Internal control

The Board of Directors has overall responsibility for the Group’s system of internal control and has delegated responsibility for the implementation of this system to executive management. This delegation ensures the embedding of the system of internal control throughout the Group’s operations, and ensures that the organisation is capable of responding quickly to evolving business risks, and that significant internal control issues, should they arise, are reported quickly to appropriate levels of management. Such a system of internal control by its nature is designed to manage rather than eliminate the risk of failure to achieve business objectives, and can provide reasonable, but not absolute, assurance against material misstatement or loss.

The key elements of the Group’s system of internal control include the following:

• a clearly defined organisation structure with formal lines of authority, accountability and responsibility;
• a formal schedule of matters specifically reserved for decision by the Board;
• regular assessment of major business, investment and financing risks;
• a comprehensive annual budgeting process and a review by the Board of actual performance compared with budget on a monthly basis;
• clearly defined and appropriate levels of authorisation for all transactions;
• the Audit Committee and the internal audit function;
• the chairman of the Audit Committee reports to the Board on significant issues considered by the committee, and the minutes of its meetings are circulated to all directors;
• systematic monitoring and assessment of risk areas through management and Board reviews.

The Directors confirm that they have conducted an annual review of the effectiveness of the system of internal control up to and including the date of approval of the financial statements. The process used by the Board for this review includes:

• the review by the Audit Committee of the external and internal auditors’ work plans, reports and internal control recommendations;
• review by the Board and Audit Committee of the specific identified risk areas;
• consideration of reports from management, internal and external auditors on the system of internal control and on material control weaknesses;
• discussions with management on the implementation of strategies on any internal control and risk areas identified;
• consideration by the Board on the impact of relevant legislation on the Group.

The approach by the Board is proactive in identifying possible weaknesses and obtaining the relevant degree of assurance on specific areas of internal control and not merely reporting by exception.

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