Accountability & Audit
Risk Management Framework
Our risk governance structure is guided by the “Three Lines Model”. As the first line functions, risk owners of all corporate departments and business units regularly conduct risk and control assessments to evaluate the implications of identified risks and the adequacy and effectiveness of controls in place to mitigate these risks.
As the second line, specific functions are established to effectuate risk management and ensure the first line is functioning properly. The responsibilities of these functions include but are not limited to financial controls, risk management, legal and compliance, cost and quality. Under its approved terms of reference, the Enterprise Risk Management (“ERM”) Working Group (comprising our CEO as Chair and unit heads from all business units and support divisions) oversees risk management activities across all functions and makes a robust assessment of the principal risks and uncertainties that the Company is exposed to.
As the third line, the Internal Audit Department plays a crucial role in assessing the effectiveness of the risk management system, reports regularly to the Audit Committee on key findings, and makes recommendations for improving and tracking the implementation of such measures.
The Board and the Audit Committee reviewed the Company's top and emerging risks and conducted an annual review of the effectiveness of the ERM framework. Taking into consideration the principal risks and mitigation actions, the Board believes the Company has the ability to adequately respond to changes to our business and the external environment.
The Company takes proactive measures to identify, evaluate, and manage significant risks arising from our business and the constantly changing business environment at different levels within the organization. This integrated approach combines a top-down strategic view with complementary bottom-up operational processes, as illustrated below:
A list of principal risks (including ESG-relate risks), covering both strategic and operational risks as identified by our risk assessment process, is complied with reference to their residual risk impact and likelihood (after considering mitigation actions and controls). Action plans are developed, and risk ownership is assigned for each principal risk. The risk owners coordinate the mitigation actions to ensure the proper implementation of these action plans. They are also required to continuously monitor, evaluate, and report on risks for which they bear responsibility. Mitigation controls are subject to internal audit review and testing.
Through this integrated top-down and bottom-up risk review process, which enables the identification and prioritization of risks throughout the Company, we maintain effective lines of communication to ensure timely escalation of potential risks and the initiation of mitigation actions to manage them.
Internal Control Framework
Specifically, our internal control system monitors the Company's overall financial position and ensures it is accurately reflected in our financial and management reporting while safeguarding our assets against major losses and misappropriation; providing reasonable assurance against material fraud and error; and efficiently identifying and correcting non-compliance.
To ensure efficient and effective operations in our expanding business units and functions, relevant internal control policies and procedures, committees, and working groups are in place to achieve, monitor, and enforce internal controls. These policies and procedures are periodically reviewed and updated when necessary. All employees are made aware of the policies and procedures, with comprehensive staff communications and training programs in place to ensure understanding and awareness.
The Audit Committee supports the Board to oversee the effectiveness of internal controls, while management is responsible for designing, implementing, and maintaining an effective internal control system with reference to the COSO principles. In particular, appropriate policies and procedures governing the activities of the Executive Committee, Board Members, executives and senior staff, such as delegation of authority, approval of annual and mid-year budgets for all capital, revenue, and expenditure items, etc., have been put in place. Management also continually reviews, updates, and refines the internal control system to anticipate future challenges
Our Internal Audit Department is independent of our operations and accounting functions. The Deputy Director (Head of Corporate Audit) reports directly to the Audit Committee.
A risk-based internal audit program is approved by the Audit Committee each year. Based on the audit program, the Internal Auditor performs an assessment of risks and testing of controls across all business and supports units of the Company in order to provide reasonable assurance that adequate controls and governance are in effect. In line with the Company’s zero tolerance for fraud and bribery, the Internal Auditor is responsible for the conduct of relevant investigations should fraud or irregularities be uncovered or suspected.
The Audit Committee meets quarterly to discuss internal audit issues with the Internal Auditor and to discuss financial and internal control matters with the External Auditor. The Audit Committee holds four direct discussions with the External Auditor in the absence of management every year. The Audit Committees reports any key issues arising from these meetings to the Board.