RISK
MANAGEMENT
RISK MANAGEMENT FRAMEWORK
The Manager has developed a
comprehensive risk management
framework that enables the Board
and Audit and Risk Committee (“ARC”)
to review and manage the risks arising
from LMIR Trust’s portfolio of assets
from time to time on a consistent and
systematic basis.
The framework quantifies key property-
related risks such as occupancy and
rental rates, credit-related risks and
financial market risks, including counter-
party risks, foreign currency exposure
and interest rate volatility. Tenant and
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 Delegation
of Authority guidelines. These cover
significant strategic, operational
and financial risks. The overall risk
framework is managed by the Manager
who reports to the Board and ARC
on a quarterly basis or whenever it is
deemed necessary.
The internal audit function of the
Manager has been outsourced to a
third party, KPMG LLP, who plans its
internal audit work in consultation with
management, but works independently
by submitting its reports to the ARC for
review at ARC meetings.
RISK MANAGEMENT STRATEGY
Property, financial market, operational
and strategic risks and other
externalities such as regulatory
changes, natural disasters and act of
terrorism may occur in the normal
course of business. TheManager has an
established risk management strategy
to manage 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 are:
OPERATIONAL RISK
The Manager has an established risk
management strategy towards the
day-to-day activities of the 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
the management and the Board of
Directors of the Manager. The risk
management system is regularly
monitored and examined 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.
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 includes accretion yield, growth
potential and sustainability, location
and specifications. The key financial
projection assumptions and sensitivity
analysis conducted on key variables are
reviewed by the Board. The potential
risks associated with proposed projects
ANNUAL REPORT 2015
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