Annual Report 2012

5 MANAGEMENT DISCUSSION AND ANALYSISConsistently optimising evaluation over operational risk management. The Bank guided tier-one branches to promote the application ofoperational risk management tools and consolidate fundamental management in order to achieve steady improvements in both internal controland operational risk management.Anti-money LaunderingIn 2012, the Bank continued to strengthen the building of anti-money laundering (AML) management policies and systems. By optimising therules for filtering suspicious transactions and customer risk level classification, the Bank improved the reporting data quality of AML. In addition,the Bank carried out reinforced trainings and information-sharing on AML, and conducted transformation research on AML, which helped todefine the method and process of AML, which are more closely related to daily operation and management.Reputation Risk ManagementReputation risk is the risk of negative impacts or damages to the banks’ overall image, reputation and brand value, arising when commercialbanks’ operational, managerial and other behaviours or contingencies are reported negatively by the media.In 2012, the Bank further emphasized on reputation risk management, enhanced the reputation risk awareness among all levels of managementand staff, clarified duties and requirements, and improved accountability management. The Bank launched the new generation public sentimentmonitoring system, and set up the quick response mechanism for public sentiment both vertically and horizontally, to improve the reportingand response efficiency for public sentiment. In addition, the Bank amended its reputation risk management measures on the Group level andenhanced reputation risk controls over its subsidiaries and overseas entities. The Bank made emergency planning for reputation risk matters,clarified working procedures, and organised emergency drills in order to improve the reputation risk management capability.Consolidated ManagementThe Bank conducts consolidated management over its subsidiaries, and imposes comprehensive and continuous management over the Group’scapital, finance and risks based on the single legal person, to identify, measure, monitor and assess the overall risk profile of the Group. In 2012,the Bank strengthened overall planning of consolidated management, optimised consolidated management system, and orderly conducted thefollow-up consolidated management targeted at the weak links.Reinforcing the Group’s large risk exposure management. The Bank optimised the industry limit management scheme by incorporating thesubsidiaries into the industry limit management scope. The Bank promoted the unified credit management on the Group level to preventexcessive concentration of risks.Conducting monitoring and supervision of consolidated management. The Bank organised and conducted examinations on consolidated risks,and timely found out and improved internal control deficiencies. The Bank actively cooperated with the CBRC to conduct on-site inspection ofconnected businesses of the shadow bank as well as the related audit checks by the National Audit Office to promote the Group’s complianceoperation.Enhancing risk management in other fields on the Group level. The Bank reinforced liquidity risk management on the Group level, andincorporated the liquidity risk profile of its subsidiaries into the Bank’s liquidity risk monitoring report. The Bank standardised the prevention workrelated to the Group’s legal risks, and made emergency response plans on material risks and contingencies in legal category. In addition, theBank enhanced the data management of the Group’s internal transactions, with improved consolidated management of internal transactions.Promoting the building of consolidated management information system in an active manner. The Bank initially established an informationreporting and submission platform of the consolidated management in compliance with both the internal and external management requirements.The Bank integrated the financial statements and the underlying data of its subsidiaries, and clarified the information reporting and submissionmechanism for consolidated management, to improve the standardisation and accuracy.5.3.6 Internal AuditIn order to promote the establishment of a sound and effective risk management mechanism, internal control system and corporate governanceprocedures, the Bank’s internal audit department evaluates the effectiveness of the internal controls and risk management, the effect ofcorporate governance procedures, the efficiency of business operations, and the economic responsibilities of key managers, and puts forwardsuggestions for improvement on the basis of its internal audit. The internal audit department works in a relatively independent manner, and ismanaged vertically. It is responsible to and reports to the Board and the audit committee, as well as reports to the board of supervisors andsenior management. There is an audit department at the head office, and 39 audit offices are at tier-one branches, responsible for managing andconducting audit projects.In 2012, the internal audit department earnestly conducted various audit projects and performed its internal audit duties, with further improvedaudit quality and performance capability.50 China Construction Bank Corporation annual report 2012