ESR-REIT Annual Report 2024 109 In line with the strategic objectives of providing Unitholders with a stable income stream and achieving long-term growth in net asset value per unit, the Manager critically analyses each transaction before proceeding. To arrive at an investment decision, the Manager identifies the risk exposures and determines how to mitigate, transfer, manage and/or reduce those risks, where possible, to a level which is appropriate for the corresponding expected return on that investment. Extensive procedures, including due diligence, are carried out at various stages of the investment process. The Board reviews management reports and feasibility studies on proposed acquisitions prepared by the Manager, and approves the proposal if the Board believes it is in the best interests of ESR-REIT and the Unitholders to enter into the transaction. Board’s Comment on Risk Management and Internal Controls The Board has received confirmation from the CEO and CFO of the Manager that, as at 31 December 2024, they were not aware of any events that have arisen which would have a material effect on the financial results of ESRREIT, except as disclosed in the financial statements, and nothing has come to their attention which may render the financial results false or misleading. In addition, they have provided assurances to the Board that the financial records have been properly maintained and the financial statements for FY2024 give a true and fair view of ESRREIT’s operations and finances. The Board and ARCC have also received confirmation from CEO, Deputy CEO, CFO, and the KMP who are responsible regarding the adequacy and effectiveness of the Manager’s risk management and internal control systems, including the Head of Investment, Head of Capital Markets & Investor Relations, Head of Asset Management, Head of Human Resources and Corporate Services as well as the Head of Compliance & Risk Management1, that to the best of their knowledge and belief, the internal controls (including financial, operational, compliance, environmental and IT controls) and risk management system were adequate and effective to address the risks that were relevant and material to ESR-REIT’s operations. The Board, through the ARCC, reviews the adequacy and effectiveness of the internal control policies and procedures, at least annually, to ensure robust risk management and that internal control systems are maintained. The internal and external auditors also conduct reviews on the adequacy and effectiveness of risk management and internal control systems. Any material non-compliance or lapses together with corrective measures recommended by the internal and external auditors are reported to and reviewed by the ARCC. The ARCC also reviews the adequacy and effectiveness of the measures taken by the Manager in relation to the recommendations made by the internal and external auditors and ensures the timely and proper implementation of all required corrective, preventive or improvement measures. More information on the ERM framework can be found in the “Risk Management” section on pages 86 to 91 of the Annual Report. Material Risk Assessment and Management Both the ARCC and the Management periodically review the material risks faced by ESR-REIT and the Manager to ensure relevance to the business and economic environment. With the assistance of the internal auditors, periodic risks workshops have been conducted with the involvement of the ARCC members and the Management via a top-down approach as well as bottomup engagement with the employees of the Manager. At the workshops, key risks were identified, mapped and updated into the existing Key Risk and Control Matrix to ensure the ongoing relevance of the enterprise-wide risks for both the REIT as well as the Manager. In addition, the identified risks would be addressed with mitigating controls and are reviewed by the respective head of departments quarterly (or more frequently if the business environment warrants) and monitored by the ARCC and reported to the Board, to ensure that the Key Risk and Control Matrix stays relevant and effective. If there are any breaches of regulations or any risks that fall outside the risk appetite that ESR-REIT and the Manager are willing to undertake, the Board will be alerted and measures and steps would be put in place to reduce the risk level to within the acceptable range. 1 Head of Compliance & Risk Management has stepped down in November 2024 and was replaced by the ESR Group Head of Governance & Sustainability.
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