annual report - Harvey Norman Company Reports & Announcements

CORPORATE GOVERNANCE STATEMENT (CONTINUED)
including responsibility for the day to day design and implementation of the risk management and
internal control system of the Company. Management reports to the board on the key risks of the
Company and the extent to which it believes these risks are being adequately managed.
Management is required by the board to carry out risk specific management activities in core
areas, including strategic risk, operational risk, reporting risk and compliance risk. It is then required
to assess risk management and associated internal compliance and control procedures and
report back on the efficiency and effectiveness of these efforts by benchmarking performance in
substantially accordance with Australian/New Zealand Standard for Risk Management (AS/NZS
ISO 31000:2009 Risk Management).
The board has a number of mechanisms in place to ensure that management‟s objectives and
activities are aligned with the risks identified by the board. These include the following:
(i) Board approval of strategic plans designed to meet stakeholders‟ needs and manage
business risk.
(ii) Implementation of board approved operating plans and budgets and board monitoring of
progress against these budgets, including the establishment and monitoring of KPIs of both
a financial and non-financial nature.
As part of its duties, the internal audit function of the Company is responsible for the objective
assessment of:
(i) the systems of internal control;
(ii) the risk and control framework; and
(iii) generally, objective assessment of compliance by the Company with risk management
protocols of the Company.
In order to ensure the independence of the internal audit function, the head of internal audit
meets privately with the audit committee without management present on a regular basis and is
responsible for making the final decision on the head of internal audit‟s tenure.
Underpinning these efforts is a comprehensive set of policies and procedures directed towards
achieving the following objectives in relation to the requirements of Principle 7:
(i) Effectiveness and efficiency in the use of the resources of the Company
(ii) Compliance with applicable laws and regulations
(iii) Preparation of reliable published financial information
CEO and CFO certification
In accordance with section 295A of the Corporations Act, the chief executive officer and chief
financial officer have provided a written statement to the board that:
(i) Their view provided on the Company‟s financial report is founded on a sound system of risk
management and internal compliance and control which implements the financial policies
adopted by the board
(ii) The Company‟s risk management and internal compliance and control system is operating
effectively in all material respects
The board agrees with the views of the ASX on this matter and notes that due to its nature, internal
control assurance from the CEO and CFO can only be reasonable rather than absolute. This is
due to such factors as the need for judgement, the use of testing on a sample basis, the inherent
limitations in internal control and because much of the evidence available is persuasive rather
than conclusive and therefore is not and cannot be designed to detect all weaknesses in control
procedures.
In response to this, internal control questions are required to be answered and completed by the
key management personnel of all significant business units, including finance managers, in support
of these written statements.
Remuneration
It is the Company‟s objective to provide maximum stakeholder benefit from the retention of a high
quality board and executive team by remunerating directors and key executives fairly and
appropriately with reference to relevant employment market conditions. To assist in achieving this
objective, the remuneration committee links the nature and amount of executive directors‟ and
officers‟ remuneration to the Company‟s financial and operational performance. The expected
outcomes of the remuneration structure are:
(i) Retention and motivation of key executives.
(ii) Attraction of high quality management to the Company.
(iii) Performance incentives that allow executives to share in the success of Harvey Norman
Holdings Limited.
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ASX Listing Rule/
Recommendation
ASX Rec 8.2