PAC chairman Mas Ermieyati Samsudin said the sovereign wealth fund’s reports to the finance ministry should include its projections for the economy, as well as related industries and sectors.
Mas Ermieyati noted that Khazanah’s reporting to the finance ministry currently only encompassed its financial performance and the strategic performance of its investments, including key developments and ongoing and completed initiatives.
In a statement today, she also said PAC took note of Khazanah’s efforts to strengthen its standard operating procedures for post-investment value analysis when disposing of investments that incurred losses beyond material limits.
Khazanah is expected to present a post-investment analysis report, covering causes of failure, to its executive committee and board of directors, a measure introduced last year to ensure accountability.
Mas Ermieyati said although Khazanah’s existing stress testing already considered non-financial market shocks such as technological disruptions and geopolitical factors, such tests should be improved to ensure that Khazanah could swiftly restructure or dispose of investments if required.
Stress testing is a risk management method that assesses how an investment portfolio or financial institution might behave during severe but realistic market or economic downturns.
“Although Khazanah already has existing SOPs, the PAC reminds Khazanah and the finance ministry to continue strengthening governance and oversight to minimise the risk of losses while fulfilling its mandate,” she said.
“The PAC reminds Khazanah to remain vigilant and ensure it is prepared for any drastic changes to investment fundamentals.”
The PAC recently concluded its proceedings on Khazanah’s domestic investments, following which it issued four recommendations.
Khazanah’s investment strategy gained attention last October when it was reported that the fund and Permodalan Nasional Bhd lost RM43.9 million after selling their stake in e-commerce platform Fashion Valet Sdn Bhd for RM3.1 million.
The PAC had said Khazanah’s failed investment in Fashion Valet was due to the company’s risky omnichannel strategy, external market shocks caused by the Covid-19 pandemic, and shifts in post-pandemic consumer behaviour.