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32
Singapore Airlines Annual Report 05/06
STATEMENT ON
RISK MANAGEMENT
1. ENHANCEMENTS TO THE RISK FRAMEWORK
Building on the emphasis on effective responses in the previous year, Singapore Airlines improved the
Risk Management Framework with enhancements to the management of Strategic and Regulatory Risks.
Introduction of Strategic Risks Framework
During the year, Singapore Airlines introduced a Strategic Risks Framework to assist business units in identifying and
reporting strategic risks and other long-term issues for senior management’s attention. These risks are then taken
into account within the Strategic Planning Process.
Review of Risks to Singapore Airlines Reputation
In recognition of the importance of reputation to Singapore Airlines’ business, guidance was issued to business
units to help in explicit identifi cation and management of various aspects of reputation risk. In the latest Annual
Risk Management Review in Jan-Mar 2006, business units actively reviewed their risks for potential impact to the
Company’s reputation.
Review of Regulatory Compliance
In view of the wide range of laws and regulations with which the Group is expected to comply, a review was
initiated to help business units gain more awareness of applicable legislation and stay within the regulatory
framework under which they operate. In particular, specifi c reviews were conducted in relation to fi re safety
and other workplace safety and health legislation, environmental laws and requirements, as well as business and
tax regulations.
2. SIMULATIONS AND TESTS OF RISK CONTROLS
Simulations of Business Continuity Plans were conducted during the year to test the effectiveness of risk controls
and handling of business continuity. Independent verifi cation of such tests was performed by Risk Management
Department, whose input on improvements were taken into account by business units. Specifi cally, a world-wide
Crisis Response simulation exercise was conducted in November 2005 involving all Singapore Airlines stations across
the globe. The exercise tested recall responses, communications systems, functional preparedness and management
decision-making under simulated “crisis scenarios”.
3. OTHER RISK PROCESSES AND PROGRAMS
Annual Risk Management Review
Singapore Airlines carried out the 4th Annual Risk Management Review from January to March 2006. Risks at
company levels were surfaced to each Group Company’s Risk Management Committee before being consolidated
for review by the Group Risk Management Committee.
Whistle-Blowing Program
As a further enhancement to internal risk control processes, Internal Audit Department introduced and
implemented the “Policy on Reporting Wrongdoing” across the Singapore Airlines Group. Under this “Whistle-
blowing” policy, all forms of “wrong-doings” can be reported to an investigation unit, with the “whistle-blower”
being provided confi dentiality protection. “Wrong-doings” can include fraud, theft, abuse of authority, breach of
regulations or non-compliance with corporate policy such as improper banking or fi nancial transactions.
Banking Transaction Procedures
Lenders to Singapore Airlines are to note that all bank transactions undertaken by any Group Company must be
properly authorized, including the opening of new bank accounts and any proposed credit facilities. Each Group
Company has its own approval limits and procedures for every banking transaction, having regard to the nature of
the transaction concerned. These approval limits and procedures are updated from time to time and are available
on request. The bankers of each Group Company should always verify, in accordance with the verifi cation process
set out in the applicable procedures, that the transaction is properly authorized.
4. BOARD OF DIRECTORS’ COMMENTS ON THE PRACTICE OF RISK MANAGEMENT IN SINGAPORE AIRLINES
Having reviewed the risk management practices and activities of Singapore Airlines, the Board of Directors has not
found anything to suggest that risks are not being satisfactorily managed.