Managing Investment Risks
Once an investment is made, it is often difficult to make a withdrawal decision and the loss impact is usually significant in scale. To manage the investment risk, we have in place an integrated framework covering the entry process to the exit process. For the entry process, we carefully select investments that exceed the hurdle rate, a threshold for the rates of return on new investments relative to the cost of capital. In case of new investments for large-scale, important projects, cases are put forward to the Loan and Investment Committee for thorough examination. According to business performance, financial conditions and/or business environment, the Committee discuss how to enhance the value of the business including expansion, downsizing or disposal when necessary. When the performance of investments falls short of required standards after a certain period from their inception, we have an Exit Rule that shall designate those investments as "Investments to withdraw from.