SFC issues risk warning to Hong Kong-listed companies

Jun 27, 2019
Regulator puts case for robust and effective company risk management

The Securities and Futures Commission (SFC) has warned listed companies in Hong Kong to be up to speed on the financial risks they face – or fear the consequences.

‘In this day and age, it is all too easy to lose sight of the basics, get sucked in by the latest trend or put profits before prudence. As a regulator, I cannot overstate the importance of having robust and effective risk management,’ observed Julia Leung, executive director of the SFC, at a speech to the 2019 Risk Hong Kong conference last week. 

‘The art of risk management is how to identify and deal with such unknowns effectively. Inherently, risk deals with uncertainties and probabilities. You can never be sure whether there will be a black swan event.’ 

And from an SFC regulatory perspective, Leung said: ‘There is one thing you can be sure of: if you forget the basics, if you fail to properly manage your risks, if you neglect your fiduciary duty to treat your clients fairly, if you put your firm’s interests ahead of clients, the SFC will come knocking on your door. 

‘And when we do, you do not want to be the manager in charge of risk management who failed to notice the risk flags, or failed to exercise independent judgment and escalate your risk management concerns. You do not want to be the manager in charge of compliance who turned a blind eye to the warning signs of misconduct – and you most certainly do not want to be the manager in charge of overall management oversight who fell asleep at the wheel and allowed unethical, egregious or reckless behavior to go undetected. The consequences can be dire.’

Throwing the gauntlet down to Hong Kong’s listed companies, Leung added: ‘To conclude basic risk management 101, my final questions to you are: do you really understand the risks your firm is exposed to? Do you have the proper safeguards in place to effectively manage those risks? At the end of the day, have you done your homework and are you doing the right thing?’ 

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