STEERING INTEGRITY AND ACCOUNTABILITY SEC 6 150 STATEMENT ON RISK MANAGEMENT AND INTERNAL CONTROL Description The sugar industry faces significant challenges stemming from increased production costs, such as increased raw sugar prices, higher energy costs, freight charges, and currency depreciation against the USD. Additionally, reduced refinery utilisation rates have contributed to lower production levels. Key Mitigations The Group implements hedging mechanisms to manage fluctuating raw material prices, freight, energy costs, and currency exchange rates. Moreover, FGV adopts pricing strategies to account for rising production costs, expands distribution channels, and actively engages stakeholders to strengthen market share. Collaboration with both industry and government is prioritised to foster innovative solutions. To tackle low refinery utilisation, the Group emphasises reliability programmes, process enhancements, and seeks guidance from consultants and experts to optimise the sugar refining process to increase production volume. SUGAR: Refinery High Production Cost & Low Utilisation Factor Description The palm oil industry faces close scrutiny for sustainability practices, especially concerning labour rights, deforestation, and climate impact. Allegations of forced labour incidents within FGV’s plantations have significantly impacted the Group’s reputation and business operations, resulting in the ongoing suspension of the Roundtable on Sustainable Palm Oil (RSPO) certification and actions by the United States Customs and Border Protection (US CBP). Key Mitigations FGV has taken decisive action to address human and labour rights concerns by implementing a comprehensive range of initiatives. In response to the Withhold Release Order (WRO) issued by the US CBP, FGV engaged LRQA (formerly known as ELEVATE) to conduct an independent assessment of its operations and devised a remediation plan targeting 12 key focus areas to mitigate risks of forced labour. One crucial focus was bolstering labour compliance management by introducing and refining policies, improving worker welfare with upgraded housing and facilities, and aligning recruitment procedures with ethical recruitment principles, including eliminating workers recruitment fees. Forced labour risks are now part of routine audits. SUSTAINABILITY: Allegations of Forced Labour Description Unfavourable weather conditions greatly impact the cropripening process, harvesting capability, and FFB yield. Prolonged droughts can harm oil palm inflorescence, leading to bunch failure, while floods can hinder estate access and cause FFB loss, resulting in low crop recovery. Key Mitigations To mitigate the impacts of adverse weather and extreme climate conditions on FFB yield, FGV implements good agricultural practices like moisture conservation and mulching, especially for immature palms. In flood-prone estates, FGV constructs bunds, improves drainage systems, and adjusts harvesting arrangements as part of its response measures. FGV has formulated an integrated climate action plan encompassing six strategic factors in its sustainability agenda: Climate Governance, Waste Management, Operational Efficiency, Carbon Management, Water Management, and Climate Awareness. FGV is currently establishing short- and long-term emission reduction objectives to further enhance its sustainability initiatives. CLIMATE: Extreme Weather Description Digital infrastructure is vital for connectivity and widespread device utilisation within FGV, offering significant benefits. Threats like malware attacks, security vulnerabilities, unsecured Wi-Fi networks, weak passwords, and lax user attitudes pose significant risks to system operability and security. Key Mitigations FGV has implemented a comprehensive set of measures to manage cyber security risks effectively. These include user security awareness sessions, round-the-clock Managed Security Services (MSS) monitoring, and digital risk reviews. The Group regularly conducts IT penetration testing to identify vulnerabilities in systems, networks, and applications, enabling prompt rectification of weaknesses and mitigating exploitation risks. Additionally, FGV conducts Cyber Drill exercises for IT Business Continuity Management to ensure uninterrupted critical IT systems and processes operation during disruptive events. CYBER SECURITY: Security Threats
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