Market Risk

• earnings volatility from our dry bulk and towage vessels;
• cost volatility including fuel prices, interest rates and other operating costs; and
• exchange rate volatility from the currencies we use.

Earnings volatility

• We aim to secure contracts of affreightment of a year or longer for our dry bulk business and long-term charter contracts for our offshore project towage business to stabilise our main sources of earnings.

Cost volatility

• Fuel represents a significant portion of our costs, and fluctuations in fuel prices would impact our financial results. We manage this risk in part by entering into forward agreements to purchase fuel oil at predetermined prices.
• Interest rates in relation to our interest-bearing bank loans can be volatile. We manage this in part by maintaining a balanced portfolio of floating and fixed interest rate loans.

Exchange rate volatility

• The functional currency of most of the Group's operating companies is the United States Dollar (USD) as the majority of our transactions are denominated in this currency. A major part of our exchange rate fluctuations risk arises from the purchase of vessels in non-USD denominated currency.

We also use derivative instruments to manage volatility in dry bulk freight rates, fuel prices, interest rates and exchange rates.

Vessel Investment & Deployment Risk

Inappropriate timing and choices of vessel investment and deployment may lead to an uncompetitive cost structure and reduced margins.

The value of our vessels may vary significantly through shipping cycles, and we need competitively priced and high quality vessels to provide our services to customers.

We evaluate potential investments and divestments based on relevant market information, estimated future earnings and residual values to maximise returns to shareholders. We adopt a flexible ownership/leasing strategy that is aligned with shipping cycles, and we consider maintaining an active fleet renewal programme by:

• securing newbuilding contracts with leading, reputable and financially viable newbuilding shipyards;
• transacting secondhand deals with creditworthy counterparties; and
• actively engaging in long-term charter-in of dry bulk vessels.

Credit & Counterparty Risk

Default or failure of counterparties to honour their contractual obligations may cause financial loss. These counterparties include:

• RoRo vessel buyer;
• dry bulk and towage chartering counterparties;
• vessel sellers;
• newbuilding shipyards;
• derivative counterparties;
• banks and financial institutions; and
• joint venture partners.

Our global network of offices positions us close to our counterparties allowing us to better know them, thus minimising the risk of counterparty failure. In addition, we take measures to limit our credit exposure by:

• securing a diversified profile of counterparties with successful track records and sound credit ratings;
• actively assessing the creditworthiness of counterparties; and
• obtaining refund guarantees from newbuilding shipyards.

The management of trade receivables and our credit policy are set out in the Financial Statement section.

Due to increased concentration risk of receivables in relation to the sale of our RoRo vessels.

Insurance Risk

Any vessel accident could endanger our crew, adversely affect the strength of our brand and our reputation with stakeholders and result in service disruption and significant costs.

We implemented measures to ensure safe operations across our companies and fleets which have positively impacted our performance in safety.

However, accidents do happen, and so we place insurance cover at competitive rates through marine insurance products, including hull and machinery, war risk, protection and indemnity, freight demurrage and defense cover, etc. Sufficiency of insurance cover is regularly evaluated and adjusted in line with prevailing asset values and in compliance with loan covenants and internal policies.

Liquidity Risk

Insufficient financial resources (such as bank borrowing facilities) may result in the Group not meeting its payment obligations as they fall due.

We regularly review our Group's treasury policy to ensure:

• sufficient funds are available to meet our existing and future commitments; and
• compliance with covenants relating to bank loans, finance leases and convertible bonds.

Due to limited availability of credit lines from the banking industry.

Capital Management Risk

Weakness in our financial management capability and insufficient capital could impact our ability to operate as a going concern, provide adequate returns to shareholders, and benefit other stakeholders to support the stability and growth of the Group.

We conduct regular reviews to ensure an optimal capital structure after considering:

• future capital requirements and capital efficiency;
• prevailing and projected profitability;
• projected operating cash flows; and
• projected capital expenditure and expectations for strategic investment opportunities.

Our dividend policy is to distribute regular dividends to shareholders and to pay out a minimum of 50% of eligible profits for the year, with the remainder of the profits retained as capital for future use.

Our Board of Directors monitors closely the ratio of net borrowings to net book value of property, plant and equipment, and the ratio of net borrowings to shareholders' equity.

Customer Satisfaction & Reputation Risk

Poor service could lead to loss of customers. Adverse impacts to our brand value and reputation as a trusted counterparty may restrict our access to customers, cargoes, high quality vessels, funding and talent.

