Company code: China Merchants Securities Co.Ltd(600999) company abbreviation: China Merchants Securities Co.Ltd(600999)
China Merchants Securities Co.Ltd(600999)
Internal control evaluation report in 2021
China Merchants Securities Co.Ltd(600999) all shareholders:
In accordance with the provisions of the basic norms of enterprise internal control and its supporting guidelines and other internal control regulatory requirements (hereinafter referred to as the enterprise internal control normative system), combined with the company’s (hereinafter referred to as the company’s) internal control system and evaluation methods, and on the basis of daily and special supervision of internal control, we evaluated the effectiveness of the company’s internal control on December 31, 2021 (the benchmark date of internal control evaluation report). I Important statement
It is the responsibility of the board of directors of the company to establish, improve and effectively implement internal control, evaluate its effectiveness and truthfully disclose the internal control evaluation report in accordance with the provisions of the enterprise’s internal control standard system. The board of supervisors shall supervise the establishment and implementation of internal control by the board of directors. The management is responsible for organizing and leading the daily operation of the enterprise’s internal control. The board of directors, the board of supervisors and the directors, supervisors and senior managers of the company guarantee that there are no false records, misleading statements or major omissions in the contents of this report, and bear individual and joint legal liabilities for the authenticity, accuracy and completeness of the contents of the report.
The objective of the company’s internal control is to reasonably ensure the legal compliance of operation and management, asset safety, authenticity and integrity of financial reports and relevant information, improve operation efficiency and effect, and promote the realization of development strategy. Due to the inherent limitations of internal control, it can only provide reasonable assurance for the realization of the above objectives. In addition, as changes in circumstances may lead to inappropriate internal control or reduced compliance with control policies and procedures, there is a certain risk to speculate the effectiveness of internal control in the future according to the internal control evaluation results. II Internal control evaluation conclusion 1 On the benchmark date of the internal control evaluation report, does the company have any major defects in the internal control of financial reporting
□ yes √ no
2. Evaluation conclusion of internal control over financial reporting
√ valid □ invalid
According to the identification of major defects in the company’s internal control over financial reporting, there are no major defects in the internal control over financial reporting on the benchmark date of the internal control evaluation report. The board of Directors believes that the company has maintained effective internal control over financial reporting in all major aspects in accordance with the requirements of the enterprise’s internal control standard system and relevant regulations. 3. Whether major defects in internal control over non-financial reporting are found
□ yes √ no
According to the identification of major defects in the company’s internal control over non-financial reports, the company found no major defects in the company’s internal control over non-financial reports on the benchmark date of the internal control evaluation report. 4. Factors affecting the evaluation conclusion of internal control effectiveness from the benchmark date of internal control evaluation report to the date of issuance of internal control evaluation report □ applicable √ not applicable
There are no factors affecting the evaluation conclusion of the effectiveness of internal control from the base date of the internal control evaluation report to the date of issuance of the internal control evaluation report. 5. Whether the internal control audit opinion is consistent with the company’s evaluation conclusion on the effectiveness of internal control over financial reporting
√ yes □ No 6 Whether the disclosure of major defects in internal control of non-financial reports in the internal control audit report is consistent with the disclosure of the company’s internal control evaluation report √ yes □ no III Internal control evaluation (I) Scope of internal control evaluation
According to the risk oriented principle, the company determines the main units, businesses and matters included in the evaluation scope and high-risk areas. 1. The main units included in the evaluation scope include: China Merchants Securities Co.Ltd(600999) and five wholly-owned subsidiaries – China Merchants Securities Co.Ltd(600999) International Co., Ltd. (hereinafter referred to as “China Merchants International”), China Merchants Futures Co., Ltd. (hereinafter referred to as “China Merchants futures”), China Merchants Securities Co.Ltd(600999) Asset Management Co., Ltd. (hereinafter referred to as “China Merchants asset management”) China Merchants Zhiyuan Capital Investment Co., Ltd. (hereinafter referred to as “China Merchants Zhiyuan capital”) and China Merchants Securities Co.Ltd(600999) Investment Co., Ltd. (hereinafter referred to as “China Merchants investment”). 2. Proportion of units included in the scope of evaluation:
Proportion of indicators (%)
The ratio of the total assets of the units included in the evaluation scope to the total assets of the company’s consolidated financial statements 100
The total operating income of the units included in the evaluation scope accounts for 100% of the total operating income in the company’s consolidated financial statements
3. The main operations and matters included in the scope of evaluation include:
(1) Internal control environment
① Governance structure
The company has established a corporate governance structure composed of the general meeting of shareholders, the board of directors, the board of supervisors and the company’s management in accordance with the provisions of the company law, the securities law, the regulations on the supervision and administration of securities companies, the standards for the governance of securities companies, the standards for the governance of listed companies, the rules for the listing of shares on the Shanghai Stock Exchange, the rules for the listing of securities on the stock exchange of Hong Kong Limited and other laws, regulations and normative documents, It has formed a mechanism of mutual coordination and checks and balances between power institutions, decision-making institutions, supervision institutions and management with clear rights and responsibilities and standardized operation. The board of directors of the company has established five special committees: Strategy Committee, risk management committee, audit committee, salary and assessment committee and Nomination Committee, formulated corresponding working rules, and clarified their rights and responsibilities, decision-making procedures and rules of procedure. The company has established an independent director system, and there are five independent directors among the current members of the board of directors.
