27 KENANGA INVESTMENT BANK BERHAD Annual Report 2022 MANAGING OUR SUSTAINABILITY RISKS OUR APPROACH For effective management of risks, the Group is governed by the Enterprise Risk Management (“ERM”) Framework and the philosophy adopted is based on the ‘Three Lines of Defense’ approach. The ERM Framework defines the roles and responsibilities throughout the organisation to ensure accountability and ownership, as well as sets out the principles of sound corporate governance to assess and manage risks to ensure risk-taking activities are aligned with the Group’s long-term viability and its capacity to absorb losses. The Group Board Risk Committee is responsible to ensure the Group’s activities are consistent with its approved risk appetite, strategies and policies. For more information on our Sustainability Risk Management approach, please refer to page 25 of our Sustainability Report 2022 and for more information on our Risk Management Framework and Governance, please refer to the Statement on Risk Management and Internal Control from pages 110 to 114 of this Annual Report. RESPONSE TO ESG AND CLIMATE RISKS We recognise the impact of climate change as a non-diversifiable risk to Kenanga’s business activities and financial operations. We have been gradually enhancing our disclosures in line with the TCFD recommendations and mapped against the prescribed four (4) pillars – Governance, Strategy, Risk Management, as well as Metrics and Targets. In 2022, we integrated the Climate Change Risk Management Framework (“CCRM Framework”) to strengthen our climate risk management strategy for business activities. The implementation progress includes training on CCRM Framework’s Risk Assessment Criteria (“Climate Change RAC”) in making decisions on investments. To build on this, we are further enhancing our policy and practice by incorporating the new guidelines introduced by BNM in November 2022, including the Climate Risk Management and Scenario Analysis (“CRMSA”) and JC3’s TCFD Application Guide for Malaysian Financial Institutions issued in June 2022 into the Group’s business strategies and enterprise risk management framework. The implementation of these guidelines will be completed in phases and it is in line with regulatory timeline by the end of 2024. For more information on our TCFD Reporting by the four (4) pillars and Climate Change Risk Management Framework, please refer to pages 28 to 31 of our Sustainability Report 2022. For more information on our supply chain risk, please refer to page 32 of our Sustainability Report 2022. Managing Our Supply Chain Risk Our Group Procurement Policy provides employees with a guiding framework to achieve and maintain high standards of professionalism, transparency, and accountability in our procurement decisions. Our ‘Know Your Vendor Assessment’ allows us to ensure we maintain high standards of ethics and integrity in our business partnerships with contractors, consultants, suppliers, agents and individuals who undertake work for the Group. Our vendors undergo an extensive due diligence process that reviews risk indicators resulting in a score that allows us to manage our front-end risk, including corruption risk assessments. Moving forward, we will engage our vendors and enhance our vendor assessment framework to integrate environmental and social risk assessments in line with our Sustainability Roadmap 2023-2025 to integrate ESG screening in our supplier onboarding process. In 2022, our local suppliers’ proportion are 89.1% and local business procurement spent was over RM65 million. For more information on our Group Code of Conduct for Vendors, please scan the QR code below: OUR SUSTAINABILITY STATEMENT
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