34 / 160
Hyprop Investments Limited
Integrated annual report 2016
32
RISK MANAGEMENT
The material risks identi ed by the group in terms of their probability
and potential impact are shown below. Each risk has been mapped to
the strategic objective it could impact, affected stakeholders,
management’s strategic response and related key performance
indicators, as below.
Approach
Hyprop’s system of internal control is designed to provide reasonable
assurance as to the integrity and reliability of the nancial statements.
By managing rather than eliminating risks, these systems are intended
to safeguard, verify and maintain accountability of the company’s
assets. Equally, they are designed to identify and minimise significant
fraud, potential liability, loss and material misstatement, while
complying with applicable laws and regulations.
Framework/process
The board reviews and monitors the effectiveness of internal control
systems, assisted by the audit and risk committees. These committees
in turn are assisted by management reporting and periodic reviews, as
Internal risks (under control of management)
External risks (can be mitigated by management)
External risks (outside the control of management)
Strategic
objective
Key risk
Probable effects
Severity
of risk Stakeholder
SOUTH AFRICAN ECONOMY
Focus on
sustainable
income growth
Low GDP growth impacts
business growth in South Africa
•
•
Slower retail sales growth
affects retailers’ financial
positions and ability to pay
rent
High
•
•
Providers of capital (debt
and equity investors and
financial institutions)
Slowing consumer spend
affects retailers’ trading
densities and rent ratios
•
•
Leases not renewed
•
•
Discounted rentals to retain
tenants
•
•
Tenants more cautious on
renewals and new lettings
•
•
Tenants taking less space,
slower extension plans
High
•
•
Tenants
•
•
Providers of capital (debt
and equity investors,
financial institutions)
Downgraded sovereign credit
rating
•
•
Increased borrowing costs
High
•
•
Providers of capital (debt
and equity investors and
financial institutions)
LEASING
Focus on
sustainable
income growth
Increased supply of retail space
in the market
•
•
Discounted rentals to retain
tenants
•
•
Tenants become more
demanding on leasing terms
•
•
Increased vacancies
•
•
Leases not renewed
•
•
Lower rental growth
High
•
•
Tenants
Significant volume of leases
expiring in any one period
•
•
Increase in vacancies
Medium
•
•
Tenants
Restrictive clauses in leases
•
•
Limitation on tenant
selection
Medium
•
•
Tenants