Corporate Governance
Risk and Dividends
The main risks facing the Company and the policies followed to manage and monitor them are as follows:
Information on Risks Facing the Company (Operational, Financial, or Market-Related) and Policies for Their Management and Monitoring
- Financial Risks: These include liquidity risk, credit risk, and fluctuations in interest rates. They are monitored through periodic reporting, cash flow forecasting, and oversight by the Finance Department or Executive Management.
- Market Risks: Includes competition, changes in customer demand, and economic or regulatory changes. These are monitored through regular market and competitor analysis and continuous strategy updates.
- Compliance and Regulatory Risks: Includes adherence to local and international laws and regulations. Monitoring is done through compliance programs, periodic follow-up, and continuous employee training.
- Information Technology and Cybersecurity Risks: These include cyberattacks, data loss, and system disruptions. They are managed through stringent security controls, periodic backup procedures, and continuous security testing.
The Board of Directors of Avalon Pharma adopts well-considered measures to address various risks that may affect the Company’s operational and production performance. The Board seeks to strengthen a culture of awareness among all relevant parties within the Company, ensuring full understanding of their responsibilities. At the same time, the Company continues to enhance internal control effectiveness and implement corporate governance measures according to the highest standards of transparency.
The Company’s risk management policy is based on the following principles:
- Effective self-monitoring.
- Sense of responsibility.
- Accuracy and transparency.
- Initiative
Risk Management Mechanis:
In pursuit of achieving the highest possible efficiency in risk management while maintaining a balance between achieving objectives and preserving value and sustainability, the Company follows the following mechanism:
- Identification of Potential Risks and Identify all potential risks facing the Company, including financial, operational, environmental, and other types of risks.
- Risk Assessment: Measure the impact of risks and the likelihood of their occurrence, then classify risks according to priority as high, medium, or low.
- Development and Implementation of Risk Management Strategies: Determine appropriate control measures to mitigate the impact of risks, reduce their likelihood, and allocate the necessary resources to implement these strategies.
Description of the Dividend Distribution Policy
The Company distributes its annual net profits according to the following policy:
- The General Assembly, based on the Board of Directors’ proposal, may allocate a portion of the net profits to form a statutory reserve and designate it for purposes determined by the Assembly.
- The General Assembly may also decide to establish other reserves to the extent that serves the Company’s interest or ensures the distribution of as consistent a dividend as possible to shareholders. The Assembly may additionally deduct amounts from the net profits to establish social institutions for the Company’s employees or to support existing such institutions.
- The Company’s cash position and capital adequacy ratios are reviewed, and if sufficient, a first installment of up to 50% of the distributable net profits may be paid to shareholders.
- The Board of Directors may distribute interim dividends during the year based on the Company’s results, retained earnings balance, liquidity position, and future cash flow requirements, after obtaining an annual authorization from the General Assembly.
- Dividend distribution is restricted to accumulated retained earnings from previous years or distributable reserves formed from profits, or both. The Company must consider the sequence and regularity of distribution based on the available capacity and liquidity. The Board of Directors is required to disclose and announce the regular dividend percentages decided for distribution to shareholders on their scheduled dates.
Dividends Distributed to Shareholders
- The Percentage of Dividends Distributed to Shareholders During Different Periods of the Financial Year, in Addition to the Proposed Dividend Percentage at the End of the Financial Year and the Total Dividends.
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Details of Any Agreement or Arrangement Under Which Any Shareholder of the Company Has Waived Their Dividend Rights.
There are no arrangements or agreements under which any of the Company’s shareholders have waived their dividend rights.
If the Board of Directors has recommended replacing the external auditor before the end of its term, the report must clarify this and state the reasons that prompted such a recommendation
No requests were made to replace the external auditor during the year, as the General Assembly of Shareholders held in May 2025 approved the appointment of Ernst & Young Professional Services to audit the preliminary financial statements for the second and third quarters of 2025, review the annual financial statements for 2025, and audit the preliminary financial statements for the first quarter of 2026, following the expiry of the engagement term of the previous external auditor, KPMG.