Grant Thornton Hong Kong would like to present the results of our fifth Corporate Governance Review. In 2014, the Hong Kong Exchange and Clearing Limited proposed certain changes to the Code Amendments regarding risk management and internal control of publicly listed companies. These companies with financial yearsstarting from 1 January 2016 are required to disclose howthey implement these changes. This year, our Corporate Governance Review continue to focus on how the companies have responded to these changes, and also try to investigate any correlation between their disclosure practice and financial performance.
This year, we reviewed 475 Hang Seng Composite Index companies listed on the Hong Kong Stock Exchange. We saw a steady increase in the level of disclosure on Code compliance, internal control and risk management. There is an indication of the companies increasing their focuses on risk management. Within the HSCI group of companies, 26% of them established a separate risk committee to manage risk while last year’s figure was just about 17%.
Within the study, we also attempted to examine whether there was any kind of correlation between the companies’ financial performance and their disclosure practice. Interestingly enough, it was observed that the level of disclosure and the financial performance appeared to be positively correlated with each other.
Cyber security has also been a topic of much discussion and concern this year. Data breach, phishing, ransomware and mobile application vulnerability are all affecting how companies conduct their business on the Internet. Same as the last few years, we also examined the level of information security awareness of those publicly listed companies.
Environmental, Social and Governance (ESG) reporting is also required to complement financial reporting for listed companies with financial years starting from 1 January 2016 onwards. We found that more and more companies are aware of the importance of having a well-designed ESG strategies to be compliant. The “comply-or-explain” approach is an effective tool to encourage ESG reporting since it enables listed companies to take a revolutionary approach to build their competencies and devise their own ESG strategies.
We hope that you will find this year’s review of value in helping you more effectively formulate your risk management and internal control strategies. Lastly, we would be delighted to hear your thoughts and comments.
Download2016 Hong Kong Corporate Governance Review
