Cromwell European REIT - Annual Report 2021

Material Risks Details Key Mitigating Actions Economic and financial Strategic risks • Investment and divestment • Market and competition • Deployment of capital into investments which are loss- making or have sub-optimum returns • Inadequate planning to identify suitable divestment opportunities • Vulnerability to external factors, including volatility in the global economy, implications of geopolitical developments, intense competition in core markets and disruptive technology • Continue to apply the Manager’s well-established process for evaluating investment and divestment decisions where activities are monitored to ensure that they meet CEREIT’s strategic intent, investment objectives and returns • Applying a 13-risk factor matrix across three broad categories that provides a framework to assess existing properties, proposed investments and potential divestments on its alignment with CEREIT’s strategy, financial viability, country specific political and regulatory developments and contractual risk implications • Conducting rigorous due diligence reviews on all investment and divestment proposals and, where necessary, engaging third- party consultants with the requisite expertise to assist in the due diligence review • Incorporating environmental due diligence into all stages of the investment process with the aim of gaining a more complete understanding of target assets’ environmental risks such assessing the energy consumption, intensity and efficiency of the asset prior to acquisition and minimising environmental and social impact post acquisition (For more information, please refer to CEO Interview, pages 10 to 15 of this Annual Report Financial management risks • Credit • Liquidity • Interest rate • Foreign exchange • Exposure to financial risks related to liquidity, foreign currency and interest rates • Volatility of cash flow negatively impacting CEREIT’s ability to meet financial obligations • Volatility of foreign currencies and interest rates resulting in realised / unrealised losses • Actively monitoring CEREIT’s debt maturity profile, operating cash flows and the availability of funding to ensure that there are sufficient liquid reserves, in the form of cash and banking facilities to meet its capital, refinancing and operating needs • Diversifying sources of funds from banks and capital markets, including green financing, to minimise overreliance on a single source of funds for any funding or refinancing requirements • Establishing credit limits for tenant-customers and managing exposure to individual entities through regular and thorough monitoring of receivables on an ongoing basis • Actively reviewing and maintaining an optimal mix of fixed and floating interest rate borrowings, taking into consideration investments’ holding period and nature of the assets ENTERPRISE RISK MANAGEMENT STRENGTHENING ENTERPRISE RISK MANAGEMENT The ERM framework provides a holistic and structured approach towards assessing, monitoring and mitigating risks. The three-step risk management process comprises (1) risk identification and assessment, (2) formulation of risk mitigation measures and action plans and (3) monitoring and reporting. A robust ERM framework enables CEREIT to manage risks systematically and remain nimble when capitalising on opportunities. The risk assessment process takes into account both the impact and the likelihood of occurrence and covers the investment, financial, operational, compliance and reputational aspects of CEREIT’s business. Tools such as a risk-rating matrix and a risk register assist the Manager. The Board, supported by the ARC, is responsible for the governance of risk and ensures that the Manager maintains a sound system of risk management and internal controls to safeguard Unitholders’ interests and CEREIT’s assets. Sustainability covers a broad range of material issues, many of which have been identified and managed according to CEREIT’s ERM framework. In addition, risks and opportunities relating to climate change have been recognised as fundamental to CEREIT and its operations. More details will be provided in CEREIT’s FY 2021 Sustainability Report which will be published in late May 2022. In FY 2021, the Board has assessed and deemed the Manager and CEREIT’s risk management system to be adequate and effective in addressing the key risks identified below: FOCUS ON STRENGTHS PIVOT TO LOGISTICS 186