and policies are put in place to ensure business
continuity. This includes the monitoring of incident and
ensuring safety-related standards and procedures are set in
place. To mitigate the risk of any disasters, disaster recovery
testing is conducted at least once a year.
Performance and Reputational Risk
CIT’s NPI yield, Mean Expense Ratio and DPU are some
of the metrics monitored and measured against peers
benchmarks to ensure that the Trust is performing better
than or at least on par with themarket. In addition, regulatory
requirements on base capital and financial resources are
being monitored to ensure that the requirements are met
on an ongoing basis.
Reputational risk is the current or prospective risk to earnings
and capital arising from adverse perception of the image of
CIT by tenants, counterparties, shareholders, investors and
regulators. CITM uses formal media monitoring to assess if
there are any adverse news on CIT that warrants any actions
from the Manager.
Other than the above material risks, CITM also needs to
manage the following risks:
Regulatory and Compliance Risk
Due to the nature of business, CITM, being a Capital Markets
Services Licence Holder, is required to comply with the
relevant legislation and regulations issued by the Monetary
Authority of Singapore, SGX-ST and the tax rulings issued
by the Inland Revenue Authority of Singapore on the
taxation of CIT and its Unitholders. Thus, any changes in
these legislation and regulations may affect CIT’s business,
results or operations. The Manager has established relevant
regulatory related policies and procedures to ensure CIT’s
and CITM’s compliance with applicable legislation and
regulations. Regulatory compliance is being monitored via
the reporting of results of compliance monitoring program,
non-compliance instances, regulatory breaches and
overdue internal/external/regulatory inspection findings to
ensure that both CIT and CITM are adhering to regulatory
requirements.
People Risk
People are the key to CIT’s business. Succession planning
is in place for key personnel and staff remuneration is
reviewed periodically to ensure it is aligned to the market
to retain and reward staff.
Risk Assurance
On top of the risk management tools that are highlighted
above, the Manager also has a Whistle-Blowing Policy
put in place which provides an avenue for employees
and external parties to raise any concerns about possible
improprieties in matters of financial reporting or other
matters to the ARCC Chairman. Independent investigation
and appropriate follow-up action will be taken for all
concerns raised.
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