② Development strategy
Guided by the guideline of “dynamic and balanced development of quality, benefit and scale”, the company adheres to the overall requirements of “quality first, benefit priority and appropriate scale”, and strives to achieve high-quality and sustainable development. During the planning period from 2019 to 2023, the company will implement the “change strategy”, take the initiative to change in the consideration of the company’s strategic decision-making, the focus of strategic layout and the construction of customer service system, break the path dependence, continuously improve quality and efficiency and enhance comprehensive competitiveness.
From 2019 to 2023, with the strategic goal of “achieving comprehensive competitiveness and entering the top five in the industry”, the company implemented the following core strategies: first, build a “six modernizations” modern investment bank, implement a “customer-centered” customer service system, and give play to the value traction of investment banking business; Second, integrate the company’s resources, build a comprehensive wealth management service provider, and consolidate the comprehensive service advantages of institutional customers; Third, strengthen business linkage, create a comprehensive service model and enhance business collaborative contribution; Fourth, strengthen the integrated management at home and abroad, rely on domestic customer resources and business resources, and enhance the ability to provide customers with integrated cross-border services; Fifth, accelerate the digital transformation, increase investment in financial science and technology, and build a “science and technology enabled” ecosystem. 2021 is the key year of the company’s transformation strategy in the new five years. Guided by the strategic goal of “entering the top five in the industry in terms of comprehensive competitiveness”, the company implements the requirements of “bigger and lighter capital, stronger and heavier assets”, and improves the ability of wealth management and “investment bank, investment research and investment”. All businesses develop steadily, the market competitiveness rises steadily, and the overall operation maintains a good development momentum.
③ Human resources policy
The company has established a scientific and perfect human resource management system, and various policies cover recruitment management, performance management, cadre management, salary and welfare, employee relations, employee training and other aspects. The human resources department closely adheres to the company’s development strategy, focuses on the relevant requirements of the “double hundred action” and the group’s “quality and efficiency improvement project”, solidly completes all work, deeply promotes the comprehensive implementation of the “six abilities” human mechanism of “being able to work up and down, in and out, high energy and low”, constantly stimulates the organizational vitality, builds a high-quality professional talent team, and supports the realization of the company’s strategy. The company has formulated incorruptible employment regulations to incorporate the incorruptible employment of employees into the personnel management system.
④ Social responsibility
The company’s responsibility strategic goal is to “focus on customers, strive to build the best investment bank in China with distinctive characteristics, innovation leadership, quality first and outstanding contribution, and continuously improve the company’s responsibility ability in becoming bigger and stronger”. The company’s responsibility strategic path is: “with the mission of ‘promoting China’s economic transformation and upgrading and helping maintain and increase the value of social wealth’, adhere to the path of scientific development, innovative development, harmonious development and green development, based on its own operation and management practice, show the height of responsibility awareness, implement the strategy of responsibility work, reflect the value of responsibility and improve the ability of responsibility performance in the actual business process”. The company’s responsibility strategy focuses on “harmony with the society, development with the capital market, and strive to promote the progress of the securities industry”.
⑤ Corporate culture
“Boosting the transformation and upgrading of China’s economy and maintaining and increasing the value of social wealth” is the mission of the company. The company inherits the family and country feelings of China Merchants Group for a century, and strives to find big topics and achieve great achievements in serving the country, society and the real economy. The company is determined to build an enterprise with customer trust, employee pride, shareholder satisfaction and social respect, and promote the progress of the times with excellent financial services.
“Building the best investment bank in China” is the vision of the company. The company is committed to building a financial institution with distinctive characteristics, innovation leading, quality first and outstanding contribution, and building the best investment bank in China.
“Family and country feelings, the responsibility of the times; encouraging new and strong, Dunxing Zhiyuan” is the core value of the company. “Merchants blood, Shekou gene” is the cultural foundation of the company. “The feelings of family and country, the responsibility of the times; encouraging the new, striving for strength and pursuing the future” is the crystallization of historical and cultural inheritance and development experience rooted here.
“Focusing on customer needs, talent oriented, responsible for the person in charge, and always maintaining integrity” is the cultural feature of the company. Starting from the needs of customers, the company’s management, processes, products and services should focus on the needs of customers, strive to improve the customer experience, strive to create a cultural atmosphere of responsibility, integrity and professionalism, and create a warm environment for talent growth, talent value and talent comfort.
