Risk management

GRI reference: 2-23, 205-1

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 threats can be understood, managed, mitigated, transferred or avoided while opportunities can be captured where appropriate. This demands a proactive approach and an effective Group-wide risk management framework.

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 is integrated into its business and decision-making processes across the organisation, 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 to ensure a holistic view of both risks and opportunities. The Board oversees this process through the Audit & Risk Committee.

Underpinned by its 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 process section. 

Furthermore, CLP's risk management process takes into account the identified material topics which are identified, revalidated and updated through the three-year double materiality assessments cycle. CLP undertook a comprehensive assessment in 2024 to identify the megatrends, material topics and sustainability-related risks and opportunities 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 other factors. It guides CLP in managing these topics.

CLP's risk management process

CLP reviews how sustainability topics 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 identified: