The Risk Management Committee
Risk Management Committee Charter B.E. 2005 (Revision No.7)
Table of Contents
4. Qualification of the Committee Members
5. Duties and Responsibilities
6. Term of Service and Remuneration
9. Risk Management Unit
10. Effective Date
With the purpose of enhancing the risk management of PTT Exploration and Production Public Company Limited (PTTEP) and in compliance with the corporate governance practice of listed companies, PTTEP has appointed the Risk Management Committee to oversee and support the enterprise risk management program, which is the significant component to support the company to achieve its objectives.
In this Charter
“The Company” means PTT Exploration & Production Public Company Limited and PTTEP’ s subsidiaries
“Board” means Board of Directors of PTTEP
“The Sub- Committee” means the Committee Members of Standing Sub-Committee of PTTEP
“The Working Committee” means the Management and Personnel who have been appointed by the Risk Management Committee
“Risk Management Function” means the function” means Function that is nominated by the President to be responsible for corporate risk management in accordance with risk management policy framework defined by Risk Management Committee.
The Board appoints the Risk Management Committee which is composed of at least three PTTEP’s directors and at least one of committee member must be an independent director.
One of the committee members is nominated to be the Chairmen while the Head of Risk Management unit will be appointed as Secretary of the Committee.
A Committee Member must possess qualifications according to the criteria as follows:
(1) Being a Board Director and not a Chairman of the Board nor Chief Executive Officer
(2) To dedicate time to perform the Risk Management Committee’s job
(3) Independent Committee Member must have qualification according to the definition of independent director as prescribed in Good Corporate Governance of PTTEP.
5. Duties and Responsibilities
The duties and responsibilities of Remuneration Committee Charter are as follows;
(1) Define the policy framework and process for risk management including recommend on corporate risk management to the Board and Managements.
(2) Consider risk appetite prior to propose to the Board for approval as well as to determine Risk metrics and limits and regularly monitor the results.
(3) Promote and implement the risk strategy and policy by enhancing the level of risk awareness within PTTEP, and through the development of appropriate procedures and commitment of resources.
(4) Maintain an enterprise-wide view of risks which are related to Corporate Direction in the businesses i.e. E&P, related businesses and other businesses which PTTEP invest in, as well as to recommend mitigation strategy to manage the risks to keep them within the acceptable level according to clause (2) and to continuously monitor, assess and improve the mitigation strategy in responding to changing of the business environment.
(5) Support Risk Management Function in assessing key risk factors and advise on other potential risks which may impact to the Company for continuous and efficient risk management in comparable to leading companies as well as assign certain tasks related to PTTEP risk management to Risk Management Function to perform.
(6) Support the monitoring of risks across PTTEP and regularly report to the Board.
(7) Disclose the committee’s performance in the company’s annual report.
(8) Regularly review and update its own charter to ensure its appropriateness.
(9) Perform other duties relating to PTTEP risk management as may be assigned by the Board
In order to perform the duties, the Risk Management Committee may seek independent opinion from any other professional counselor when it is deemed necessary and proper, including the training and development of the committee members for the knowledge related to the company’s activities. PTTEP is responsible for those expenses.
The Risk Management Committee is responsible directly to the Board according to the duties and responsibilities, while the responsibilities for all activities of PTTEP towards third person are still vested in the entire Board.
6. Term and Remuneration
The term of service of the Committee Member is equivalent to the director’s Board term.
In case of any Committee Member’s vacating from Office or any unavailability before the expiration of his term of service, the Board must appoint another Risk Management Committee Member with is fully qualified to replace the resigning member not later than 3 months as of the date of incomplete composition of the Risk Management Committee.
Upon the expiration of the term of service, if there is no appointment of a new Risk Management Committee Member, the resigning member has to standby to perform the duty until the arrival of a new Risk Management Committee Member.
The resigning Committee Members may be re-appointed for another term. However they cannot be re-appointed immediately after two consecutive terms of service are expired.
Besides the vacating from office by expiration of term of service, the Risk Management Committee member has to resign once he/she cannot possess the qualification according to the Article 4.
The Risk Management Committee will receive an appropriate remuneration approved by the Shareholders Meeting for his duties and responsibilities and PTTEP has to disclose that remuneration in its annual report too.
The frequency of the meeting is at least four times a year.
The Risk Management Committee fixes the number of members required to attend a meeting to make it valid by not less than a half of the Committee Members. If the Chairman is absent, the attending committee members have to choose on Committee Member as Chairman of the meeting.
The voting in the meeting is exercised by a majority. A Committee Member has a casting vote. If the votes are equal, the Chairman will have an additional vote which becomes final and decisive. The Secretary of the Risk Management Committee has no right to vote.
Any Committee Member who has a stake in any issue on the agenda must inform those in attendance, abstain from expressing an opinion and voting on the issue and leave the meeting room when the issue is discussed to allow the other committee members to express their opinions freely. An exception can be made if the other committee members vote unanimously to allow the committee member to stay in the meeting room to provide information on the issue so that the Risk Management Committee can deliberate on the issue thoroughly. However, the committee member is not allowed to vote or make a decision on the issue.
The Risk Management Committee has an authority to invite the management, or any other concerned parties or other appropriate persons to participate or to explain the concerned subjects in the meeting.
