Our performance in 2009 - Sappi

2009 annual report 79
board to establish, co-ordinate and drive the risk management process throughout Sappi. It has
established a comprehensive risk management system to identify and manage significant risks.
The group risk management team reports regularly on risks to the audit committee who have an
oversight role with regards to the risk management processes at Sappi as well as to the board.
A full report on Sappi’s risk management can be found on pages 67 to 69.
Financial statements
The directors are responsible for overseeing the preparation and final approval of the group annual
financial statements. The auditors are responsible for auditing the group annual financial statements
and expressing an opinion thereon. While management is responsible for the preparation of the
annual financial statements, the directors have overall responsibility to ensure that suitable
accounting policies, supported by reasonable and prudent judgements and estimates, have been
used in the preparation of the annual financial statements, which fairly present in all material
respects the state of affairs of the group. In 2006, the group adopted International Financial
Reporting Standards as issued by the International Accounting Standards Board. The directors
are responsible for determining that appropriate accounting standards have been applied and
adequate accounting records have been maintained. The directors also oversee the appropriate
adoption of the going concern basis in preparing the annual financial statements, based on the
historical financial performance of the group, the ready access to financial resources and financial
forecasts. The group’s results are reviewed prior to submission to the board as follows:
All four quarters and financial year end – by the disclosure committee and audit committee;
Interim and final quarters – by both the group’s external auditors, and the audit committee;
and
In 2009, additional reviews were performed by the group’s external auditors for quarters one
and three as a result of financing activities during the year.
Internal controls
The board is responsible for the group’s systems of internal financial and operational control. The
group’s internal controls and systems are designed to provide reasonable assurance as to the
integrity and reliability of the annual financial statements, that assets are adequately safeguarded
against material loss and that transactions are properly authorised and recorded. Such controls
are based on established written policies and procedures which are monitored throughout the
group and are applied by trained, skilled personnel with an appropriate segregation of duties
through clearly defined lines of accountability and delegation of authority. The control system
includes comprehensive reporting and analysis of actual results against approved standards and
budgets. All employees are required to maintain the highest ethical standards in ensuring that the
company’s business practices are conducted in a manner which in all reasonable circumstances
is above reproach. As part of an ongoing process, reviews were undertaken across the group of
the effectiveness of various elements of the group’s internal controls, procedures and systems.
Where potential improvements are identified, they are being addressed. The reviews enabled
management to further strengthen the group’s controls and the results of the reviews did not
indicate any material breakdown in the functioning of these controls, procedures and systems
during the year under review. The internal controls in place are considered to be effective. The
internal controls at the four new mills in the Europe region were assessed for adequacy but not
for effectiveness as most of the underlying IT systems and platforms were only moved over to
Sappi during the course of 2009. This transitional phase will be completed in 2010 and effectiveness
testing will be performed. A material breakdown is defined as a critical weakness in process or
financial systems which could result in a material loss, contingency or uncertainty requiring
disclosure in the published annual financial statements. Section 404 of the US Sarbanes-Oxley
Act requires companies listed on the NYSE to complete a comprehensive evaluation and report
on the effectiveness of their internal controls over financial reporting. Sappi has conducted its
fourth evaluation at the end of fiscal 2009 and will include its Section 404 report in its Form 20-F
to be filed with the United States Securities and Exchange Commission.
governance