Annual Report - SABMiller

58 Corporate governance SABMiller plc Annual Report 2010Corporate governance continuedKey features of the systems of internal control are:■ the risk management system described in the preceding section;■ written policies and procedures within our businesses, which aredetailed in policy manuals;■ clearly defined lines of accountability and delegation of authority;■ identification and regular testing of key financial controls throughthe IFC programme;■ key policies employed in managing operating risk involvesegregation of duties, transaction authorisation, monitoring,financial and managerial and comprehensive reporting andanalysis against approved standards and budgets;■ group treasury operations which manage exposure to interestrate, counterparty, liquidity and currency transaction risks and coordinatethe activities of group companies in this area. Treasurypolicies, risk limits and monitoring procedures are reviewedregularly by the audit committee on behalf of the board;■ a group tax risk and tax operating framework which forms thebasis of tax governance across the group and is managed bya group tax function which monitors tax risk and implementsstrategies and procedures to control it;■ minimisation of operating risk by using appropriate infrastructure,controls, systems and people throughout the businesses; and■ business continuity planning, including preventative and contingencymeasures, back-up capabilities and the purchase of insurance.Assurance on compliance with systems of internal control and ontheir effectiveness is obtained through regular management reviews,review of key financial controls, internal audit reviews and qualityassurance described in section 10 below, testing of certain aspectsof the internal financial control systems by the external auditors duringthe course of their statutory examinations and regular reports tothe audit committee by the external auditors. The group’s divisionalFinance, Control and Assurance committees consider the results ofthese reviews to confirm that controls are functioning and to ensurethat any material breakdowns and remedial actions have beenreported to the appropriate boards of directors. This does not applyin respect of the group’s associated undertakings or joint ventures.At the half year and at the year end the divisional managing directorsand finance directors of all the group’s operations, and each of thegroup’s functional directors, are required to submit formal letters ofrepresentation on controls, compliance and notification of continuingor potential material financial and legal exposures.These letters form the subject of reports to the audit committee.They cover all subsidiary companies but do not cover joint venturesor associates (except for MillerCoors and Tsogo Sun, which submittailored letters of representation). Where material, group executivessit on the boards of associated companies. Directors and membersof the executive committee also make annual written declarationsof interests and are obliged to report without delay any potentialor actual conflicts of interest which may arise.The directors are responsible for the group’s systems of internalcontrol and for reviewing their effectiveness annually. The boardhas conducted a review of the effectiveness of the group’s internalcontrols covering material financial, operational and compliancecontrols and risk management systems for the year under review.Necessary actions have been, or are being, taken to remedy anysignificant weaknesses identified from the board’s review of theinternal control system. The systems of internal control are designedto manage, rather than eliminate, the risk of failure to achieve businessobjectives and can provide reasonable, but not absolute, assuranceagainst material misstatement or loss. In reviewing these, the boardhas taken into account the results of all the work carried out byinternal and external auditors.The board, with advice from the audit committee, has completedits annual review of the effectiveness of the system of internal controlfor the period since 1 April 2009 in accordance with the TurnbullGuidance, and is satisfied that this system is in accordance with thatGuidance and that it has been in place throughout the year underreview and up to the date of this report.10. Internal auditThe global internal audit function consists of local and regionalinternal audit functions operating in each of the group’s principalbusiness units, centrally co-ordinated by the group internal auditteam and led by the Chief Internal Auditor. In keeping with the group’sdecentralised collaborative management structure, the local internalaudit functions report to local senior finance management but havedirect access to local audit committees, group internal audit andthe Chief Internal Auditor. The local and regional audit functions havecontinuous, unfettered interface with the group internal audit function,which reports directly to the Chief Financial Officer and has directaccess to the audit committee through the Chief Internal Auditor.Internal audit activities are performed either by teams of appropriate,qualified and experienced employees, or through the engagement ofexternal practitioners upon specified and agreed terms with equivalentaccess. The Chief Internal Auditor prepares formal reports for eachaudit committee meeting as to the consolidated activities and keyfindings of the global internal audit function.The global internal audit function utilises a standardised group-wideinternal audit methodology and has implemented a formal globalquality assurance and effectiveness programme. Accordingly, detailedquality review assessments are performed with regard to the localand regional internal audit teams, to ensure compliance with definedquality and performance measures. This process provides a basisfor the annual review of the effectiveness of the global internal auditfunction and results in a formal report (prepared by the Chief InternalAuditor) to the audit committee to support the committee’s formalannual assessment of the effectiveness of internal audit. In addition,periodic reviews by independent external consultants are undertakenwhen deemed necessary by the audit committee.The audit committee has therefore satisfied itself that adequate,objective internal audit assurance standards and procedures existwithin the group, and that continuous improvement in the qualityand objectivity of the global internal audit function remains a primaryobjective of the department.11. Whistleblowing measuresAll employees in subsidiaries within the group have the opportunityto make confidential disclosures about suspected impropriety andwrongdoing. The Company Secretary or the Deputy Company Secretary,in consultation with the Chief Internal Auditor where appropriate,decide on the appropriate method and level of investigation. The auditcommittee is notified of all material disclosures made and receivesreports on the results of investigations and actions taken. The auditcommittee has the power to request further information, conduct itsown inquiries or order additional action as it sees fit.John DavidsonGeneral Counsel and Group Company SecretaryFor and on behalf of the board of SABMiller plc3 June 2010