The Risk Management Committee must report to the Board the result of the meeting or the other necessary reports so the Board is kept regularly informed
9. Risk Management Function
The Risk Management Function has to support Risk Management Committee as follows;
(1) Support the Risk Management Committee as assistant Secretary by performing duty regarding to Risk Management Committee Meeting ; prepare complete and accurate minutes of meeting and reports including inform meeting resolution to concerned parties for acknowledgment and implementation.
(2) Report Corporate Risks and significant operational risks together with mitigation strategy and progress of mitigation plan to reduce risks regularly and promptly.
(3) Report key risks for investment decision to Risk Management Committee for considering the investment proposal.
(4) Perform any other duties relevant to PTTEP risk management as may be assigned by Risk Management Committee.
10. Effective Date
This Charter has come into force since 15 October 2018.
The Risk Management Committee Report
The year 2018 was very challenging for risk management to cope with the two expiring petroleum concessions, Bongkot and Erawan. The total capacity of these two concessions amounts to 60% of the total production in the Gulf of Thailand. The expiring concessions would significantly affect our production and sales volume. Therefore, the preparation of the bidding processes for both Bongkot and Erawan concessions as the representative of Thai exploration and production companies to maintain production volume and serve the country's energy demand was vitally important to sustain Thailand's energy security in the long term as well as to pursue the goal of becoming a sustainable organization for all stakeholders. 2018 was also the year of oil price volatility, even though the global oil price has risen from that recorded last year, the rise in renewable energy usage, disruptive technology, changes in laws and regulations relating to PTTEP’s business and operation, as well as an increase in cyber treats all played a part in such instability. As these factors could potentially affect the achievement of PTTEP's goals or strategies, PTTEP’s Board of Directors appointed the Risk Management Committee. As of December 31, 2018, the Committee comprised six members, two of which were independent directors. The Committee played a vital role into overseeing that PTTEP’s risk management is in line with PTTEP’s Board of Directors’ directions by considering corporate risks in the areas of strategic planning, investment, capital project management and capability as well as providing advice and monitoring the results to ensure that the risks are effectively and efficiently managed.
In 2018, the Committee convened 15 times which include 2 meetings that were conducted together with the Audit Committee. The duties and responsibilities of the Committee can be summarized as follows:
(1) Managed strategic risks in response to the dynamically changing external environments such as the changing global energy landscape and an increase of digitally-driven technology in every industry. The Risk Management Committee assessed the risks associated with the Company’s “RESET, REFOCUS, RENEW” strategies and the implementation of business plans in accordance with the strategies designed especially for expanding our investment in related E&P business and new businesses which has growth opportunity in the future. PTTEP’s Risk Appetite Statement was revised accordingly to fit with corporate directions while the Risk Metrics and Risk Limits were reviewed in order to appropriately determine our investment in new businesses.
(2) Considered and screened investment projects to expand E&P investments including M&A, new exploration and divestment projects in alignment with the company’s growth strategies, and project value realization. The Risk Management Committee also advised PTTEP to assess risks in all dimensions including counterparty risks; moreover, they focused on the bidding for the two expiring petroleum concessions, i.e., Bongkot and Erawan gas fields to ensure the continuity in natural gas supply while maintaining competitive costs, resulting in the maximization of benefits to the country and creating energy security in the long term. The risk mitigations were also prepared for bidding; for example, cost management to increase competitive bidding capability and worst case scenario analysis including contingency plan.
(3) Focused on the risk management of large development projects such as the Algeria Hassi Bir Rekaiz Project, the Mariana Oil Sands Project and the Mozambique Rovuma Offshore Area 1 Project by closely monitoring and providing advice to manage risks through options and impact analysis for proper decision-making. Risk Management Committee also drove these projects forward to manage the risks to PTTEP in both the financial and the reputation impact.
(4) Supported the exchange of views between the Audit Committee and the Risk Management Committee. The meetings were held to discuss the various risks; for example, legal and contractual risks whereby the Committee initiated the review of work processes, roles and approval framework between the corporate legal division and projects/assets. Cyber treat risks were also discussed in order for PTTEP to prevent and respond in a timely manner. Furthermore, subsidiary management risks especially for new investment were monitored to ensure good governance and ring-fencing of liabilities between PTTEP and the subsidiary.
In addition, Risk Management Committee consistently oversaw enterprise risk management to ensure businesses were operated within PTTEP’s risk appetite, particularly risks related to market, oil price, finance, and exploration and production operations as well as enhanced the level of organization readiness to cope with emerging risks, in addition to existing corporate risks. The minutes of Risk Management Committee meetings were reported to the Board on a monthly basis. In this regard, PTTEP has been selected as a member of the 2018 Dow Jones Sustainability Indices (DJSI) in the DJSI World Oil and Gas Upstream & Integrated Industry and maintained DJSI score in the area of Risk and Crisis Management in the top quartile for the fifth consecutive year.
In summary, during the year 2018, the Committee independently performed duties relating to PTTEP risk management systematically, prudently, competently for PTTEP to achieve our objectives and goals and to the highest benefits of PTTEP, shareholders, and all stakeholders.
(Mr. Sethaput Suthiwart-Narueput)
Chairman of the Risk Management Committee