Risk Management
Each day, every business faces numerous risks at many different levels, so primary responsibility for risk
management of each employee at CITIC Pacific is in his day-to-day activities. One of the essential elements of
corporate governance is to ensure that these risks are identified and appropriately controlled.
Many parts of this annual report refer directly or indirectly to various risks faced by our businesses, but in this
section key financial risks are addressed. Other non-financial risks, such as business, operational and other external
risks associated with CITIC Pacific’s businesses, are also briefly discussed later in this section.
Overall risk management starts with the board of directors. The board has established asset and liability
management, audit, executive, investment, nomination and remuneration committees whose activities play
important roles in the overall control of various risks faced by CITIC Pacific. For details on how various risks
are assessed and managed by these committees, please refer to the “Key control policies and measures” in the
Corporate Governance section on page 100 of this annual report.
Financial Risk
Governance structure
The asset and liability management committee (“ALCO”) was set up by the board to oversee and monitor the
financial risk exposures of CITIC Pacific. At each meeting, the board receives reports of the financial results and
the financial positions of CITIC Pacific, both current and projected. Written reports are provided to directors on all
businesses identical to those reviewed by management at executive committee meetings. ALCO’s major functions
are asset and liability management (“ALM”) and treasury risk management.
The group treasury department, headed by the group treasurer, is responsible for implementing the Treasury and
Financial Risk Management Policy (“treasury policy”, see Governance policy below), and communicating ALCO
decisions to operating units, monitoring adherence and preparing relevant management reports to be presented
to ALCO, the executive committee and the board.
All business units, whether they are subsidiaries, associates or joint ventures, are responsible for managing their
financial risk positions within the confines of the overall risk framework and specific delegations defined by ALCO.
They are responsible for identifying areas of risk and managing thereafter within their organisations and reporting
those risks to ALCO on a timely basis.
Listed subsidiaries including Dah Chong Hong and Daye Special Steel manage their financial and treasury affairs
within the framework of CITIC Pacific’s treasury policy.
Governance policy
The basic framework for financial risk management has been developed and is defined in the treasury policy
approved by ALCO. This treasury policy is subject to periodic review so as to incorporate the latest risk standards
in the market and/or business developments in CITIC Pacific.
The treasury policy sets out control requirements and ensures alignment and consistency in which the major
financial risks are dealt with, from identification, quantification and evaluation to final reporting to ALCO for its
decisions on both ALM and treasury risk management.
66 CITIC Pacific Annual Report 2013
Risk Management
Financial Risk Management
Asset and liability management
One of the main functions of ALCO is asset and liability management. CITIC Pacific’s investments in different
businesses are financed by a mixture of long-term debt, short-term debt and equity including perpetual capital
securities. CITIC Pacific 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.
Debt and leverage
Debt
As at 31 December 2013, total outstanding debt of CITIC Pacific Limited and its subsidiaries amounted to
HK$121,144 million. Total debt increased by HK$4.2 billion in 2013. Facilities totalling HK$34.5 billion were
established or renewed during the period (HK$18.9 billion by CITIC Pacific Limited and HK$15.6 billion by its
subsidiaries). The new facilities included US$500 million notes due in 2020 and HK$500 million notes due in 2018
issued under a medium-term note programme, and RMB500 million notes due in 2016 under another mediumterm
note programme in mainland China. Net debt increased by HK$1.9 billion from the end of 2012 to the end of
2013