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 ompany2Controlling these operations, which concerns all players, is theresponsibility of the Finance f unction. The purpose of these controlprocedures is as follows:■ to ensure that transactions involving financial instruments are properlyrecorded in the Group’s books in accordance with Group policies forproducing financial and management data;■ to guarantee the quality of financial instrument measurement andreporting used both in preparing the financial and managementaccounts and in managing and monitoring market and liquidity risk;■ to ensure that the results of market transactions are determined,understood and analysed correctly;■ to control the related operational risks.This permanent control process is based upon a range of organisationalprinciples defined in the Group’s internal control Charter and exists ateach level in the organisation, i.e., Group, Corporate and InvestmentBanking Division and in the main entities recording market transactionsin their accounts.Finance Departments perform controls at their level and have visibilityover the entire process via dedicated corporate investment banking teams(“CIB Financial Control”). They decide on the information that must bereported by the various players: this comprises both quantitative andqualitative data indicating trends in different businesses as well as theresults and quality of upstream controls carried out.Committees that meet on a monthly basis are being set up to bring all ofthe players together to discuss the entire range of issues concerning themeasurement and recognition of market transactions in the accountingsystems. As part of the quarterly accounts closing process, CIB Financereports back to an arbitration and decision-making committee (“PFC”– Product Financial Control Committee) chaired by the Group ChiefFinancial Officer on the actions of the CIB Financial Control teams andtheir work to enhance control effectiveness and the reliability of themeasurement and recognition of the results of market transactions.This committee meets every quarter and brings together Group Finance,Corporate Investment Banking and Group Risk Management.Development of the systemThe control system is continuously adapted to the Group’s requirements.The procedures described form part of an evolving system that aims toguarantee an adequate level of control throughout the Group.In particular, in collaboration with the Divisions/OE – Business Lines, stepsare taken systematically to review the quality of the process of accountcertification, with the gradual deployment of indicators calculated toapply to certain controls, and one-off actions directed at certain majorcontrols. These steps are supplemented by presentations made to thevarious committees concerned with Finance, on-site inspections, thedistribution of Group procedures giving details of certain major controls,and finally detailed instructions intended to ensure homogenous responseprocedures and adequate documentation for that process.Similarly, with regard to data used for the solvency ratio, specific stepsare taken to improve the production processes. In particular, with regardto the reconciliation of accounting data and information relating to thecredit risk, standard methodologies have been defined and deployedwithin the most significant entities to strengthen the audit trail andto ensure close collaboration between the Finance and Risks teams incarrying out analyses. This approach is being extended to other entitiesin the Group.The system will also be adapted in the context of the programmeembarked upon to review liquidity reporting.PERIODIC CONTROL – CENTRALACCOUNTING INSPECTION TEAMGeneral Inspection includes a team of inspectors (the Central AccountingInspection Team) specialised in financial audits. This reflects the strategyof strengthening the Group’s internal audit capability both in terms oftechnical scope and the areas of accounting risk tackled in the auditengagements undertaken.Its action plan is based on the remote accounting internal control toolsavailable to Group Finance and the risk evaluation chart set up by GeneralInspection .The core aims of the team are as follows:■ to constitute a hub of accounting and financial expertise in orderto reinforce the capability of General Inspection when carrying outinspections in such areas;■ to disseminate internal audit best practices and standardise the qualityof audit work throughout the Group;■ to identify and inspect areas of accounting risk at Group level.RELATIONS WITH THE GROUP’SSTATUTORY AUDITORSEach year, the Statutory Auditors issue a report in which they give theiropinion concerning the fairness of the consolidated financial statementsof the BNP Paribas Group as well as the annual financial statements ofthe Group’s companies.The Statutory Auditors also carry out limited reviews on the closing ofthe half-yearly accounts, and specific tasks in relation to the quarterlyaccounts. As part of their statutory audit assignment:■ they examine any significant changes in accounting standards andpresent their recommendations to the Financial Statements Committeeconcerning choices with a material impact;■ they present the Finance f unctions of the entities/Business Lines/divisions, and of the Group, with their conclusions, and in particularwith any observations and recommendations intended to improvecertain aspects of the internal control system that contributes to thepreparation of the accounting and financial information that theyexamined in the course of their audit.The Financial Statements Committee of the Board of Directors is briefedconcerning accounting choices that have a material impact, as discussedin section 2.2.1 “Corporate Governance”.22012 Registration document and annual financial report - BNP PARIBAS 71