Annual Report 2011 - Hysan Development Company Limited

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Internal Controls and Risk Management Currently, the key features of our system of internal controls include: – Strategic and business planning: each business unit produces and obtains Board approval on a business plan each year, against which its performance is regularly monitored. Targets for a wide variety of key performance indicators are set. There is a Schedule of Matters Reserved for the Full Board to cover all major policies and directions of the Group. (See the separate Corporate Governance Report for details) – Investment appraisal: capital projects are reviewed in detail and approved by the Chief Executive Officer, or the Board where appropriate, in accordance with delegated authority limits. – Financial monitoring: profitability, cash flow and capital expenditure are closely monitored and key financial information is reported to the Board on a regular basis, including explanations of variances between actual and budgeted performance. – Systems of control procedures and delegated authorities: there are clearly defined guidelines and approval limits for capital and operating expenditure and other key business transactions and decisions. Risk Assessment Specify Corporate Objectives 2012 focus: further Refine corporate objectives based on changes potentially impacting the business enhancement of risk identification and assessment process Identify and analyse risks to achievement of corporate objectives Monitoring • Internal audit function • Oversight by Board and Audit Committee • 2012 focus: more frequent and structured reporting to Audit Committee and Board Determine impact of such identified risks on the achievement of corporate objectives Continuous Improvement Hysan’s internal controls system: • is designed to ensure corporate objectives are achieved • has five components that work together Information and Communication Implement and operate information and communication to support internal controls Determine how each of the other internal controls components, both separately and together, mitigate such risks Control Environment • Strong tradition of emphasising good corporate governance • Human resources policies Control Activities • Documented key control policies and processes • Annual review update of risk registers by department heads Determine Effectiveness Hysan’s internal controls model is based on that set down by COSO 46 Hysan Annual Report 2011
Our Approach to Risk Management We maintain a simple and practical approach to risk management. Given the size and nature of our business, we do not have a separate risk management function. Instead, we seek to have risk management features embedded in our operations. The following summarizes our process to identify, evaluate, and manage the risks faced by the Group. Overview Methodology: We capture and report risk in a consistent manner across the Group by way of “risk registers”, enabling management to assess the significance of risks by considering the relationship between the likelihood and consequence of their occurrence. We monitor and report risk as appropriate on both “Inherent” and “Residual” risk bases, the latter reflecting how management has reduced risks through appropriate controls and mitigating activities. Annual assessments: department heads review and update the relevant risk registers once a year, providing assurances that controls are both embedded and effective within the business. Potential weaknesses and action items are regularly monitored by the management team. Internal audit: responsible for reviewing and testing key business processes and controls in accordance with its audit plan, including following up the implementation of management actions and reporting any overdue actions to the Audit Committee. The Head of Internal Audit reports to the Chief Executive Officer and has direct access to the Audit Committee Chairman. Way Forward We recognise that the strengthening of internal controls is a continuing process. We shall continually review our business processes and control activities accordingly. During 2012, our focus will centre around the following directions: • Risk Identification and Assessment • Control Activities • More Structured and Frequent Reporting to Audit Committee We shall further refine the risk registers in phases by adopting a more risk-based approach, with clearer description of specific yearon-year risks. Training sessions and workshops will be provided to department heads, with guidance, facilitation, and discussions throughout the process. We shall continue to enhance our Control Activities by refining our documented policies and procedures, including greater use of automation (information processing). There will be a greater use of performance indicators, also facilitating top-level reviews. In addition to meetings scheduled primarily for reviewing annual and interim results, an additional Audit Committee meeting will be held to review and monitor risk management activities. Management will report on progress in action plans against our principal risks. Strategy in Action Corporate Governance Financial Statements and Valuation Hysan Annual Report 2011 47
