into interest rate swaps and/or fixedrate borrowings. The Manager enters into foreign currency forward contracts as well as uses borrowings in the same foreign currency as ESR-REIT’s overseas investment to manage exposure to foreign currency exchange rate fluctuations. The Manager also continuously measures and monitors ESR-REIT’s performance against peer benchmark 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 noncompliance with workplace health and 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 dayto-day management of the properties and ensure that operations adhere to the relevant 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 noncompliance with applicable laws and/or regulatory requirements. The Manager maintains a framework that proactively identifies new laws 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 ESR-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. In addition, a Board Sustainability Committee has been established to assist the Board in overseeing ESR-REIT’s wider sustainability strategy, policies and initiatives. The responsibilities of the Board Sustainability Committee include, amongst others, ensuring that the Manager continuously identifies, assesses and monitors material ESG risks and obtains sufficient resources, including manpower, to develop tools and metrics to monitor ESR-REIT’s exposure to ESG risks. The Board Sustainability Committee also ensures that the sustainability governance, management and disclosures of ESRREIT (including the sustainability report of ESR-REIT) are in line with the rules, requirements and guidelines set out by the relevant regulatory requirements and global best practices. For more details on ESR-REIT’s ESG journey, please refer to our Sustainability Report available on our website: https://esr-reit. listedcompany.com/ar.html. vi. People Risk The inability to retain staff and attract talent, coupled with inadequate succession planning, talent management and insufficient measures to upskill employees may lead to sudden loss of key management personnel and identified talents, which can cause disruptions to the Managers’ business operations. Talent management including succession planning has been put in place for key management personnel and staff remuneration is reviewed periodically to ensure it remains competitive to retain and attract talent. The Manager also carries out periodic employee engagement surveys to gather feedback on the general sentiments among the employees. vii. Technology Risk Inadequate management of IT infrastructure and business continuity planning can result in operational disruptions, data breaches, and compromised business processes, potentially leading to financial losses and reputational damage. The Manager has implemented a comprehensive IT Information Risk Management Framework that is reviewed annually to ensure robust cybersecurity protection and business continuity. This includes a multi-layered security approach with 24/7 Security Operation Centre monitoring, Endpoint Detection and Response (EDR) solutions, and advanced email protection systems including Advanced Threat Protection to combat phishing attempts. Data protection measures include daily full backups (both internal and cloud-based), encryption of sensitive 89 ESR-REIT ANNUAL REPORT 2025
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