Content2011 - PETRONAS Gas Berhad

Internal Control Statement
Contractor Risk
Contractor risk is managed through technical and commercial evaluation
exercises conducted by the Company’s Supply Chain Management
Department prior to the award of contracts in line with the PETRONAS
Group Supply Chain Management Division (GSCMD) requirements.
During the year, the Company adopted the enhanced Contractor Risk
Assessment (CoRA) process that was developed by GSCMD as part of
its contractor selection process prior to awarding the contract to the
contractor. In addition, a Vendor Evaluation Committee and Contractor
Performance Review Committee were also established to ensure closer
monitoring and communication on contractor performance after
the award of the contract in order to mitigate the risk of contractor
non-performance.
Credit Risk
To reduce its credit risk exposure, the Company continues to apply the
Credit Risk Management processes whereby the customers are assessed
using the PETRONAS Credit Risk Rating System in line with the credit
assessment process adopted by the PETRONAS Group. The system
evaluates the creditworthiness and assigns credit risk ratings to all of
the Company’s external customers. Annual reviews are conducted on
the assigned credit risk ratings of these customers while the trend of
the customers’ fi nancial performance are also analysed to detect early
signs of fi nancial distress and provide early warning to Management.
In addition, Credit Value at Risk (CVaR), which measures potential loss
from customers’ overdue balances, is monitored against the established
Credit Risk Tolerance Limit (CRTL) to ensure that CVaR exceeding CRTL
is promptly highlighted to Management. Reporting on credit risk is
captured in the PGB Credit Risk Management Dashboard.
During the year, Credit Risk Reports were also generated by PGB RMD
as an independent monthly reporting to the General Manager of
Finance Division. The Credit Risk Reports were also incorporated into
the ERR submitted to BAC.
122 petronas gas berhad (101671-h)
In anticipation of new businesses which would attract new customers
for the Company, the Credit Risk Management Work Procedure was
reviewed and enhanced in order to address the risk exposures arising
from these new businesses and customers. The revised Credit Risk
Management Work Procedure was endorsed by PGB Management
Committee on 21 February 2011 to be applied to future contracts and
new customers.
The Company is represented in the PETRONAS Credit and Trading Risk
Council, which establishes and coordinates the PETRONAS Groupwide
risk management approach on credit and trading risk.
Plant and Facilities Risk and Business Continuity Plan (BCP)
The Plant and Facilities Risk and Business Continuity Plan are governed
under the Business Continuity Management (BCM) capability as part
of the Integrated Plant Operations Capability System (iPOCS) driven by
PETRONAS Group Technology Solutions (GTS). The iPOCS supports the
PETRONAS Operational Excellence (OE) Framework implementation in
PETRONAS.
In PGB, the BCM is established at the relevant Divisions, i.e. Plant
Operations Division (POD), Transmission Operations Division (TOD)
and Centralised Utility Facilities (CUF). The Plant and Facilities Risk is
assessed, monitored and reported within the respective Divisions on a
continuous basis.
During the year, three BCP drills were carried out simultaneously at
PGB and Division level on 12 January 2011 as part of a PGB Tier 3
Emergency response exercise. The objectives of the exercise include
testing the effectiveness of PGB and Division BCP as well as enhancing
the readiness of Management in handling crisis situations. In this
exercise, the BCP at PGB level as well as BCP at POD and CUF were
simultaneously activated. At the end of the exercise, feedback was
gathered from the internal as well as external evaluators invited to
observe the exercise. Good practices were acknowledged while areas
of improvement were highlighted to further improve the effectiveness
of the BCP procedures.
The iPOCS assessment was carried out by GTS at POD and TOD during
the year. Intervention plans were identifi ed to enhance operational risk
management at the plant and facilities as well as business continuity
preparedness.