RISK MANAGEMENT

As a responsible corporation, MTR, through its corporate governance and management structures, seeks to identify and manage risks which may materially affect its business and by implication, the interests of our shareholders, customers and staff and the Hong Kong environment. Risk management is not analogous to sustainability but by likening risk management to sustainability, MTR gains greater insights into the creation of long-term shareholder value.

Table here presents a non-exhaustive selection of MTR's priority business risks. MTR has adopted a three-year program to develop further its approach to risk management, strengthen its reporting systems and related internal controls and provide enhanced comfort to its stakeholders over the quality of information provided. To this end it has engaged PricewaterhouseCoopers to assist and support this programme. Further details are provided here.

Identification: By considering the three elements of sustainability (finance, people and environment), a long list of possible risks to the business is compiled. At this stage, the emphasis is on generating a wide range of risks (risk register) with no attempt to assess their importance.

Prioritization: Each of the identified risks is assessed in terms of severity of consequence and frequency of occurrence. The prioritization of risks is undertaken separately for the three elements of sustainability as their severities are not necessarily directly comparable. Risks with a high consequence - likelihood score are identified as priority business risks and are taken forward to the next stage for senior management attention. To ensure their status remains up-to-date, business risks are reviewed periodically and as events take place.

Action: For each priority risk, ownership is agreed and actions identified. Whilst risks are identified and prioritized by the Executive, actions are identified within the relevant Division(s).

Monitor & Report: The implementation and effectiveness of the actions are monitored on an ongoing basis using key performance indicators wherever possible. Senior management is informed of risk and action status through regular reporting and key results are presented in MTR's Annual Report and Corporate Sustainability Report.

Developing our reporting and assurance