Page 74 - HRC_Annual_Report_2023

72 About HRC Value Creation Management Discussion Leadership
& Analysis

STATEMENT ON RISK MANAGEMENT AND
INTERNAL CONTROL

The Board of Directors (Board) of Hengyuan Refining Company Berhad (Company or HRC) is
committed to maintaining a sound internal control and risk management system to ensure the
smooth running of the business. It is HRC’s aim to manage its risks and to control its business
and financial affairs economically, efficiently and effectively so as to be able to deliver profitable
business outcomes in a disciplined way, to avoid or mitigate risks that can cause loss, reputational
damage or business failure, and to enhance our resilience to external events.
The following statement outlines the nature and scope of HRC’s internal control and risk
management in 2023.

BOARD’S RESPONSIBILITY risk management system. Management is accountable for
regularly assessing that the systems continue to operate
The Board affirms its overall responsibility for HRC’s risk efficiently and effectively.
management and the internal control system, and for reviewing
the system’s adequacy and integrity. The Board recognises
that this system is designed to manage, rather than eliminate, RISK MANAGEMENT
the risks of not achieving HRC’s objectives and adhering to The energy landscape continues to be shaped by the
the policies. Due to the inherent limitations, the system can geopolitical influence in particular the events in Ukraine and
only provide reasonable and not absolute assurance against the Red Sea tension. Macroeconomic variables such as
material misstatement, fraud or loss or the occurrence of high interest rates, weakening ringgit, rising material costs,
unforeseeable circumstances. and evolving policies and regulations of Net-Zero emission by
2050 are impacting the energy sector.
The Board Audit Committee (BAC) assists and supports the
Board’s responsibility of overseeing the suitability, objectivity and The Risk and Integrity Department oversees the risk
independence of the Company’s external auditor and internal management function within HRC. The main objective of risk
audit function. The adequacy of the HRC Control Framework management is to promote advanced awareness and define
and effectiveness of the internal control system has been boundaries for risk-taking, and to apply fit-for-purpose risk
reviewed and endorsed by the BAC based on the assurance responses in order for HRC to provide a reasonably sufficient,
provided by management, the internal and external auditors. but not an absolute assurance, against material misstatements,
Audit issues and actions taken by Management to address fraud or loss. In addition, it allows HRC to operate and achieve
the issues tabled by the auditors during the year were its objectives, within an acceptable risk profile.
deliberated on during the BAC meetings.
Fit-for-purpose risk responses are primarily intended to:
The Board Risk Management Committee (BRMC) provides • Minimise the likelihood of a risk occurring by actively
oversight and direction on risk management matters including managing the sources of the risk and ensuring competent
bribery and corruption risk to ensure prudent risk management people are overseeing the risk on a regular basis; and
over HRC’s business and operations. Management has
conducted a systematic and comprehensive evaluation of • Mitigate the impact of a risk should it arise, often through
the Key Risk Areas which were deliberated and presented to the application of some forms of alert that the risk has
the BRMC. The implementation of risk controls is monitored, materialised, followed by the initiation of a contingency or
and the results are presented during the quarterly recovery plan to reduce the potential consequences and
BRMC meetings. also future occurrences.

Internal control and risk-related matters which warrant the HRC adopts the best practices from MS ISO 31000:2020
attention of the Board are recommended by the BAC and Risk Management to manage the risks of its business and
BRMC to the Board for its deliberation and approval. operations. HRC has an established and structured process
for the identification, assessment, treatment, communication,
MANAGEMENT’S ROLE monitoring and continual review of risks and the effectiveness
of risk mitigation strategies and controls.
Whilst the Board assumes responsibility for HRC’s internal
controls and risk management, the Management holds the
key role in the implementation of the internal controls and