KUALA LUMPUR, Aug 21 — Khazanah Nasional Bhd has been advised to establish a standard operating procedure (SOP) to conduct post-analysis for every divested investment that incurs losses exceeding a certain material threshold.
Public Accounts Committee (PAC) chairman Datuk Mas Ermieyati Samsudin said that the post-investment analysis report must outline the cause of failure, process weaknesses (if any), and recommendations for improvements, and must be presented to the Board Audit Committee and the Board of Directors to ensure accountability and institutional learning.
“PAC has found that Khazanah does not have an SOP related to the post-analysis for every investment that has been disposed of that incurs losses exceeding a certain material limit,” she told a press conference at the Parliament building today.
Ermieyati presented the PAC Statement on the domestic investment by Khazanah under the Finance Ministry (MOF) and Permodalan Nasional Bhd in FashionValet Sdn Bhd in Parliament today.
Among other things, the committee recommended that Khazanah strengthen its risk management framework to include more in-depth scenario analysis of non-financial market shocks.
Examples of non-financial market shocks include disruptive technological changes, pandemics, geopolitical changes, and shifts in social sentiment, so that Khazanah is more responsive to restructure or exit from the investment when the investment fundamentals have changed drastically.
She added that Khazanah should proactively and continuously educate the public on the strategies and investment opportunities through venture capital, including the high-risk nature of this model.
“Annual reports, media statements, and other communication platforms should be used to explain the rationale behind the portfolio approach and the expectation that some investments will fail as part of the strategy to drive innovation,” Ermieyati said.
Through proceedings carried out on February 20, PAC had called three key witnesses: the MOF's Government Investment Companies Division deputy secretary Afidah Azwa Abdul Aziz, Khazanah managing director Datuk Amirul Feisal Wan Zahir, and Khazanah chief investment officer Datuk Hisham Hamdan.
Based on the proceedings, she said the PAC concluded five key findings, including that Khazanah has a layered internal governance process for investment screening and approval.
“Monitoring mechanism by the MOF was also found to be at the strategic level and did not interfere with the daily commercial operations, in line with good governance practices,” Ermieyati noted.
She explained that the investment in FashionValet, although it had gone through rigorous due diligence process, failed due to the high-risk omnichannel strategy, external market shocks (Covid- 19), and changes in consumer behaviour post-pandemic.
