2010 annual report - touax group

Annual report 2010
➜ Financial and accounting risks
LThese financial risks are market risks (interest rate and currency),
liquidity and/or counterparty risk, and equity price risk.
Managing financial risk is an integral part of managing the
company. To monitor this risk more effectively and optimize
internal control, the Administration and Finance Department is
now divided into four financial business units (shipping containers,
modular buildings, river barges and railcars) and four
corporate units (holdings, financing & cash, reporting & consolidation,
financial, legal & fiscal communications). This method
of organization makes it possible to combine business and technical
expertise and as a result to assess risks more effectively.
The objective of the Administration and Finance Department is
to rapidly produce accounting information that is reliable and
pertinent, to pass on this information, to monitor risk, in particular
financial, operational and counterparty risks, to put in
place administrative, accounting and financial procedures, to
provide legal and fiscal monitoring of the Group and consolidation
of the accounts, and to ensure compliance with accounting
principles.
All the financial files are managed in a centralized manner by
the Treasury and Finance Departments who monitor and check
the information daily. This information is forwarded to the executive
committee. The Treasury and Finance Department
implement the means necessary to limit financial risk.
➜ Other risks
Responsibility for monitoring risks is delegated to the various
operational and functional departments who implement risk
management at the operational level. The operational and functional
departments are accountable for the risks inherent in
their businesses and give an account to the senior management
of the risks identified and the action plans put in place to reduce
their exposure. The administrative and financial department can
be associated with the management of these risks.
2.4. Management and supervision
of the internal control system
➜ 2.4.1. Overall organization
of internal control
Internal control is based on formalized procedures, the information
system and its architecture and the competence and
training of the staff.
The primary internal control cycles are income and trade
accounts receivable, charges and trade accounts payable, tangible
assets, cash and financing. The secondary cycles are
inventory and employees/payroll.
➜ 2.4.2. Role of internal audit
and management control
The objective of internal audit and management control is to
monitor risk mapping, put in place and control feedback via the
various reports, and introduce and monitor the administrative
and accounting procedures in liaison with the various accounting
departments.
The Group reinforced its management control teams in 2010.
Their role is part of a process of continuous improvement in
internal control and mainly involves helping to implement the
Group's internal control standards and coordinating internal
financial control operations in their division. The Group aims to
harmonize methods, monitoring, control and reporting in each
division.
These employees report to the Administration and Finance
Department and the operational departments.
➜ 2.4.3. Limits of internal control
and risk management
Even if it is designed and applied with great care, the internal
control and risk management system can never totally guarantee
that the objectives will be achieved. There are inherent
limits to any internal control system, like, for example, the
uncertainty of the external environment and the use of judgment
or malfunctions that can arise due to technical faults or
human error.
Furthermore, it is necessary to take into account the cost-benefit
ratio when introducing the controls, and not to develop
internal control systems that are unnecessarily expensive, even
if this means accepting a certain level of risk.
➜ 2.4.4. General description of the control
procedures
❙ Income and trade accounts receivable
The main objectives are to verify the reality of the income, the
valuation of trade accounts receivable and the exhaustiveness
of the cash inflows and to monitor counterparty risk.
To achieve these objectives, the senior management has set up
the following method of organization:
• Operating Department: This department is separate from the
sales and marketing departments and is mainly responsible
for processing and monitoring the filling of customer orders,
• Trade Credit Department: This department reports to the
Administration and Finance Department, and is consulted
before an order is processed. It is responsible for dealing with
disputes. It draws up the invoices on the basis of information
entered into the information system by the Operating Department.
The invoices are recorded in the accounts via an
automatic and integrated system.
The basic principles of the income-trade accounts receivable
cycle are:
• systematic existence of leases entered into the information
system,
• integration of the management and invoicing system with the
accounting system,
• segregation of duties between the credit department, the operational
departments and the cash department,
• regular supervision of trade credit (DSO – Days Sales Outstanding)
by the senior management.
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