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Introduction
The Board has established procedures to implement the Turnbull Guidance “Internal Control: Guidance for Directors on the Combined Code”. These procedures, which are subject to regular review, provide an ongoing process designed to identify, evaluate and manage significant risks faced by the Group.Responsibility
The Board has overall responsibility for the system of internal control. A sound system of internal control is designed to manage rather than eliminate the risk of failure to achieve business objectives and can only provide reasonable and not absolute assurance against material misstatement or loss.Framework
The Board recognises that Risk Management is the cornerstone of a sound system of internal control. Therefore, the Board performs an annual review of the key risks faced by the Group, covering strategic, business, financial, compliance and other risks. Controls are then identified to alleviate or mitigate these risks to an acceptable level, and these are then constantly monitored to ensure they have been operating throughout the period under review and any weaknesses or issues addressed on a timely basis.Control structure
The Group maintains an extensive system of internal controls. Key elements include:- a defined operating structure for the Group with clear lines of responsibility and delegated authority. The Group’s organisational structure is relatively flat, assisting close control, fast information flow and responsiveness;
- written policies and procedures which define the limits
- of delegated authority and provide a framework for management to deal with areas of significant business risk. These policies and procedures are regularly reviewed and, where necessary, updated;
- a Treasury Operating Committee which oversees the operation of the Group treasury function and sets appropriate limits to mitigate treasury risk;
- representation letters obtained from all operating companies prior to publishing results confirming disclosures and compliance with internal and external requirements, compliance with ethical policies, that appropriate recruitment checks have been made and that a whistleblower policy has been circulated;
- operating procedures which include a comprehensive system for reporting information to the Directors which is adjusted as necessary; and
- budgets prepared by operating company management
- and subject to review by both Group management and the Directors. Forecasts are revised during the year and compared against budget.
Monthly reports of operating performance, with commentary on variances against budget, forecasts and prior year, are prepared at operational and Group levels. Key performance indicators are monitored by the Board.
The acquisition of any business requires a rigorous analysis of the financial implications of the acquisition and key performance figures. A sensitivity analysis is performed of the key assumptions made in the acquisition case.
Post investment appraisals of the Group’s investments are conducted on a periodic and timely basis.
A treasury report, with details of borrowings and investments, is distributed to corporate management on a weekly basis.
The Audit Committee reviews reports detailing any significant legal actions faced by Group companies.
Monitoring and review activities
There are clear processes for monitoring the system of internal control and reporting any significant control failings or weaknesses together with details of corrective action.The Audit Committee is responsible for monitoring and reviewing, on behalf of the Board, the Group’s system of internal control, risk assessment, management policies and the integrity of management systems.
The Audit Committee periodically receives and reviews reports on internal controls from the external auditors and a formal annual self assessment is provided by the presidents and controllers of each operating company detailing the operation of their control systems and highlighting any weaknesses.
A biannual survey is prepared of employees’ views and opinions on a wide variety of risk management issues.
Regional management and the Audit Committee review the results of such reports and assessment taking action as appropriate.
Where, as a result of these reviews, issues are identified in the internal control environment, prompt corrective actions are taken.
The Group has an internal audit function that reports directly to the Audit Committee whose role includes assisting the Board to discharge its responsibilities regarding internal control.
