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LIPPO MALLS INDONESIA RETAIL TRUST ANNUAL REPORT 2013
RISK MANAGEMENT
RISK MANAGEMENT FRAMEWORK
The Manager has developed a comprehensive risk
management framework that enables the Board and
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arising from LMIR Trust’s portfolio of assets from time to
time on a consistent and systematic basis.
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business sector concentration risks are also monitored
as part of the risk framework. The risk framework is
supplemented by internal processes and procedures
that are formalized in the Manager Organizational and
Reporting Structures, Standard Operating Procedures and
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strategic, operational and fnancial risks. The overall risk
framework is managed by the Manager who reports to
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deemed necessary.
The internal audit function of the Manager has been
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internal audit work in consultation with management,
but works independently by submitting its reports to the
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RISK MANAGEMENT STRATEGY
Property, fnancial market, operational and strategic risks
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disasters and act of terrorism may occur in the normal
course of business. The Manager has an established risk
management strategy tomanage these risks as they arise,
and is aligned with its overall business objectives which
aim to balance risks and returns in order to optimize LMIR
Trust’s portfolio values and returns.
Some of the key risks faced and how these are being
monitored and managed are detailed below:
1. OPERATIONAL RISK
The Manager has an established risk management
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properties portfolio, which are carried out by the third
party Property Manager. These include planning and
control systems, operational guidelines, information
technology systems, reporting and monitoring
procedures, involving themanagement and the Board
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to ensure effectiveness. The risk management
framework is designed to ensure that operational
risks are anticipated so that appropriate processes and
procedures can be put in place to prevent, manage,
and mitigate risks that may arise in the management
and operation of LMIR Trust.
2. INVESTMENT RISK
As LMIR Trust’s growth is partly driven by acquisition
of properties, the risk involved in such investment
activities is managed through a rigorous set of
investment criteria which include accretion yield,
growth potential and sustainability, location and
specifcations. The key fnancial projection assumptions
and sensitivity analysis conducted on key variables are
reviewed by the Board. The potential risks associated
with proposed projects and the issues that may
prevent their smooth implementation are to be
identifed at the evaluation stage. This enables us to
determine actions that need to be taken to manage
or mitigate risks as early as possible.
3. INTEREST RATE RISK
The Manager adopts a proactive strategy to manage
the risk associated with changes in interest rates
on any loan facilities while seeking to ensure that
LMIR Trust’s ongoing cost of debt capital remains
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notes) and by an interest rate swap.