New risk management requirements in Hong Kong's corporate governance code: "More than just a box to tick"

On 1 January 2016, Hong Kong's listed entities will be regulated by an amended Corporate Governance Code and Corporate Governance Report. The core changes contain the re-situating and revamping of risk management requirements along slide internal control systems from the recommended best practices to code provisions. Whilst the proposed changes seem to be in line with international trends, new risk management obligations should not be treated as another set of procedures and processes for the board. The code provisions oblige the board to manage and monitor the company's risks. This code also expects risk management to be embedded in the issuer's organization. Failure to comply not only attracts sanctions from the exchange, but has legal implications for directors under statutory duty of care. Therefore, any omissions by directors in the managing and monitoring of the company's risk will find themselves exposed to legal risks.