2007 Interactive Registration Document - Renault

CORPORATE GOVERNANCE 04
REPORT OF THE CHAIRMAN OF THE BOARD PURSUANT TO ARTICLE L. 225-37 OF THE COMMERCIAL CODE
4.5.2 CHAIRMAN’S REPORT ON INTERNAL CONTROL PROCEDURES ✦
This report was prepared under the responsibility of the Chairman of the Board of
Directors, pursuant to Article L. 225-37 of the French Commercial Code on the
basis of information provided by senior management in charge of organization
and internal controls.
The report was written on the basis of input from a cross-disciplinary working
group of representatives from the Group’s fi nancial, corporate control and legal
functions.
The report covers all fully-consolidated Group companies.
The report was presented to the Board of Directors at its meeting on February 12,
2008.
4.5.2.1 APPLICATION OF AMF STANDARDS
A review of Renault’s internal control system, overseen by the Executive Vice
President, Finance, and the Corporate Controller, was undertaken in 2007 to
assess compliance with standards laid down by France’s securities regulator,
the Autorité des m archés fi nanciers (AMF). This review was conducted by a
working group of representatives from the above-named main functions.
The aim is to spell out Renault’s internal control procedures in order to:
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assess their compliance with AMF standards;
make recommendations intended to extend their respect and application.
The review conducted in 2007:
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identifi ed internal control guidelines and associated processes defi ned by
Renault SA and Renault s.a.s applicable worldwide;
emphasized the tailoring of AMF standards to Renault’s specifi c procedures
and defi ning additional operational internal control objectives deemed
necessary in the phases prior to transaction accounting.
At this stage, the working group’s remit covers Automobile. Sales Financing is
making headway with the Basel II process. The French banking regulator has
authorized RCI Banque to use an advanced internal ratings-based approach
for measuring credit risk from January 1, 2008, pursuant to the Basel II capital
adequacy requirements. This authorization covers all the activities of RCI Banque
(consumers, corporate clients and networks) in four countries (France, Germany,
Spain and Italy). It covers slightly more than 70% of credit risks, pending
expansion to the UK in 2009, which is due to be concluded in 2008.
In some areas, the international expansion of the business calls for accounting
and management standards to be applied in a more formal manner through
a description of standard processes, procedures and detailed operating
methods.
A multi-year action plan will be launched in 2008 to pursue actions engaged in
2007 and bolster the Group’s internal control system. This plan aims to:
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complete work on establishing formal procedures and internal control
activities covering the areas reviewed in 2007, focusing on the most effi cient
control systems and methods; this will provide the baseline internal control
system for Automobile;
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establish or update certain procedures and/or specifi c operating methods;
formalize further detailed rules and procedures, standard processes,
recommended operating methods, etc. for decentralized operating entities;
extend the scope of the review to operations not covered in 2007 and to the
Group’s main subsidiaries;
update and circulate the Group’s internal control charter to reaffi rm the
accountabilities of everyone in the company in terms of control.
This action plan offers the opportunity to review internal fi nancial control
processes across the board and to pursue actions aimed at giving line managers
the tools they need to execute and control operations more effectively.
4.5.2.2 INTERNAL CONTROL SYSTEM
OBJECTIVES
The Renault group encounters risks and contingencies, both internal and
external, in the regular course of its business activities and strategy. It has
therefore put in place an organizational structure and procedures to identify,
quantify, prevent and control these risks as far as possible, in order to mitigate
their negative impact and thus help the company achieve its operational and
strategic goals.
This internal control system has been implemented in all the company’s
functional departments and for every area of activity. Its priorities are to:
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comply with legal requirements and the company’s by-laws;
control quality, costs and delivery times in all industrial and commercial
activities;
ensure the quality, reliability and relevance of all internal and external
information, notably fi nancial and accounting disclosures;
adapt the company’s organizational structure to standards and
regulations;
match risks identifi ed to objectives and expected benefi ts;
control any risks the company might engender for its staff, customers, suppliers
and shareholders, as well as for its union partners and stakeholders, and any
risks it faces in running the business and implementing its strategy;
reduce the company’s exposure to fraud risk;
prevent and, where necessary, punish unethical behavior.
However, as with any control system, there is no cast-iron guarantee that
risks are completely under control. The system’s role is to prioritize risk and to
implement prevention plans that will reduce the likelihood of risks occurring.
✦ Global Reporting Initiative (GRI) Directives Registration Document Renault 2007 149
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