KHONG GUAN LIMITED ANNUAL

Risk Management

Risk Management The Board is responsible for the governance of risk. The Board ensures that Management maintains a sound system of risk management and internal controls to safeguard shareholders’ interests and the Company’s assets, determines the nature and extent of the significant risks which the Board is willing to take in achieving its strategic objectives. The Group adopts a decentralized approach to risk management, whereby the individual heads of business units take ownership and accountability for risks at their respective levels. The individual business units through a detailed key risk register, updates the Board on their operational, financial and compliance risk management system. The Group operates within a low overall risk range. The Group’s lowest risk appetite relates to safety and compliance objectives including health, safety and financial reporting (with almost zero risk tolerance) and marginally higher risk appetite towards its strategic and operational objectives (with low to medium risk tolerance). Instead of setting a separate board risk committee, the AC has assumed a risk oversight role to assess the risk management as part of the Group’s efforts to strengthen its risk management processes and framework, in overseeing the formulation, update and maintenance of an adequate and effective risk management and internal control system. Risk assessment and evaluation has become an essential part of the business planning and monitoring process. The Group has put in place detailed key risk registers on its risk profile which summarizes the material risks faced by the Group and the countermeasures in place to manage or mitigate those risks. The risk assessment report and its detailed key risk registers are reviewed by the AC and the Board annually. Internal controls Internal controls have been implemented to enhance the Group’s functions in the areas of finance, operations, compliance and information technology. The internal control measures aim to ensure that the Group’s assets are safeguarded, proper accounting records are maintained, and that financial information used within the business and for publication is reliable. The system of internal controls and risk management established by the Group provide reasonable, but not absolute, assurance that the Group will not be adversely affected by any event that can be reasonably foreseen as it s