Appendix J: Risk Management Policy

Appendix I	Table of contents	Appendix K

PURPOSE

The purpose of this policy is to identify risks that arise from the Solco's operations, quantify the impact and likelihood of that risk event occurring and manage the risk in accordance with the company's level of risk tolerance.

The objectives of the policy are to:

1. ensure that Solco has in place a structured and effective approach to risk management, taking into account the business environment in which Solco operates and the Company's assessed level of risk tolerance;
2. ensure that Solco establishes a culture that encourages risk identification, assessment and management;
3. ensure that Solco complies with all relevant laws, regulations and contractual obligations and appropriate recognition is given to Solco's social and community obligations;
4. ensures the health and safety of all employees, customers, visitors to the Company's sites and others who may be affected by the Company's operations;
5. ensures that Solco has the capacity (both technical and financial) to meet contracted requirements on time and within budget
6. ensure that effective monitoring and regular reporting of risk, under the new risk management program is conducted.

SCOPE

This policy sets out the broad principles, responsibilities and practices that are used to manage Solco risk exposure and the risk management systems and internal controls that Solco uses to respond to those risks.

RISK STRATEGY AND RISK TOLERANCE

Risk is an inherent part of a company's operations. The exposure to, and tolerance to risk differs across Solco's operations and the Board recognises that its level of risk tolerance must be set at a level that encourages entrepreneurship and innovative corporate development. However, Solco is also committed to building a sound foundation of quality control systems and a culture that identifies and manages the risks associated with the level of risk tolerance set by the Board.

1. Products

Risk tolerance is currently set at a level to ensure that the company is able to respond to a changing market conditions and ensure that continuity of supply for its solar power and pumping solutions, whilst ensuring the ability and incentive to identify, test and secure new, low cost, technology products is not compromised.

Subject to the availability of working capital, the Board is committed to providing sufficient resources to allow an innovative product identification and research and development programme. Each year, the Board agrees to allocate part of the Company's resources to improving existing products and assessing new opportunities. Risk tolerance is set at a medium level to ensure that resources are used effectively in these areas and in line with the Company's strategy.

2. Projects

Solco has a demonstrated capability to manage water and solar power infrastructure projects in Australia and aims to expand this part of the business. Solco has recruited dedicated staff to research and identify projects with commercial and industrial clients. Solco will take a low risk approach to setting project assessment criteria and ensuring that the ongoing profitability from projects is maintained and that contractual arrangements with customers are sufficiently clear and robust.

Where Solco contributes to the funding of these projects it will ensure that associated funding risks are transferred to other parties where possible.

RISK MANAGEMENT FRAMEWORK

The Company has completed a strategic risk assessment to formally identify, collate and prioritise material business risks and has adopted a framework for risk management that covers the following areas:

1. Ongoing assessment of Solco's tolerance to risk;
2. Material risk identification;
3. Material risk assessment;
4. Management of material risks;
5. Establishing and maintaining a material risk register;
6. Regular reporting on mitigation strategies and updates on the Solco's risk profile.

Solco maintains a number of policies and procedures which are designed to manage specific business risks. These include:

1. Code of Conduct;
2. Audit and Risk Management Committee Charter;
3. Occupational Health and Safety framework;
4. Policy on ASX Disclosure;
5. Policy on trading in the Solco's securities;
6. Management of insurance programs to acquire appropriate coverage at optimum premium levels;
7. Regular budgeting and forecasting;
8. Maintenance of internal control systems in order to provide management with accurate, timely and reliable operating and financial information;
9. Delegation of authority framework;
10. Procedures to manage environmental obligations.

Solco recognises that risk management is an ongoing process that requires the Board and executive to provide a framework that encourages regular and timely reporting on the Company's risk profile and mitigation strategies that are in place and allows these changes to be identified and managed in a timely fashion. To this extent, the Board reviews risk on at least a quarterly basis, or on an as needs basis as and when material risks arise between scheduled meetings.

ROLES AND RESPONSIBILITIES

1. Board of Directors

The Board is ultimately responsible for overseeing the establishment and implementation of effective risk management systems and the monitoring of internal controls and compliance.

2. Audit and Risk Management Committee

The Audit and Risk Management Committee, on behalf of the Board, reviews the effectiveness of the Solco's risk management systems, including without limitation, reviewing and updating the company's risk profile. The Committee will at least annually review the implementation of the Solco's risk management policy and re- assess the risk management framework

3. Executive

TThe Managing Director (or most senior executive officer), with the support of the executive, is responsible for the implementation of risk management systems and ongoing management of risk on a day to day basis. It is management's responsibility to assess risk and where appropriate, devise strategies to eliminate, mitigate or transfer the risk. Where such strategies are required in relation to material risks, regard will be had to finding the most cost effective way to reduce those risks to a level acceptable within this policy. The executive is also responsible for ensuring that material risksare incorporated into Solco's strategic and project plans.

4. Employees

It is the responsibility of all employees and contractors to ensure the company complies as appropriate with its legal, regulatory, contractual and compliance obligations and to take appropriate action as required to identify, manage and report on risks within the individual staff member's area or responsibility.

Where deemed relevant, Solco may engage specialists to assist it to implement appropriate risk management practices within its business.

Appendix I	Table of contents	Appendix K