Our global office network position us closer to our customers enabling a clear understanding of their needs and first-rate, localised customer service. A large, modern, uniform fleet and a comprehensive in-house technical operations function enhance our ability to deliver a high-quality and reliable service. Frequent customer engagement enhances customer satisfaction.

Banking Relationships Risk

Poor relationships with banks may reduce our ability to access different funding sources.

We have a dedicated treasury function tasked with developing and maintaining relationships with a diverse group of reputable banks worldwide. These relationships are maintained and augmented through regular senior management contact and consistent compliance with our loan obligations.

Employee Engagement Risk

We are only as good as our people and so our ability to move towards our vision depends on the effectiveness of our staff both ashore and at sea. Loss of key staff or an inability to attract, train or retain staff could affect our ability to achieve our long-term goals and expand our business.

Group HR and Crewing departments are tasked with recruiting and maximising engagement of staff ashore and at sea.

• We use diversified manning sources for seafarers.
• We offer regular training for staff ashore and at sea.
• We implement annual staff performance appraisals and incentives and other HR initiatives to encourage, retain and otherwise engage staff.

Succession Risk

Inadequate succession planning could lead to prolonged executive searches, disruption to our strategic momentum and the business, and undermine stakeholder confidence in the Group.

The Group has a dedicated HR department which oversees organisational design, talent management, hiring and remuneration.  Succession plans for senior management are regularly reviewed.

The Group closely monitors the Board succession planning process through its Nomination Committee so as to ensure Board continuity. The Group has a clear vision, mission and business principles to ensure that any potential successors are equipped to lead the business forward.

Emerging risk as the organisation grows.

Corporate Governance Risk

Inadequate corporate governance measures may adversely impact the diligence, integrity and transparency of our risk assessment, decision-making and reporting processes and undermine stakeholder confidence.

The Group has a committed structure on Corporate Governance to meet the needs and requirements of the business and its stakeholders. The Audit Committee and the Risk Management Committee are proactively ensuring the overall corporate governance and risk management framework for the Group.

During the year, the Board and relevant employees received regular trainings in relation to corporate governance matters to ensure high standard of corporate governance.

Investor Relations Risk

An ineffective investor relations function or inadequate transparency in our external communications could undermine stakeholder confidence in our Group.

The Group has a dedicated investor relations function as well as policies and guidelines on communication and disclosure of information to the public. Our website is updated regularly with company news and financial information.

Safety Risk

Piracy, inadequate safety and operational standards and other causes of accidents may lead to loss of life, severe damage to property and our vessels, and impact the Group's reputation among seafarers, customers and other stakeholders.

Our commitment to the safe operation of our ships is manifested through a proactive system ashore and at sea – the Pacific Basin Management System – enhanced by well-conceived training and maintenance programmes and innovative initiatives to ensure our vessels are in good condition and in all respects safe to trade.

The high quality of our attention to safety is evidenced by an excellent safety record and our several safety-related awards in recent years.

Environmental Risk

Non-compliance with environmental emissions and standards may result in financial loss and significant damage to our brand and the long-term sustainability of our business.

Emissions reduction

We are at the forefront of efforts in our sector to reduce emissions. Such emissions reduction efforts include initiatives to improve engine performance and hull and propulsion hydrodynamics, and to adopt fuel-efficient operational measures.

Pollution liability

We promote a proactive safety culture across our fleet involving safety risk assessments to mitigate risk in critical tasks on board. Through our safety training, we seek to eradicate the risk of accidents that lead to pollution and related penalties, costs and adverse publicity. In addition, we cover our risk of liability for pollution through membership of reputed Protection & Indemnity (P&I) clubs.

Vessels & Systems Risk

The strength of our operational performance depends on the effective deployment of our vessels and the reliability of our systems and technology.

Failure to operate and utilise reliable vessels, equipment and systems could result in vessel down-time, service disruption and disruption to communications.

Vessels operational risk

We operate high-quality vessels built by reputable shipyards which we maintain to a high standard under our ISM Code compliant "Pacific Basin Management System" to assure safety and reliability of service.

Systems risk

Regular meetings of our IT Governance Committee to oversee the Group's IT policies and procedures ensure that our IT strategies are met. Preventive or contingency measures are in place to minimise the risk of system failures and to promptly address system breakdowns. Our IT team receives regular technical training and our general staff are regularly updated of IT policies and system upgrades.