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RISK MANAGEMENT
Risk management
The material risks identified by the group in terms of their probability and potential impact on Hyprop are shown below. Each risk has been mapped to
the strategic objective on which it could have an impact, affected stakeholders, management’s strategic response and related key performance indicators.
Approach
Hyprop’s system of internal control is designed to provide reasonable assurance as to the integrity and reliability of the financial statements. By managing
rather than eliminating applicable 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 efficacy of systems of internal control, assisted by the audit and risk committees. These committees in turn are
assisted by management reporting and periodic reviews, as well as reports from an outsourced internal audit service provider. The committees report
to the board on the findings of the internal audit function.
Strategic
objective
Key risk
Probable effects
Severity
of risk
South African economy
Focus on
sustainable
income growth
Low GDP growth impacts business growth in
South Africa
Q
Slower retail sales growth affects retailers’
financial positions and ability to pay rent
High
Slowdown in consumer spend affecting
retailers’ trading densities and rent ratios
Q
Small line stores under pressure
Q
Leases not renewed
Q
Discounted rentals to retain tenants
Q
Lower distributable income
High
Potential increase in interest rates
Q
Increased borrowing costs result in reduced
distributable income
Low
Downgrading of sovereign credit rating
Q
Growth and national/global competitiveness
at risk
Q
Reduced foreign direct investment
Q
Increased borrowing costs
Medium
Leasing
Focus on
sustainable
income growth
Increased supply of retail space in the market
Q
Discounted rentals to retain tenants
Q
Tenants become more demanding on leasing
terms
Q
Increased vacancies
Q
Leases not renewed
Q
Increased pressure on renewal terms
Q
Lower rental growth
High
Tenants more cautious on renewals and new
lettings
Q
Inability to renew leases or retain tenants means
increased vacancies and prolonged periods of
vacant space in shopping centres
Medium
Tenants taking less space and slower extension
plans
Q
Negative impact on budgets
Medium
Significant volume of leases expiring in any
one period
Q
Negative rent reversion
Medium
Lease renewals and tenant retention
Q
Discounted rentals to retain tenants
Medium
Restrictive clauses in leases
Q
Discounted rentals to retain tenants
Medium
Internal risks (under the control of management)
External risks (able to be mitigated by management)
External risks (outside the control of management)
GROUP OVERVIEW
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Hyprop Investments Limited
Integrated Report 2015