-Most Senior Person Responsible for Risk Management and Reporting Process

The Board has established a Risk Control Committee, and has formulated, implemented and monitored risk management and internal control systems with the assistance of the Risk Control Committee. We integrate ESG risks into the current risk management system, and identify and manage ESG risks related to the Group’s business according to the risk management process. The Risk Control Committee regularly reviews the risk-related matters of the Group, including ESG risks, and provides advice to the Board.

Our internal control system fully observes the requirements of the COSO risk management framework and the guidelines of the Hong Kong Institute of Certified Public Accountants on risk management, draws on the internal control model of peer companies, and takes into account the actual situation and business characteristics of the Group to formulate an effective monitoring system. The governance structure is as follows:

  1. The Risk Control Committee and its subordinate working groups are responsible for taking the lead in risk identification, and cooperating with relevant departments at the management level to follow up

  2. Carry out risk analysis and select areas with higher risk

  3. The department in the corresponding field describes the risk

  4. Summarize risks in various fields and prepare risk reports

  5. Risk reports are submitted to the Board Risk Control Committee for review. After the review, the reports are then submitted to the Board of Directors meeting.

-Non-executive Directors to Receive Risk Management Training

All directors have participated in risk management training and continuously review relevant guidance materials on integrity and ESG legal developments provided and published by the Hong Kong Stock Exchange, the Hong Kong Institute of Certified Public Accountants, and the Hong Kong Accounting and Financial Reporting Council. These materials include:

  1. In January 2024, forward to all directors the summary of the Hong Kong Exchanges and Clearing Limited's (HKEX) review of listed companies' 2022 financial year annual reports.

  2. In June 2023, forward to all directors：

     ①The HKEX's "Regulatory Newsletter for Listed Issuers" for June 2023

     ②The Independent Commission Against Corruption's (ICAC) "Practical Guide on Corruption Prevention System for Listed Companies"

  3. In October 2023, forward to all directors:

     ①The HKEX's "Regulatory Newsletter for Listed Issuers" for September 2023

     ②The Hong Kong Institute of Corporate Governance's "Directors' Duties and Legal Developments in ESG - What Directors of Hong Kong Companies Need to Know"

-Financial Incentives Tied to Risk Management Indicators

The “Annual Performance Contract for Management Members” signed between the company and the management includes a key initiative to “control financial business risks,” specifically setting targets for the proportion of public utility financing leases and the level of non-performing assets.

The company closely links financial incentives with risk management factors. The “Annual Performance Contract for Management Members” signed with the management includes key performance indicators (KPIs) for “controlling financial business risks” . These KPIs include:

  1. Target for the Proportion of Public Utility Financing Leases: Controlling the proportion of public utility financing lease business within the total investment portfolio to maintain it at a reasonable level, ensuring that the overall asset portfolio's risk remains manageable.

  2. Target for Non-Performing Asset Ratio: Setting clear annual targets for the non-performing asset ratio, requiring management to take effective measures to continuously improve asset quality and reduce the level of non-performing assets.

By integrating risk management indicators into the performance evaluation system, we ensure that the group's financial performance and operational robustness can meet expected targets, effectively protecting the interests of shareholders.

-Independence between Risk Management Functions and Business Lines

The group has set up an audit department with guaranteed independence in terms of its organization, staffing and work. When performing its duties, the audit department may inspect all business and meet relevant personnel without restrictions. To ensure the independence of financial operations and risk management, the group conducts separate evaluations of senior executives in charge of financial operations and risk management departments, based on metrics such as "Financial Sector Asset-Liability Ratio" and "Total Interest Liability of the Financial Sector." This approach aims to maintain transparency and fairness in the decision-making process.