Annual Report 2006 - Clariant

Clariant Chemicals (India) Limited811.3.3 Liquidity risk: Sufficient and not excessivecash and marketable securities are keptand investment is made mainly in debtoriented mutual funds.11.3.4 Credit risk: Credit risk policy is in place toensure that sale of products is made tocustomers after an appropriate creditlimit allocation process.11.4 Litigation RisksThe outcome of litigation in matters of tax law orin any other statutory obligation cannot bepredicted and therefore poses a risk. In thiscontext, too, insurance policies, liquidityreserves and credit lines limit the risk for theCompany.11.5 IT RisksInformation Technology risk is associated withfailure of the system network resulting indisruption of operations and consequential lossof business. The Company’s business criticalsoftware is operated on a server with regularmaintenance and back-up of data. The globalcommunication network is managed centrallyand is equipped to deal with failures andbreakdowns. Updated tools are regularly loadedto ensure virus free environment.Cautionary StatementStatements in this Report particularly those which relateto “Management Discussion & Analysis” may constituteforward looking statements within the meaning ofapplicable laws and regulations. Actual results maydiffer materially from those expressed or implied inthe statement since the Company’s operations areinfluenced by many external and internal factors beyondthe control of the Company.12. Internal Control Systems and their adequacyThe Company has a proper and adequate system ofinternal controls to ensure that all assets aresafeguarded and protected against loss fromunauthorised use or disposition and that transactionsare authorised, recorded and reported quickly. TheCompany has established well defined written policiesand processes across the organisation pertaining to allmajor activities including authority for approvals. In allcases where a monetary decision is involved variouslimits and authority are in place. A structuredManagement Information System together with anexhaustive budgetary control system covering allmajor operations form part of the overall controlmechanism that ensures the requisite informationrelated to operations is being reported and is availablefor control and review.M/s. Mahajan & Aibara, Chartered Accountants isthe internal auditor for the Company. To ensureindependence and objective functioning, the internalauditors report directly to the Audit Committee of theBoard. The internal auditors independently evaluateadequacy of internal control systems. Based on theaudit observations and suggestions, follow up andremedial measures are being taken including theincreased area of coverage, if necessary.13. Cost RecordsAs per government directives, the Company’s costrecords in respect of Dyes and Pharma intermediatesfor the year ended December 31, 2006 are beingaudited by cost auditors M/s. Nanabhoy & Co. whowere appointed by board with the approval of CentralGovernment.14. Human ResourcesDuring the year, the Company focused on continuingthe integration and harmonisation of various HRsystems applicable to management staff such asthe Perquisite/Benefit Structure, the PerformanceManagement System, Leave Rules and Local BonusPlan.HR supported the Businesses and Functions rationalisetheir business processes and manpower. TheCompany’s headcount as on December 31, 2006 was1431 (March 31, 2006 – 1490).15. Particulars of EmployeesThe statement giving particulars of employees, asrequired under Section 217(2A) of the Companies Act,1956 read with the Companies (Particulars ofEmployees) Rules, 1975 forms part of this report.However, as per the provision of Section 219 (1)(b)(iv) ofthe Companies Act, 1956, the report and the statementof accounts are being sent to all shareholdersexcluding the above statement. Any shareholderinterested in obtaining a copy of this statement maywrite to the Company Secretary at the RegisteredOffice of the Company.16. Corporate Governance(i) The disclosures as required under the CorporateGovernance have been furnished as a part of thisreport. The Company has taken the requisite stepsto comply with the recommendations concerningCorporate Governance. All board members andsenior managerial personnel have affirmedcompliance with the code of conduct for thecurrent year.(ii) As a Listed Company, necessary measures aretaken to comply with the Listing Agreements withthe Stock Exchanges. A report on CorporateGovernance together with a certificate of