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Risk Management
In accordance with the Group’s development strategy, CITIC Limited has established a risk management system
covering all business segments to identify, assess and manage various risks in the Group’s business activities.
The risk management system of CITIC Limited is established along the core concepts of risk management and
internal control released by the Committee of Sponsoring Organizations of the Treadway Commission (COSO),
and the Basic Standard for Enterprise Internal Control jointly issued by five ministries and commissions (Ministry
of Finance, CSRC, National Audit Office, CBRC and CIRC) in 2008, as well as relevant guidelines and governmental
policies.
The risk management system of CITIC Limited comprises “Four Levels” and “Three Lines of Defence” based on
the corporate governance structure. The “Four Levels” are the (i) board of directors, (ii) management and several
committees, (iii) risk management functions of CITIC Limited, and (iv) member companies. The “Three Lines of
Defence” are the (i) first line of defence comprised by business units of each level of CITIC Limited, (ii) second
line of defence comprised by the risk management functions of each level of CITIC Limited, and (iii) third line of
defence comprised by the internal audit departments or functions of each level of CITIC Limited.
Financial Risk
Governance structure
As a sub-committee of the Executive Committee, the Asset and Liability Management Committee (“ALCO”) has
been established to monitor financial risks of the Group in accordance with the relevant treasury and financial
risk management policies (“management policies”). Relevant departments of CITIC Limited are responsible
for communicating and implementing the decisions of ALCO, monitoring the adherence of the management
policies and preparing relevant reports. All member companies have the responsibility for identifying and
effectively managing their financial risk positions and reporting to the corresponding departments of CITIC
Limited on a timely basis, in accordance with the overall risk framework under the management policies and
within the scope of authorisation.
Based on the annual budget, ALCO shall review CITIC Limited’s financing plan and instruments, oversee fund
management and cash flow positions, and manage risks relating to counterparties, interest rates, currencies,
commodities, commitments and contingent liabilities, and is responsible for formulating hedging policy and
approving the use of new risk management tools.
Asset and liability management
One of the main functions of ALCO is asset and liability management. CITIC Limited’s sources of funds for
different businesses include long-term and short-term debt and equity, of which ordinary shares, preferred
shares and perpetual securities are the alternative forms of equity financing instruments. CITIC Limited manages
its capital structure to finance its overall operations and growth by using different sources of funds. The type of
funding is targeted to match the characteristics of our underlying business.