Corporate governance: Internal control, audit and board committees

What are the company’s main internal controls?

The Board is responsible for the Company’s system of internal control and risk management and for reviewing the effectiveness of those systems. Such systems are designed to manage rather than eliminate risk of failure to achieve the Company’s strategic objectives. It should be recognised that such systems can only provide reasonable and not absolute assurance against material misstatement or loss. The Combined Code requires the Directors to review the effectiveness of the Company’s system of internal controls. This relates to all controls, covering financial, operational, compliance and risk management matters.
 
The Company has processes for identifying, evaluating and managing the significant risks faced by the Group and this in the form of a Company Risk Register which is reviewed and up-dated regularly as required. The processes are in accordance with the guidance of the Turnbull Committee.
 
The key procedures which the Directors have established with a view to providing effective internal control are as follows:

• Regular Board meetings to consider a schedule of matters reserved for Directors’ consideration
• An annual review of corporate strategy, which includes a review of risks facing the business
• A risk management process (Company Risk Register) which identifies the key risks facing the business and how these risks are monitored and managed on an ongoing basis
• An established organisational structure with clearly defined lines of responsibility and delegation of authority Documented and enforced policies and procedures
• Appointment of staff of the necessary calibre to fulfil their allotted responsibilities
• Comprehensive budgets and forecasts, approved by the Board, reviewed and revised on a regular basis, with performance monitored against them and explanations obtained for material variances
• A detailed investment approval process, requiring Board approval for major projects. Post investment appraisals are conducted and are reviewed by the Board
• An Audit Committee of the Board, comprising Non-executive Directors, which considers significant financial control matters as appropriate
• An internal audit function which performs continuous assessments of the quality and effectiveness of risk management and control
• Documented fraud and whistle blowing policies and procedures and regular review of current whistle blowing regulations
• Reporting of accounting policies and legal developments to the Board
• Review of treasury policies and activities by the Audit Committee An established programme of management development and succession planning The Board conducts a review of the effectiveness of the system of internal control on an annual basis taking account of any material developments which have taken place in the year.

What is the role of the Audit Committee? 

The Audit Committee is made up of Ian Fraser (Chairman), Fritz Ternofsky and Mark Pain and meets at least three times per annum. Senior management, including the Finance Director and internal and external auditors attend for part or all of each meeting. The internal and external auditors have unrestricted access to the Audit Committee and its Chairman. All of the members of the Audit Committee are independent Non-executive Directors.
 
The Audit Committee considers all matters relating to internal control and reporting, internal and external audits, the scope and results of the audits, the independence and objectivity of the auditors and establishes that an effective system of internal financial control is maintained.
 
The Audit Committee has primary responsibility for making a recommendation on the appointment or re-appointment of the external auditors. In order to maintain the independence of the external auditors, the Board has determined policies as to what non-audit services can be provided by the Company’s external auditors and the approval processes related to them. Under those policies work of a consultancy nature will not be offered to the external auditors unless there are clear efficiencies and value added benefits to the Company. The Audit Committee monitors the level of non-audit fees paid to the external auditors.
 
Download the Terms of Reference - Audit Committee (in pdf format)

What is the role of the Nominations Committee?

The Nominations Committee is made up of Mike Foster (Chairman), Ian Fraser and Peter Cawdron and meetings are held as deemed necessary by the Chairman of the Committee. The majority of the Nominations Committee members, including the Committee Chairman, are independent Non-executive Directors.
 
The Nominations Committee considers all matters relating to the structure, size and composition of the Board and makes necessary recommendations to the Board with regard to adjustments and new appointments where deemed necessary. The Committee considers the mix of skills and experiences that the Board requires and seeks the appointment of directors to meet its assessment of what is required to ensure that the Board is effective in discharging its responsibilities. The Nominations Committee used the services of external search agencies when recruiting the two new Non-executive Directors.

Download the Terms of Reference – Nominations Committee (in pdf format) 

What is the role of the Remuneration Committee? 

The Remuneration Committee is made up of Fritz Ternofsky (Chairman), Peter Cawdron and Mike Foster and meets at least twice a year and at such other times as the Chairman of the Committee deems necessary. All of the members of the Remuneration Committee are independent Non-executive Directors. The Chairman, Chief Executive and other directors may be invited to attend meetings as considered appropriate by the Remuneration Committee.
 
The Remuneration Committee will consider all material elements of the remuneration policy, remuneration and incentives of Executive Directors and senior management to ensure that remuneration is sufficient to attract, retain and motivate directors of the quality required to run the company successfully; however is not in excess of what is necessary for this purpose. This is performed with reference to independent remuneration research and professional advice, which is provided by Halliwell Consulting, in accordance with the Combined Code. The Remuneration Committee will then recommend to the Board the framework for executive remuneration packages of individual Directors. The Board is then responsible for implementing the recommendations although no Director is involved in deciding his own remuneration.  The Directors are not permitted, under articles, to vote on their own terms and conditions of remuneration. The Remuneration Committee is responsible for preparation of the Report on Directors Remuneration which forms part of the Annual Report.
 
Download the Terms of Reference – Remuneration Committee (in pdf format)