Key Risks Details Key Mitigation Actions Property Damage Risk Significant damage to property as a result of severe events caused by natural and other disasters, human negligence or wilful attack may severely disrupt MUST’s business operations and lead to the loss of rental income from tenants. Each property has adequate insurance coverage for the risks such as all risk, wind, flood, fire, earth movement, gross rent loss, vandalism/public disturbance and terrorism. With support from its Sponsor, the Manager has in place a global Business Continuity Plan (BCP). This includes policies and procedures that seek to minimise the impact of natural or man-made disasters, and is designed to ensure that key business functions can continue normal operations in the event of a major disruption. The business continuity team establishes and conducts regular BCP testing. Environmental Risk Physical risk arises from the impact of weather events and long-term or widespread climate changes. Risks include flooding, extreme storms and wildfires. Transitional risk arises from the processes of adjustment to an environmentally sustainable economy, such as punitive actions for polluting the environment and changed expectation from the stakeholders to address environmental impact. The Manager follows the Sponsor’s sustainable real estate policy and works in conjunction with the Sponsor to implement various initiatives to drive a greener future such as implementing environmental management systems, obtaining green building certifications, and reducing carbon emissions and improving energy efficiency. Assessment of potential acquisitions includes examination of environmental and social sustainability risks and opportunities. Pandemic, Health and Safety Risks An epidemic of an infectious disease spreading across a large region, for instance multiple continents or worldwide, could result in a decline in office usage and affect tenants’ businesses. In addition, pandemic risk can have an adverse impact on MUST’s business operations, financial results and future prospects, leading to downward valuation of MUST’s properties. MUST is also expected to provide a safe and healthy environment for its stakeholders. Health and safety risks could result in adverse effects on the well-being of our tenants, employees and vendors. The business continuity team establishes and conducts regular BCP testing. The Manager has established playbooks such as Return to Office: Tenant Guidebook and Return to Office: Best Practices Playbook to provide guidance on what needs to be done amidst the occurrence of a pandemic. A full life safety training programme at the property level has been established. This programme is provided to tenants either online or in a manual that is maintained at the property management offices. Other health and safety offerings at the properties include periodic slip testing of the lobby floor surfaces to prevent slip and fall injuries and installation of automated external defibrillators, as well as fire hazard safety systems in the building. ENTERPRISE RISK MANAGEMENT 64 | MANULIFE US REIT
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