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Risk management
It is a-iTrust’s policy that the a-iTrust Group (“Group”) will implement a consistent risk management approach and methodology
across its entities, recognising that risk management is integral and essential to achieving the Trust’s strategic goals and business
outcomes.
The Group has minimal direct employees. APFT and ASIPL act as the Trustee-Manager and Property Manager respectively.
Hence the risk management processes and practices will be executed by APFT, ASIPL and such other parties providing services
to the Group, for or on behalf of the Group.
The Group accepts, as an organisational philosophy, that:
•
Management of risk is critical to the governance and forms part of management’s responsibilities at all levels within the
Group (Board, senior management and, ultimately, all staff);
•
Guidance for discharge of these responsibilities will be provided via key strategic and operational risk management principles
applicable throughout the Group; and
•
External assistance may be engaged periodically to independently verify implementation of this policy and key risk
management principles.
Enterprise wide risk management process is put in place to ensure potential risks are identifed and key controls to mitigate these
risks are established and implemented. This is continuously assessed, monitored and reviewed in light of changing circumstances
and regulatory requirements and re-aligned as required.
KEY RISKS & CONTROL MEASURES
Investment risk
Investment risk arises when the Trust develops existing land within the portfolio, acquires new properties, or does not divest
existing investments when it is timely to do so. Such risks encompass market risk, as well as the impact of the investment on
the existing portfolio. The Trustee-Manager adopts the following measures to mitigate investment risk:
•
A research-driven investment approach focusing on the relevant national macroeconomic outlook, analysis of the relevant
micro real estate markets (including supply and demand, vacancy and rental), and detailed asset analysis;
•
Detailed property and technical due diligence prior to any new acquisition;
•
Independent valuation as a guide to the purchase price;
•
Detailed evaluation of the impact of the proposed acquisition on the portfolio income, geographical and tenant diversifcation,
and lease expiry profle; and
•
Review and approval of the investment by the Investment Committee/Board.
Operational risk
The Group has integrated risk management into its day-to-day activities across all functions. These include a comprehensive
operating, reporting and monitoring controls put in place to manage risks arising from leasing, management and maintenance
activities of the Group. The Trustee-Manager monitors and reviews such controls regularly and improves them where necessary.
Interest rate risk
The Group’s exposure to changes in interest rates relates primarily to interest-earning fnancial assets and interest-bearing
fnancial liabilities. The Group has entered into interest rate swaps to hedge its entire foating-rate debt into fxed-rate obligation.
As at 31 March 2012, 100% of the debt outstanding is with fxed-rate interest.
Currency Risk
The Group is exposed to foreign currency risk as a result of having operations in two countries. Whilst the distribution to
Unitholders is in Singapore Dollar (reporting currency), the Group’s income is in Indian Rupee (functional currency). To enhance
the stability of distribution to Unitholders, the Group enters into forward contracts to hedge a substantial portion of the cash
fow it expects to receive from VCUs. The currency exposure as a result of borrowing in SGD to fund developments and/or
acquisitions in India is managed through currency swap.
To address the short term operating requirements for currencies other than Indian Rupee, the Group will buy or sell the foreign
currency at the prevailing spot rate.
46 POSITIONED FOR GROWTH
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