Risk management

In line with international standards and best practices, CLP defines “risk” as the effect of uncertainty on objectives. The effect can be positive, negative, or both, and can result in opportunities and threats. CLP aims to identify risks early so the threats can be understood, managed, mitigated, transferred or avoided while the opportunities can be enhanced and captured where appropriate. This demands a proactive approach and an effective Group-wide risk management framework.

GRI reference: 2-23, 205-1

CLP’s risk management framework comprises four key elements:

• Risk management philosophy;

• Risk appetite;

• Risk governance structure; and

• Risk management process.

CLP’s overall risk management process is overseen by the Board through the Audit & Risk Committee. There is strong recognition that risk management is the responsibility of everyone within the Group and cultivating and embedding risk awareness into the organisational culture is critical for the successful implementation of CLP’s risk management framework. Consequently, risk management is integrated into all business and decision-making processes, including strategy formulation, business development, business planning, capital allocation, investment decisions, internal control and day-to-day operations.

CLP’s Risk Management Process

CLP reviews how ESG issues are impacting the business and its stakeholders through an annual materiality assessment. The review process uncovers emerging ESG risks and opportunities for considerations in the risk review and business planning processes. Below is a list of selected top tier ESG risks:

• Climate change – physical and transition risks

• Major HSE incidents 

• COVID-19 outbreak

• Procurement and supply chain capabilities risks

• Cyber security attack

• Regulatory changes

• Tariff adjustment challenge – Hong Kong 

• Physical security breach

• Gas supply shortage

• Major failure – generation assets

CLP's risk management objectives are two-tiered:

• Strategic
  At a strategic level, CLP focuses on identifying and managing the material financial and non-financial risks associated with pursuing its strategic and business objectives. In pursuing growth and transformational opportunities, CLP aims to optimise risk and return decisions as defined and quantified through a diligent and independent review and challenge process.

• Operational
  At an operational level, CLP aims to identify, analyse, evaluate and mitigate operational hazards and threats while enhancing and capturing opportunities for operational improvement where appropriate. This is done to create a safe, healthy, efficient and environmentally friendly workplace for its employees and contractors. Other considerations include ensuring public safety and health, minimising environmental impact, as well as securing asset integrity and adequate insurance.