of risk management within their objectives, governance, leadership commitment, operations, and performance management. This holistic approach ensures that risk management becomes an inherent part of the operational fabric, enhancing the overall resilience and adaptability of the Group. STATEMENT ON RISK MANAGEMENT AND INTERNAL CONTROL Category No. TNB Strategic Risk Finance 8. Ineffective capital allocation to maximise value creation Management makes decisions on how to source and allocate funds effectively to maximise potential return. Failure to do so would have dire implications to TNB, including missed opportunities, reduced financial profits and market confidence. Capabilities 9. Gaps in workforce capabilities to deliver RT strategy and sustainability aspiration It is critical for TNB to focus on developing and deploying new institutional capabilities to the right areas. We also need to enhance workforcediversity in terms of skill sets and exposures that are in line with our aspiration to diversify internationally. Failure to close the capabilities gap would impact TNB’s ability to achieve its RT strategy. 10. Failure to ingrain TNB culture in employees’ behaviour in supporting Reimagining TNB strategy and sustainability aspiration Culture molds the direction, beliefs and shared values that shapes employee (at all levels including the Board)’s perceptions, behaviours and understanding. Failure to ingrain the Reimagining Culture values in the organisation and processes may result in lower productivity, fraud and bribery or silo mentality. Physical Asset Risk 11. Failure to mitigate physical risks caused by climate change Physical climate change risks pose significant challenges to TNB in the form of extreme weather events, rising sea levels, and changing precipitation patterns that can damage infrastructure, disrupt operations and impact power generation, transmission and distribution. Failure to manage these risks can result in prolonged outages, increased operation and repair costs, regulatory penalties,