HONG KONG SAR, CHINA Law and Practice Contributed by: Vincent Lung and Mike Yeung, Parkside Chambers
This may require input from finance, sustainabil - ity, operations, legal, risk, procurement and external advisers. Boards should also consider whether cli - mate disclosures are consistent with financial state - ments and business plans. Governance and Anti-Greenwashing Governance is also becoming more important. Com - panies must ensure that ESG claims are accurate and properly supported. The global political debate around ESG has made many companies more cautious about overstatement. In Hong Kong, the practical response is likely to be more disciplined disclosure, not abandonment of ESG reporting. Social Issues Social factors remain relevant, particularly labour practices, health and safety, supply chains, data pri - vacy, customer welfare and diversity. For many busi - nesses, these issues may be more immediately mate- rial than climate risk. Companies should therefore avoid treating ESG as only environmental reporting. The correct approach is to identify material risks for the specific business.
• Personal Data (Privacy) Ordinance; • Securities and Futures Ordinance; • consumer protection laws; • intellectual property laws; • confidentiality obligations; • employment laws; • cybersecurity-related duties; and • sector-specific regulatory rules.
The most immediate legal risks often arise from per - sonal data, confidentiality, misleading outputs, IP infringement and inadequate supervision. Privacy AI Framework The Privacy Commissioner (PCPD) has published an AI Model Personal Data Protection Framework. It cov - ers AI strategy and governance, procurement of AI solutions, governance structure, training, risk assess - ment and human oversight. Although the framework is not a comprehensive AI statute, it is an important practical reference for organ - isations procuring, implementing or using AI systems involving personal data. Board Structures There is no mandatory requirement for a dedicated AI committee. Depending on the company, AI issues may sit with: • the full board; • the audit committee; • the risk committee; • a technology committee; • an AI governance committee; or • senior management supported by legal, compli - ance and IT. The structure should reflect the company’s AI use and materiality. A financial institution using AI for client- facing decisions will need more formal governance than a small private company using generative AI for internal administration. 8.2 AI Use-Related Risks Governance Frameworks Hong Kong’s AI governance framework is currently guidance-led. Key sources include the PCPD’s AI
8. Artificial Intelligence 8.1 Board Oversight of AI No Single AI Governance Statute
Hong Kong does not currently have a single corporate governance statute requiring all companies to appoint AI-specialist directors or establish AI committees. AI oversight arises from existing directors’ duties, risk management obligations, data protection law, sector- specific regulation and regulatory guidance. Where AI is material to a company’s operations, prod - ucts, customer interactions, compliance or financial reporting, the board should treat AI as a governance and risk issue.
Existing Legal Framework Relevant laws may include:
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