Page 1 and 2: A BETTER FUTURE TODAY Annual Report
Page 3 and 4: A BETTER FUTURE TODAY 2011 was a pr
Page 6: Asset enhancements: Lee Theatre are
Page 10: Hysan Place at the northern gateway
Page 14: An energetic and unique district in
Page 17 and 18: Overview 16 18 20 Who We Are 16 16
Page 19 and 20: OUR VALUES We foster the highest bu
Page 21 and 22: NON-FINANCIAL PERFORMANCE 789 700 4
Page 23 and 24: Further Transformation of Hysan’s
Page 25 and 26: 24 28 30 45 48 Our Marketplace and
Page 27 and 28: 6% 4% Real Gross Domestic Product*
Page 29 and 30: Index 140 130 120 110 100 90 80 Q1
Page 31 and 32: THE LEE GARDENS 33 Hysan Avenue, Ca
Page 33 and 34: Recurring Underlying Profit, arrive
Page 35 and 36: Overview Our office has a balanced
Page 37 and 38: Overview Residential Sector Our res
Page 39 and 40: Financial Review A review of the Gr
Page 41 and 42: Cash Flows Cash flow of the Group d
Page 43 and 44: How are they measured Interest expe
Page 45 and 46: The following graph shows the perce
Page 47: Internal Controls and Risk Manageme
Page 51 and 52: Talent Management Our people manage
Page 53 and 54: 52 56 73 81 89 Board of Directors a
Page 55 and 56: Non-executive Deputy Chairman (S) S
Page 57 and 58: Overview Senior management team (fr
Page 59 and 60: Exceeded Code Provisions ✓ ✓
Page 61 and 62: Governance Framework The Group oper
Page 63 and 64: Board and Management At the core of
Page 65 and 66: Board Effectiveness Skills and Bala
Page 67 and 68: Independent Advice The Board recogn
Page 69 and 70: Audit Committee Composition and Mee
Page 71 and 72: Shareholders The Board and manageme
Page 73 and 74: Shareholder Rights Self-funded Prog
Page 75 and 76: Directors’ Report The Directors s
Page 77 and 78: THE BOARD continued According to Ar
Page 79 and 80: CONTINUING CONNECTED TRANSACTIONS c
Page 81 and 82: CONTINUING CONNECTED TRANSACTIONS c
Page 83 and 84: Directors’ Remuneration and Inter
Page 85 and 86: DIRECTOR COMPENSATION continued Lon
Page 87 and 88: DIRECTOR COMPENSATION continued Lon
Page 89 and 90: DIRECTORS’ INTERESTS IN SHARES As
Page 91 and 92: Audit Committee Report The Audit Co
Page 93 and 94: Overview 4 Financial Statements and
Page 95 and 96: Independent Auditor’s Report Over
Page 97 and 98: Consolidated Statement of Comprehen
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Statement of Financial Position At
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Attributable to owners of the Compa
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2011 2010 Note HK$ million HK$ mill
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4. Investment Properties Investment
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7. FINANCIAL INSTRUMENTS continued
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13. TAXATION continued Deferred tax
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2. APPLICATION OF NEW AND REVISED H
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5. SEGMENT INFORMATION continued Se
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6. INVESTMENT INCOME Investment inc
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9. TAXATION continued The taxation
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12. DIRECTORS’ EMOLUMENTS continu
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12. DIRECTORS’ EMOLUMENTS continu
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15. EARNINGS PER SHARE (a) Basic an
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17. PROPERTY, PLANT AND EQUIPMENT L
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18. Investments in Subsidiaries Inv
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19. Investments in Associates conti
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22. Equity Investments/Available-fo
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23. Other Financial Assets/Liabilit
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27. TIME DEPOSITS/CASH AND BANK BAL
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30. BORROWINGS continued (c) Fixed
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32. SHARE CAPITAL Number of shares
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36. CONTINGENT LIABILITIES At the e
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39. RELATED PARTY TRANSACTIONS AND
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40. SHARE-BASED PAYMENT TRANSACTION
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1. Financial Risk Management Object
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3. FAIR VALUE continued The followi
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4. CAPITAL RISK MANAGEMENT The Grou
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At 31 December As restated As resta
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Schedule of Principal Properties At
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Shareholding Analysis Share Capital
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It is not just our quality assets t
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Annual Report 2011 - Hysan Development Company Limited

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