2012 Registration document and annual financial report - BNP Paribas

CORPORATE GOVERNANCEReport of the Chairman of the Board of Directors on the manner of preparation and organisationof the work of the Board and on the internal control procedures implemented by the c ompany2MAJOR PLAYERS INVOLVED WITHINTERNAL CONTROL■ Executive Management, reporting to the Board of Directors, isresponsible for the Group’s overall Internal Control system.■ Operational staff, at all levels (front/middle/back office, supportfunction), and in particular those in the reporting line of commandhave first-level responsibility for risk management and are leadingpermanent control players. They carry out first-level controls:controls of the transactions handled by them and for which they areresponsible, controls on the operations or transactions handled byother operational staff or management controls.■ Independent permanent control functions. These functions carry outsecond-level controls:■■■Compliance contributes to permanent control of the risk of noncompliance,so as to ensure that the Group conforms to legal andregulatory provisions, professional standards and codes of conduct,as well as to the overall strategy of the Board of Directors andExecutive Management directives. It is integrated in the operationalentities under the responsibility of the Heads of operating units butthe independence of the team managers in charge of compliancein the divisions and support functions is ensured, in particular bya shared oversight, with the Head of Compliance f unction. TheHead of Compliance, who is a member of the Group’s ExecutiveCommittee, reports to the Chief Executive Officer and representsthe Bank before the Autorité de Contrôle Prudentiel with regard toall matters concerning permanent controls.Its dedicated teams are also responsible for supervising, on theone hand, the systems of permanent control, and on the otherhand, under powers delegated by the Head of Risk Management, themeasurement and oversight of the operational risks of the variousareas of business (divisions and business lines) and both supportand control functions.Lastly, its Head is responsible for coordinating the Group’s overallinternal control system, in chairing the Internal Control CoordinationCommittee and major cross-functional projects, in particular thoseintended to strengthen the internal control system;Group Risk Management contributes, in particular through its“second set of controls” of transactions and new activities, toensuring that the credit and market risks taken by BNP Paribascomply and are compatible with its policy and its profi tabilitytargets. The duties associated with this function at Group RiskManagement level are exercised independently of the divisionsand support functions, contributing to the objectiveness of itspermanent control. Its Head, who is a member of the Group’sExecutive Committee, reports directly to the Chief Executive Officer;Group Finance is responsible for the preparation of financialstatements and quality control management, overseeing projectmanagement for the Group’s financial information systems andensuring the compliance of the Group’s financial structure. Its Headreports directly to the Chief Executive Officer;■other functions are key players involved in permanent control intheir respective areas of responsibility: Legal, Tax, InformationTechnology & Processes, Human Resources.■ Periodic control (“third-level” control) is independently exercised byGeneral Inspection for all Group entities. It includes:■inspectors based at headquarters, who are authorised to carry outcontrols throughout the Group;■ auditors deployed at geographical or business line hubs.Periodic controls fall under the responsibility of the Head of GeneralInspection who reports to the Chief Executive Officer.■ The Board of Directors exercises internal control duties, in particularthrough the Internal Control, Risk Management and ComplianceCommittee, which:■analyses reports on internal control and on measuring andmonitoring risks, as well as General Inspection reports on itsoperations, and exchanges of correspondence with the mainregulators;■ examines the key focuses of the Group’s risk management policy.The Heads of the Compliance, Risk Management and General Inspectionfunctions report on the performance of their duties to the Chief ExecutiveOfficer, and whenever he or the Board of Directors consider it necessary,to the Board. They also report periodically to the competent Boardcommittee (as a general rule, the Internal Control, Risk Managementand Compliance Committee). At their request, they may be interviewedby the Board.COORDINATION OF INTERNAL CONTROLAn Internal Control Coordination Committee (ICCC) meeting is heldperiodically with the main players involved in permanent control (seeabove), the Heads of the divisions or their representatives, and the Headof periodic control.This C ommittee:■ is chaired by the Head of Compliance, who sits on the Group’s ExecutiveCommittee, and steers the coordination of the Group’s internal control;■ is not intended to replace the different Group Risk Managementcommittees but to enhance their effectiveness within the overallsystem;■ guarantees the consistency of the internal control system and itscompliance with regulations;■ seeks to promote the use of shared internal control tools;■ contributes to the overall consistency of the Annual Reports on internalcontrol and investment services control prepared by the permanentcontrol and periodic control functions as required under their “Charterof responsibilities”, and of the report of the Chairman of the Board ofDirectors on internal control procedures.22012 Registration document and annual financial report - BNP PARIBAS 65