“Integrity, innovation, synergy, performance orientation, simplicity and efficiency” is the company’s business philosophy. Innovation is the first driving force of the company’s development, and compliance risk control is the lifeline of the company. The company always adheres to “integrity-based innovation”. At the same time, it vigorously advocates the culture of synergy, performance orientation, simplicity and efficiency, and implements it into operation and management through institutional mechanisms.
Excellent corporate culture is the most powerful guarantee for strategy implementation. The company is committed to promoting cultural service strategy, cultural management, cultural harmony and cultural vitality. In 2021, the company held the 30th anniversary summary and development report meeting, the company’s history exhibition, the celebration party, the theme relay of “climbing the peak and setting sail”, the third cultural festival and other celebration activities, and launched corporate image publicity films to enhance the cohesion of the enterprise and enhance the sense of belonging of employees; Earnestly publicize and implement the group’s corporate culture, vigorously promote the publicity and implementation of the company’s cultural consensus, incorporate the creed of China Merchants in the new era into the corporate culture training course, and comprehensively publicize and implement it together with the company’s new cultural consensus through internal publicity platforms, symposiums and other means. (2) Comprehensive risk management system
In 2021, the company achieved excellent results in risk management, with controllable total risk, balanced structure, excellent asset quality and no major risk events. It is the only two securities companies in the industry that have received the highest AA rating for 14 consecutive years and one of the only six pilot securities companies in the industry.
The company always emphasizes and adheres to the integrated risk management of the group. At the level of risk governance, the company has established a risk organization structure with the risk management committee of the board of directors, the company’s risk management committee and its five professional committees and three lines of defense as the core, with clear responsibilities and conscientious performance at all levels; In terms of comprehensive risk management, from the aspects of full coverage, monitorable, measurable, analytical, responsive, systematic, cultural, institutional, heavy investment and recruitment of talents, continue to optimize the comprehensive risk management system, improve the risk management ability and ensure the sustainable and stable operation of the company. ① Full coverage
The company’s risk management system fully covers all types of risks, business lines, departments, domestic and foreign subsidiaries and branches. An effective risk management system has been established for all kinds of businesses of the parent and subsidiary companies before, during and after coverage. There are clear leading departments for market risk, credit risk, operational risk, liquidity risk and reputation risk, and clear management processes and response mechanisms have been formulated for all types of risks, Operational methods, processes and systems for risk identification, assessment, monitoring, response and reporting have been established.
② Can monitor
The company has built and continuously improved the quantitative risk monitoring system. Through the unified risk data mart and the intelligent integrated group risk management platform, the company realizes the T + 1 day cross market, multi currency and global monitoring of various businesses and risk indicators of domestic and foreign parent and subsidiary companies, timely and effectively identifies, measures, monitors and evaluates various risks, and comprehensively improves the systematization of risk management, Timely carry out automatic monitoring and early warning of all kinds of risk information to resolve potential risks.
③ Can measure
The company has achieved the model measurement ability of full product coverage and group level summary for quantifiable risks, covering four risk types: market, credit, operation and liquidity. The company continues to backtrack, verify and optimize the valuation of financial instruments and risk measurement models to ensure the accuracy and reliability of various risk measurement results of the company. The company regularly carries out backtracking tests on the valuation of financial instruments, VaR, sensitivity, internal credit rating and other measurement models to optimize the economic capital measurement model.
④ Have analysis
The company continued to collect internal and external major risk information, established an analysis mechanism of daily, monthly, quarterly and irregular reports, studied and analyzed market information and policy changes with significant impact, conducted special evaluation and risk investigation for major internal and external emergencies, and analyzed the risk faced by the company in high frequency and multi dimensions through annual comprehensive stress test and various special stress tests, Put forward countermeasures and effectively implement them to provide strong guarantee for the company’s business decision-making and steady operation.
⑤ Can cope
The company has established a complete risk response mechanism, including internal response mechanism, external rescue arrangement, emergency relief and disaster recovery mechanism. The internal response mechanism includes liquidity reserve, proprietary investment stop loss and response mechanism covering various risk events; External rescue arrangements include the overdraft limit of the bank’s RMB settlement account; Emergency relief and disaster recovery mechanisms include liquidity, emergency response mechanism of information system, disaster recovery switching mechanism of core trading system, etc.
⑥ Upper system
The company has established and continuously optimized the intelligent integrated group risk management platform, which integrates various risk management subsystems, and realizes the risk monitoring of various businesses of parent and subsidiary companies at home and abroad, the measurement and unified summary of risk indicators, the measurement and analysis of economic capital, the management of internal credit rating of bonds, the vertical management of subsidiary risks, and the generation of multi-dimensional and multi perspective risk statements, Be able to timely and effectively identify, measure, monitor, evaluate and report various types of risks.
⑦ Establish culture
The company adheres to a sound risk management culture and has established
