G4S Annual Report and Accounts 2011

Governance Financial statements Shareholder information
The process, which is reviewed regularly by the board in accordance
with the internal control guidance for directors in the UK Corporate
Governance Code, is carried out under the overall supervision of the group
risk management committee. This committee, which reports to the Audit
Committee, includes both the chief executive and the chief financial officer.
The regional risk management committees and the group risk management
committee receive internal audit reports and regular reports on risks.
They monitor the actions taken to manage risks.
The internal control system includes clearly defined reporting lines and
authorisation procedures, a comprehensive budgeting and monthly
reporting system, and written policies and procedures. In addition to a wide
range of internal audit reports, senior management also receive assurance
from other sources including security inspections, third party reviews,
company financial control reviews, external audit reports, summaries of
whistle-blowing activity, fraud reports and risk and control self-evaluations.
The group has in place robust internal control and risk management
systems for financial reporting. The group has a single global consolidation
system which is used for both internal management reporting, budgeting
and planning as well as external reporting. The group has a comprehensive
budgeting process with the budget being approved by the board. Forecasts
for the year are reported at least quarterly. Actual results at business unit,
region and group level are reported monthly and variances are reviewed.
A programme of business internal financial reviews is performed by a
finance team from either region or group to check the accuracy of financial
reporting and compliance with the group finance manual.
The Audit Committee undertakes a high level review of risk management
and internal control each year. As well as the above processes and sources
of assurance, the Audit Committee also considers the following year end
reporting in conducting this review:
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Summary of Internal Audit work, including an update on all open audits
with a deficient rating, analysis of results by region, common audit findings
and areas identified for improvement in internal controls;
Summary of Internal Financial Reviews, including significant accounting
or financial control issues and common concerns identified;
Overview of year end Financial Control Status reports completed by all
businesses confirming adherence to group standards with any exceptions
reported;
A broad overview of the general risk management and internal control
systems in place during the year;
Year end Group Risk Profile; and
External audit year end reporting on financial controls and accounting.
The Audit Committee has confirmed that it is satisfied that the group’s risk
management and internal control processes and procedures are appropriate.
The board has reviewed the group’s risk management and internal
control system for the year to 31 December 2011 by considering reports
from the Audit Committee and has taken account of events since
31 December 2011.
Board performance review
The performance of the board and its committees (other than the
CSR Committee) has been evaluated using a process conducted by an
external consultancy. This involved the use of questionnaires completed by
directors and other regular committee attendees which were then used
to inform interviews conducted by the consultants with each director.
Written reports were produced by the consultants setting out their findings
in relation to the board and its committees’ performance. These reports
concluded that the board and its committees had a strong culture and
function effectively. Following consideration of the reports by the board and
the relevant committees, however, steps have been taken to modify the
way the board and its committees work to address the issues which were
identified in these reports.
Examples of steps taken or to be taken include:
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changes to content of reporting to the board and a review of the
materiality thresholds of the matters which are presented to it;
allowing more time to address matters which do not appear on the regular
committee agendas;
providing more opportunity for review of health and safety matters;
measuring the implementation of strategy; and
increasing contact between non-executive directors and investors.
In addition, the consultants considered the performance of the chairman
and each board member and their reports were used to inform the
discussion about the chairman’s performance, which was conducted by the
senior independent director without the chairman being present, and
interviews with individual directors which were conducted by the chairman.
These individual meetings also allowed the chairman to review directors’
training and development needs.
The chairman also held meetings with the non-executive directors without
the executives being present.
Relations with shareholders
The chief executive and the chief financial officer hold regular meetings
with individual institutional shareholders to discuss the group’s strategy and
financial performance, although price sensitive information is never divulged
at these meetings. A capital markets presentation is conducted each year
at which some of the non-executive directors, the executive directors and
other senior executives describe the group’s strategy. During the course
of 2011, executive management held over 150 individual and group
investor meetings covering over 250 institutions.
It is intended that all the directors will attend, and be available to answer
questions at, the Annual General Meeting which is an important
opportunity for communication between the board and shareholders,
particularly private shareholders. At the Annual General Meeting, the
meeting is informed of the numbers of proxy votes cast and the same
information is published subsequently on the company’s website.
G4S plc
Annual Report and Accounts 2011
59