HKUST Annual Report 2022-2023

HKUST annual report 2022-2023 APPENDICES Appendix V Summary of Internal Control and Measures HKUST continues to adopt a system of internal control that is based on a 5-component framework issued by the Committee of Sponsoring Organizations of Treadway Commission to ensure the effectiveness of its governance. This 5-component framework consists of Control Environment, Risk Assessment, Control Activities, Information and Communication, and Monitoring. The following measures are in place to provide assurance about the effectiveness of internal controls to HKUST’s Council and Senior Management: a. Whistleblowing Policy is in place and operating to provide a safe and protective means by which staff, students, and other stakeholders of the University are able to raise concerns with the appropriate University authorities against any malpractice in the University. b. Internal Audit Office is responsible to prepare annual risk-based audit plans and perform independent reviews to assess adequacy of the design and operating effectiveness of internal controls as well as to provide recommendations to streamline processes and procedures for efficiency enhancement. Co-sourced external service providers are engaged whenever necessary to supplement in areas that require deep industry expert knowledge such as cybersecurity, campus development, etc. c. External Auditors are engaged to carry out statutory annual audit of HKUST’s financial statements and provide an independent assurance on the University’s compliance with guidelines, terms and conditions imposed by the Government’s University Grants Committee. External Auditors also perform review of HKUST’s tax exemption status under the Hong Kong Inland Revenue Ordinance’s section 88. Audit Committee of the University Council approves the annual audit plan, supervises the scope of work performed by Internal Audit Office, and reviews internal audit reports and concerns on internal controls raised by the internal and/or external auditors. Furthermore, the Audit Committee has an oversight role on the appointment and performance of both internal and external auditors to ensure the independence and objectivity of their work. HKUST Strategic Risk Management Strategic Risk Management policy and process play an important role in the University’s governance. HKUST’s Council and its Audit Committee are responsible for the oversight of risk management and the University’s management carries out an annual risk assessment exercise to ensure that the University’s strategic risks are identified, monitored, and well managed. HKUST continues to uphold its core values as well as formulate and optimize relevant policies and guidelines to lead its community forward. In view of the fast-changing environment, demographic changes, and a return to normalcy from COVID-19 pandemic around the world in FY2023-24, the University paid extra efforts in handling issues arising from the lack of resources, talent recruitment and retention, efficiency of administrative processes, and search for additional land to facilitate the University's strategic development. The University’s Senior Management engaged external consultant to (a) facilitate the 2023-24 Annual Risk Assessment Exercise and (b) assess HKUST’s existing Risk Management governance and framework. The 2023-24 Annual Risk Assessment’s process was enhanced to include (i) Risk Questionnaire to all heads of academic and non-academic departments/units, and (ii) workshops for key stakeholders to enable a more robust assessment from a high number of participants. Considering opportunities and challenges of the operating environment, HKUST’s overall risk profile and 2023-24 Strategic Risk Register shall be reviewed from time to time to ensure appropriate risk mitigation measures according to the latest development directions and strategic objectives of the University. The following summary highlights key aspects of 2023-24 annual risk assessment results: Reputational Risks The University’s Senior Management actively monitored how the external environment and internal activities might pose risks to its reputation and took reference of comments and observations from various stakeholders. Apart from focusing on strategic recruitment for faculty, non-academic staff, and students, the University identified ways to promote international collaborations to showcase its research impacts and developed new and innovative program disciplines such as those on Environment, Social and Governance to address major global challenges and future demand of society. HKUST spent much effort in enhancing and further developing cross-campus coordination framework on applicable activities and collaboration with HKUST (Guangzhou) (GZ). In carrying out its mission and overall competitiveness in academic excellence, research and innovation, the University under its “Unified HKUST, Complementary Campuses” principle for both Clear Water Bay and Guangzhou campuses continues to strive cohesively in assisting the economic, social, and cultural development of Hong Kong as well as the Greater Bay Area and the Mainland. Financial Risks HKUST, being a public-funded university, continues to ensure accountability and value for money by optimizing its resources while achieving its key strategic goals as well as maintaining financial sustainability to support its future operations. The University seeks to deploy a prudent approach in financial planning and budgetary controls to maintain a sound and healthy financial status while staying bold in supporting key strategic initiatives, covering faculty recruitment and retention, capital projects, and research infrastructure. Although HKUST and HKUST(GZ) are two separate legal entities and operate independently in terms of financial management, the synergy arising from this partnership, with proper oversight, creates much more significant research impact while maximizing the operational resources of HKUST. Risks arising from investment activities in the volatile financial markets are also monitored and reviewed by the Council’s Finance and Audit Committees through the formulation of investment strategies with acceptable risk profile and return objectives, to be adjusted with evolving situations. The University seeks advice from external professional consultants from time to time in modifying its investment strategies to foster the University’s financial strength. Operational Risks Operating processes and procedures are enhanced on a continuous basis with assessment of risks from various angles. The University places great importance on developing talent and efforts were made by various Schools and Offices in recruiting and nurturing talent with more diverse areas of strength. The University also paid extra attention to create a well-protected environment to ensure the health and safety of its members. Issues on cybersecurity were widely exchanged within the University community and awareness on personal data protection was also enhanced in FY2023-24.