ESR-REIT Annual Report 2024 89 regulations. In addition to the monthly inspection of properties conducted by the property managers, third party consultants are also engaged to perform workplace safety and health inspections at the properties. Risk assessments are also conducted before undertaking any works deemed as high risk. To raise tenants’ awareness of health and safety issues, seminars are organised collectively with various regulatory agencies such as the Singapore Civil Defence Force. (iv) Compliance Risk ESR-REIT and the Managers may suffer financial loss, reputation damage and regulatory sanctions as a result of non-compliance with applicable laws and/or regulatory requirements. The Manager maintains a framework that proactively identifies new and changes to applicable laws and regulatory obligations and ensures compliance in the day-to-day business processes by establishing and updating relevant policies and procedures. Where necessary, external lawyers or advisers are engaged to provide their expert advice on specific matters, ensuring the continuous compliance with the relevant laws and regulations. In particular, the Managers adopt a zero-tolerance approach to bribery and corruption of any form and are committed to acting professionally, transparently and fairly with integrity in all our business dealings and relationships. In this regard, the Manager has put in place policies and guiding principles on anti-corruption and bribery, establishing boundaries for the acceptance or offer of gifts and entertainment to ensure that the REIT’s business is conducted with honesty, fairness and high ethical standards. (v) Environmental, Social and Governance (“ESG”) Risk Inadequate implementation of ESG policies, insufficient internal capability/training or the lack of communication of an effective ESG policy framework to key stakeholders may result in higher operating costs and cost of financing as well as possible regulatory penalties. In managing climate change risk, environmental risk due diligence is conducted as part of the investment considerations and ongoing climate change risk is monitored on a periodic basis. Appropriate policies and procedures (including climate scenario analysis) are put in place by the Managers to manage the actual and potential impact of climate change risk on the asset valuation and reputation of ESR-REIT. (ii) Financial and Economic Risk Ineffective capital management by the Manager as well as the failure to monitor and manage portfolio performance may adversely impact ESR-REIT’s distribution per unit (“DPU”) and/or net asset value (“NAV”). The Manager ensures that there is diversity in terms of source of funds, maintains an adequate level of cash and cash equivalents and ensures there are available committed revolving credit facilities to finance ESR-REIT’s operations (including the servicing of financial obligations) for a reasonable period. The Manager also ensures that ESR-REIT’s gearing ratio is maintained at a prudent level and adheres to the ongoing requirements under the Code on Collective Investment Schemes issued by the Monetary Authority of Singapore (the “MAS”). The maturities of debt facilities are also spread out to mitigate re-financing risks in a single financial year. ESR-REIT’s exposure to interest rates and foreign currency exchange rates fluctuations are monitored on an on-going basis with the primary objective of limiting the extent to which the DPU and NAV could be affected by adverse movements in interest rates and foreign currency exchange rates. The Manager ensures that a majority of ESR-REIT’s exposure to changes in interest rates on borrowings is hedged by entering into interest rate swaps and/or fixed rate borrowings. The Manager enters into foreign currencies forward contracts as well as use borrowings in the same foreign currency as ESRREIT’s overseas investment to manage exposure to foreign currency exchange rate fluctuations. The Manager also continuously measures and monitors the ESR-REIT’s performance against peer benchmarks metrics. (iii) Operational and Asset Management Risk The failure to keep up to date on property specifications may result in poor rental demand. Inadequate maintenance of properties and non-compliance with workplace health & safety regulations may also heighten the risk of structural issues and work accidents. In order to manage operational and asset management risk, the properties are periodically reviewed to determine their suitability for asset rejuvenation, asset enhancement initiatives, redevelopment or sale. Policies and procedures are in place to guide the property managers in the day-to-day management of the properties and ensure the operations are adhering to the relevant
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