CITY DEVELOPMENTS LIMITED ANNUAL REPORT 2021 CORPORATE GOVERNANCE 46 47 Remuneration of Directors’ Immediate Family Members for FY 2021 (Provision 8.2) There are no other emp l oyees of the Company who are substant ial sha reho l de r s o f the Company o r immed i a t e f ami l y membe r s o f a Director or of the Group CEO, and whose remuneration exceeds $100,000 during the year. Share Option Schemes (Provision 8.3) Whi lst the Company currently does not have a share option or long-term incentive scheme in place, it is open to establishing such a scheme to promote alignment towards long-term objectives. When such long-term incentive scheme is established in due course with the assistance of external advisers, the Company will consider the inclusion of claw-back provisions within the scheme whichwould give the right to the Company to reclaim incentive components from participants in exceptional circumstances of misstatement of financial results or of misconduct resulting in financial loss to the Company. ACCOUNTABILITY AND AUDIT Principle 9: Risk Management and Internal Controls The Company maintains an adequate and e f fec t i ve sys t em o f i nt e rna l controls (including financial, operational, compliance and IT controls) and risk management systems to safeguard s t akeho l de r s ’ i n t e r e s t s and t he Group’s assets. The Board has overall responsibility for the governance of risk, including determining the risk strategy, risk appetite and risk limits, as well as the risk policies. Oversight of Risk Management (Provision 9.1) The ARC assists the Board in carrying out the Board’s responsibility of overseeing the Company ’ s r i sk management framework and policies for the Group and ensuring that Management maintains a sound system of internal controls and risk management. CORPORATE GOVERNANCE Th e Comp a ny ’ s En t e r p r i s e R i s k Management (“ERM”) Framework is implemented under the supervision of the Risk Management Committee (“RMC”), chaired by the Group CEO and comprising the Senior Management team, key functional leaders and heads of business divisions. The ARC receives regular reports on the risk management activities of the Company and progress on the ERM framework. Key risks including Tier 1 risks are reviewed and refreshed to ensure that relevant emerging risks are being considered and included for proper assessment, monitoring and reporting as appropriate. Based on the reports of the RMC, the ARC is satisfied that significant risks identified are assessed, managed and monitored adequately within the Group’s ERM Framework. The ERM Framework includes a periodic review of the risk appetite statements and risk appetite and tolerance limits for these key risks, which statements and limits are considered and endorsed by the ARC and the Board. Having regard to the risks to which the Group is exposed, the likelihood of such risks occurring and the risk tolerance accepted by the Group, an internal controls structure has been designed and put in place by the Management to provide reasonable assurance against material financial misstatements, for the safeguarding of assets, for the maintenance of proper account ing records, on the reliability, relevance and integrity of the information (including financial information). The Group’s approach to riskmanagement is set out in the ‘Risk Management’ section on pages 57 to 62 of this AR. As part of the internal and external audit programmes, the internal and external auditors report to the ARC any audit findings relating to internal controls, and the ARC reviews the adequacy of the actions taken by Management to address the recommendations of the internal and external auditors. The ARC also receives regular reports, briefings and updates from the RMC, the Chief Technology Officer, the internal and external auditors and the Management team during its meetings to help the ARC to review the adequacy and effectiveness of the Group’s material internal controls that address the Group’s f inancial , operational, compliance and IT controls. Assurances from the Key Management Personnel (Provision 9.2) In relation to Provision 9.2 of the 2018 Code and Listing Rule 1207(10), the ARC received: (i) written assurance from the Group CEO and the Group CFO that the Group’s financial records have been properly maintained and the financial statements give a true and fai r view of the Group’s operations and finances; and (ii) written assurance from the KMP that the Group’s risk management and internal controls systems in place were adequate and effective to address the principal risks (including financial, operational, compliance and IT risks) within the current scope of the Group’s business operations for FY 2021. The above wr i t ten assurances on the Group’s internal controls and risk management systems are provided half yearly and are supported by similar written assurances provided by the heads of the Group’s key operating divisions/ functions and key operating subsidiaries. T h e p r o c e s s o f r e v i ew i n g a n d strengthening the Group’s control environment is an evolving process. When controls should be enhanced, the Board and Management take action to rectify and strengthen the internal controls and risk management systems. The Board and Management will continue to devote resources and expertise towards improving the internal policies