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 that threats can be understood, managed, mitigated, transferred or avoided, and opportunities can be enhanced and captured where appropriate. This requires 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:

1. Risk management philosophy;
2. Risk appetite;
3. Risk governance structure; and
4. Risk management process.

Based on these four key elements, CLP’s risk management process forms an integral part of its business and decision-making processes, including strategy formulation, business development, business planning, capital allocation, investment decisions, internal control and day-to-day operations. This is achieved through various means including communication and consultation, monitoring and review, as well as recording and reporting. The Board oversees this process through the Audit & Risk Committee.

Underpinned by a robust risk management process, CLP maintains a vigilant approach in monitoring the evolving external environment and megatrends, which may have significant implications for CLP’s business and markets. For more detailed information, please refer to the Materiality assessment section. 

Furthermore, CLP's risk management process takes into account the identified material topics which are determined through comprehensive annual materiality assessments. The assessment enables CLP to assess and respond to the sustainability matters that are most likely to impact CLP’s business and stakeholders. In addition, Climate Vision 2050 is also an integral part of CLP's broader climate strategy, which covers key considerations around scenario analysis and long-term climate risks and opportunities identification, among others. It guides CLP in managing these issues.

CLP’s Risk Management Process

CLP reviews how sustainability issues are impacting the business and its stakeholders through an annual materiality assessment process, which uncovers emerging sustainability risks and opportunities for consideration in the risk review and business planning processes. Below is a list of selected top tier risks with sustainability drivers identified: