Pay more attention to risk management
By Hu Yuanyuan (China Daily)
Updated: 2006-06-21 08:56
State-owned enterprises (SOEs) should set up a risk management commission to
prevent losses and enhance their competitiveness, the State-owned Assets
Supervision and Administration Commission (SASAC) urged in a guideline issued
yesterday.
The guideline shed light on the overall principles, basic
process and evaluation of risk management.
The guideline aims to avoid a
recurrence of the China Aviation Oil Singapore Co (CAO) case, which forced the
company to request bankruptcy protection in November last year after losing
US$550 million in oil derivatives trading in 2004.
The CAO
case is the largest scandal involving a Chinese State-owned company listed
overseas.
Li Rongrong, SASAC minister, said at a work
conference that the incident at CAO could have been avoided if there was a sound
internal auditing and risk management system.
He pointed out that sound
corporate governance and an effective restraint scheme constitute the two
fundamentals of a solid risk-management system.
The collapse of CAO
sparked widespread concern over the credibility of Chinese companies listed on
the Singapore market, with mainland companies' shares experiencing massive
losses there after the scandal came to light.
Since 2004, and especially
after the CAO case, SASAC has been paying increased attention to risk management
work in SOEs.
Li Rongrong invited Raymond Woo, a senior financial
consultant who chairs business operations at Ernst & Young China, to give a
lecture on risk management to SOE managers at the annual work conference.
Meanwhile, SASAC sent seven SOE board members to Hong Kong to receive
training on risk management in 2005. And the ministry has organized eight
seminars on the subject over the past two years.
However, an official
with SASAC admitted that most SOEs were still in the early stages of
establishing a risk management system, with the few that have floated their
shares overseas the exception.
According to a source who participated in
the guideline drafting, SASAC at one stage planned to ask all SOEs to designate
a chief risk officer, but gave up the idea due to the big differences in SOEs'
levels of internal management.
(For more biz stories, please visit Industry Updates)
|
