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Ascott Residence Trust
Annual Report 2015
Overview
Sustainability
Business
Review
Portfolio
Details
Corporate
Governance &
Transparency
Financials &
Additional
Information
Ascott Reit’s ERM Framework sets out the required
environmental and organisational components which
enable the Manager to manage risks in an integrated,
systematic and consistent manner. The ERM
Framework and related risk management policies
are reviewed annually and periodically validated by
external ERM consultants.
A robust internal control system and an effective,
independent review and audit process are the twin
pillars that underpin Ascott Reit’s ERM Framework.
The line management is responsible for the design
and implementation of effective internal controls using
a risk-based approach, while the outsourced Internal
Audit function from CapitaLand reviews such design
and implementation to provide reasonable assurance
to the AC on the adequacy and effectiveness of the
internal control system.
Annually, the Manager facilitates and coordinates the
Ascott Reit’s Risk and Control Self-Assessment (RCSA)
exercise that requires respective risk and control
owners to proactively identify, assess and document
material risks as well as the corresponding key
controls and mitigating measures needed to address
them. Material risks and their associated controls are
consolidated and reviewed by the Manager before
they are presented to AC and the Board.
Awareness of and preparedness for potential risks
affecting Ascott Reit’s business continuity helps
the Manager minimise the impact of disruption to
business operations. The Manager has in place a
business continuity plan to respond to any disruptions.
In addition, the outsourced information technology
team from CapitaLand has in place a disaster recovery
strategy, which is reviewed and tested on an annual
basis.
The Manager believes that having the right risk
culture and people with the right attitude, values
and knowledge are fundamental to Ascott Reit’s
success. Therefore, the Manager works closely with
CapitaLand’s Risk Assessment Group to proactively
enhance risk management knowledge and promote a
culture of risk awareness with Ascott Reit.
Managing Material Risks
The Manage r unde r t ake s an i te r a t i ve and
comprehensive approach in identifying, managing,
monitoring and reporting material risks across the
Ascott Reit. Such material risks include:
Acts of God and Pandemic Events
Natural disasters, catastrophes and pandemic events
are beyond the Manager’s control. Such events
may significantly damage Ascott Reit’s properties,
adversely af fect the economy and livelihood of
the people in those countries or regions and could
severely disrupt Ascott Reit’s business operations.
The Manager manages such risks by having a
geographically diversified por tfolio. In addition,
the Manager has in place a business continuity plan
to respond to any disruption, and each property has
standard operating procedures for crisis management
and adequate insurance coverage.
Competition Risk
Ascott Reit faces keen competition from other real
estate companies or investors and managers of
real estate assets as well as new market entrants
in the serviced residence market. The Manager
adopts a relentless approach towards strengthening
its competitiveness through high-quality products
and ser vices, product dif ferentiation, speed to
market, asset enhancement initiatives and branding.
The Manager also adopts active asset management to
improve the profitability of Ascott Reit.
Economic Risk
Ascott Reit operates in various countries around
the world and is exposed to key financial and
property market developments in these regions.
These developments may reduce revenue, increase
costs and result in downward revaluation of our assets.
Market illiquidity during a financial crisis makes asset
divestment challenging and this can affect Ascott Reit’s
investment and strategic objectives. The Manager
manages this by adopting a disciplined approach
towards financial management, having a diversified
portfolio across geographies, and focusing on cities
where Ascott Reit or its sponsor, Ascott, has operational
scale and where underlying economic fundamentals
are more robust.
