Risk management

The Board has overall responsibility for the adoption, oversight and reporting of Growthpoint’s risk management framework. The Board is assisted by the Risk Management Committee.

The framework encompasses four distinct categories of risk:

STRATEGIC OPPORTUNITIES AND RISKS
  • Identified annually by the Group Chief Executive Officer with reference to the business model and the organisation’s objectives
  • Documented in terms of the recommended practices of the King IV Report on Corporate Governance for South Africa 2016 – Risk Governance section
  • Presented to and reviewed by the Risk Management Committee
  • Quarterly reporting of Key Performance Indicators (KPIs) to the Risk Management Committee

(Refer business model and value creation)

 
RESPONSIBILITIES
Ad hoc management
 
REPORTING RISK
  • Responsibility of the Audit Committee
  • Systems of internal control established to provide reasonable assurance of the validity, accuracy, completeness and timely accumulation of financial data
  • Systems of internal control assessed by internal audit up to general ledger and management reporting level
  • Analytical reviews and reconciliations performed by Group Finance function
  • Internal audit assesses the adequacy and appropriateness of management’s analytical reviews and reconciliations every second year
  • External auditor ensures the fair presentation of financial information at a statutory reporting level
OPERATIONAL RISK
  • Identified annually by the Group Chief Executive Officer with reference to the business model and the organisation’s objectives
  • Compared to the “REIT Risk Instrument” universe of risks which is an internet-based technology risk solution developed specifically for RSA REITs after having assessed the probability and likelihood of the risk
  • Key risks documented and presented to and reviewed by the Risk Management Committee
  • Monthly and/or quarterly reporting of KPIs by SBUs, sector or Group
  • Quarterly reporting of KPIs to the Risk Management Committee

 

 
Day-to-day management
 
COMPLIANCE RISK
  • Primary legislation affecting organisation identified by Company Secretarial function in conjunction with in-house and external legal advisers
  • Where necessary, or if prescribed by legislation, compliance officers appointed to oversee adherence to the relevant Acts
  • Employees expected to keep abreast of legislation and compliance requirements relevant to their area of responsibility
  • Risk Information Management System (RIMS) technology solution utilised by facilities management personnel on a quarterly basis to report on compliance to building regulations, OHS Act and fire regulations
  • Risk Officer dedicated to ensuring compliance to building regulations, OHS Act and fire regulations
  • Inspection of buildings by independent insurers

Risks on the radar

The following risks have been identified as being prevalent within the operating environment due to the reporting of related activities in the public domain during the financial period. Although not necessarily specific to Growthpoint, the risks warrant commentary as to how Growthpoint has acted to mitigate such risks.

1. COVID-19
CONTRIBUTORS
PROBABLE IMPACT
MITIGATION
  • Worldwide pandemic
  • Global recession
  • Reduced revenues
  • Increase in vacancies
  • Increase in arrears
  • Reduced valuations due to
    lower revenue and increased
    risk-free rates

Property Industry Group

A collective formed by the major representative bodies for real estate in SA to coordinate a response to Covid-19 and specifically the economic effects of the lockdown by providing a relief package to tenants.

Retention of tenants

Assistance provided to tenants in the form of relief discounts and deferments.

2. ENVIRONMENTAL
CONTRIBUTORS
PROBABLE IMPACT
MITIGATION
  • Deteriorating infrastructure and service delivery
  • Increase in administered costs
  • Increased regulatory requirements
  • Reputational damage
  • Additional costs
  • Carbon tax
  • Ability to source funding

Environmental policy

Our formalised policy focuses on climate change, carbon emissions, biodiversity and energy, water, and waste management.

New developments

  • A responsibility matrix is used which lists, among other things, the regulatory indicators to be considered when undertaking a development
  • New office developments to achieve a minimum 4-Star Green Star SA rating

Development contractors

Where required, the contractor will appoint a consultant who specialises in environmental matters.

Existing buildings

  • Obtaining green building certification in terms of the GBSA for office sector properties
  • Identifying suitable solutions in terms of our six-step sustainable change process
  • Engaging and implementing energy-efficient initiatives to reduce utility spend, the saving on which are shared with tenant
  • Using the energy and water performance tool developed by GBCSA to benchmark office buildings
  • Waste target of zero organic waste to landfill by 2022
  • Assessing carbon footprint annually, which is externally verified by a third party

Climate change

  • Tracking of data and the various weather-related incidents to identify preventative initiatives
  • Aspirational climate strategy
3. HEALTH AND SAFETY
CONTRIBUTORS
PROBABLE IMPACT
MITIGATION
  • Increase in administered costs
  • Increased regulatory requirements
  • Reputational damage
  • Fines
  • Legal liability
  • Additional costs

Risk Information Management System (RIMS)

A web-enabled software program focused on property operations, which facilities management personnel complete for each building, each quarter. The results are analysed to identify issues that need management’s attention.

Vendor vetting

The Procurement Department, when vetting a vendor, ensures that the vendor submits documentation about the way in which they ensure compliance with the OHS Act.

Training

Facilities managers as well as the Risk Officer identify health and safety training needs for individual employees as well as across the organisation.

Risk Officer

A dedicated Risk Officer ensures compliance with building and fire compliance regulations as well as the OHS Act by:

  • Regularly performing independent visits to buildings
  • Liaising with tenants when conducting building inspections
  • Liaising with facilities and property management personnel
  • Liaising with insurers

Independent insurer reviews

Growthpoint’s insurers undertake inspections of buildings each year to ensure that the insurable cover is commensurate with the insurable risk that they have underwritten.