and procedures to maintain a high level of governance and internal controls. However, the Board also notes that no system of internal controls and risk management can provide absolute assurance against poor judgement in decision-making, human errors, losses, fraud and other irregularities. Based on the work performed by Internal Auditors, the external auditors and the periodic reports from the RMC and Management, as well as the written assurances from the KMP to support the opinion to be given by the ARC and the Board, the Board with the concurrence of the ARC, is of the opinion that the internal controls and risk management systems in place as at 31 December 2021 are adequate and effective to address principal risks (including financial, operational, compliance and IT risks) within the current scope of the Group’s business operations. Principle 10: Audit & Risk Committee Composition of the ARC (Provisions 10.2 and 10.3) The ARC comprises three NEDs, all of whom including the chairman of the ARC are independent. During the year, Ms Lim Yin Nee Jenny ceased as the chairman of the ARC following her resignation from the Board on 3 May 2021. Mr Lee Jee Cheng Philip and Mrs Carol Fong were appointed the chairman and member of the ARC, respectively, on 3 May 2021. The chairman of the ARC, Mr Lee, possesses the relevant audi t , account ing and related financial management and risk management expertise and experience, whilst the remaining members of the ARC, Mr Chong Yoon Chou and Mrs Fong each has financial and risk management experience as wel l as experience in investment banking and the financial markets respectively. Wi th the current composi t ion, the ARC is of the opinion that it has the relevant accounting and related financial management expertise and experience to discharge its functions within its written terms of reference which has been approved by the Board. Based on the terms of reference of the ARC, a former partner or director of the Company’s existing auditing firm or auditing corporation should not act as a member of the ARC: (a) within a period of two years commencing on the date of his or her ceasing to be a partner of the auditing firm or director of the auditing corporation; and in any case, (b) for as long as he or she has any financial interest in the auditing firm or auditing corporation. Mr Lee ceased as a partner of KPMG LLP (“KPMG”), the Company’s existing auditors, in September 2018 and does not have any financial interest in KPMG. The remaining ARC members do not have any relationship with KPMG. Powers and Duties of the ARC (Provision 10.1) The ARC is authorised by the Board to reviewor investigate anymatters it deems appropriate within its terms of reference and has direct and unrestricted access to the external and internal auditors. It may invite any Director, Management, officer or employee of the Company to attend its meetings. It is also authorised to engage any firmof accountants, lawyers or other professionals as it sees fit to provide independent counsel and advice to assist in the reviewor investigation on suchmatters within its terms of reference as it deems appropriate at the Company’s expense. The principal responsibility of the ARC is to assist the Board in maintaining a high standard of corporate governance, particularly by providing an independent review of the adequacy and effectiveness of the Group’s financial reporting process ( including reviewing the accounting policies and practices of the Company and the Group on a consolidated basis) and key internal controls, including financial, operational , compl iance, IT and risk management controls. Other duties within its written terms of reference include: • to reviewwithManagement and, where appropriate, with the external auditors the significant financial reporting issues and judgements so as to ensure the integrity of the half yearly and full year financial statements of the Group to be issued by the Company before their submission to the Board and any other announcements relating to the Group’s financial performance; • to review annual ly the scope and results of the external audit and the independence and objectivity of the external auditors, and in this regard to also review the nature and extent of any non-audit services provided by the external auditors to the Group; • to make recommendations to the Board on the nominat ion for the appointment, re-appointment and removal of external auditors, and to approve the remuneration and terms of engagement of the external auditors; • to assess the role and effectiveness of the internal audit (“IA”) function in the overall context of the Group’s internal controls and risk management systems, and to consider the results of their review and evaluation of the Group’s internal controls, including financial, operational, compliance and IT controls, and risk management policies and systems; • to approve the appointment, resignation or dismissal of the Head of IA; • t o r e v i ew i n t e r e s t e d p e r s o n transactions falling within the scope of Chapter 9 of the Listing Manual; and • to oversee the establ ishment and operation of the Company’s whistleblowing policy and arrangements put in place for raising concerns about possible improprieties on matters of financial reporting or any other matters.
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