2009 - TDM Berhad

TDM Berhad (6265-P) 53Statement on Internal ControlIntroductionThe Board of Directors of TDM Berhad is pleased to present theStatement on Internal Control pursuant to Paragraph 15.26(b) of theMain Market Listing Requirement of Bursa Malaysia. The followingstatement outlines the Group’s key elements of an internal controlsystem for the fi nancial year ended 31 December 2009.Board ResponsibilityThe Board of Directors recognises the importance of sound internalcontrols and risk management practices for good corporategovernance. The Board affi rms its overall responsibility for the Group’ssystem of internal control and for reviewing the adequacy and integrityof the system. However, it should be noted that such systems aredesigned to manage or mitigate risks to an acceptable level ratherthan eliminate the risk of failure to achieve business objectives. Inpursuing these objectives, the system of internal controls, can onlyprovide reasonable and not absolute assurance against any materialmisstatement or loss.Key Elements of Internal Control SystemsThe Board throughout the current fi nancial year has mitigated the risksfaced by the Group through monitoring of the Group’s operationaleffi ciency and profi tability at its Board meetings. The Board is assistedby Board Committees namely the Audit Committee and Nomination andRemuneration Committee with their respective terms of reference.Furthermore, the Board has tasked its Executive Management withthe responsibility for monitoring and reviewing strategic and signifi cantoperational matters of the Group through the following key elementsof internal control:MeetingsScheduled meetings are held at operational and management level toidentify, discuss and resolve business and operational issues. Theseincluded management meetings at an individual company level whichis minuted and pertinent issues are escalated on a needs basis.Organisation and Management StructureThe Group has defined a structure with clear reporting lines ofresponsibilities and accountabilities. The management team is led by theChief Executive Offi cer and comprises of other heads of departments.There is also a clear segregation of duties to ensure the safe custodyof the Group’s assets and the responsibility is discharged with theCompany’s best interest in mind.The management team makes recommendation on major capitalexpenditure, investment or divestment affecting the Group and thepreparation of the annual budget for the approval of the Board.All employees are expected to be effective in delivering their respectivejob functions. Employees are sent for training in areas relevant to theirjob functions and they are remunerated based on their performance andlength of service according to an approved appraisal system.Business Performance ReviewThe Group’s management team carries out monitoring of fi nancialperformance against the budget and they also followed up on criticaloperational issues to ensure appropriate actions have being taken inaccordance to the agreed plan.The management team provides quarterly reports to the Board coveringfi nancial performance and production statistics which includes themonitoring of results against annual budget.The budgeting process includes the preparation of budgets by theindividual subsidiary companies and departments. That detailed analysisof fi nancial results is reviewed by the Audit Committee and approvedby the Board prior to submission to Bursa Malaysia.Internal Audit FunctionThe Company has an in-house internal audit function created by theBoard of TDM Berhad pursuant to its resolution on 29 December1994.The Group’s Internal Audit provides support to the Audit Committeein discharging its duties regarding the adequacy and effectivenessof a system of internal controls, governance processes and riskmanagement. During the fi nancial year under review, the InternalAuditors conduct independent reviews of the key activities within theGroup’s operating units based on Annual Audit Plan approved by theAudit Committee.The total cost incurred for the Internal Audit Function of the Group forthe fi nancial year 2009 is RM358,256.Risk ManagementThe Board recognises that risk management is an integral part of theGroup’s business operations to identify and ensure the achievementof it’s business objectives. This is as per the requirement of Part 2 ofthe Best Practices in Corporate Governance which states that theBoard should identify principal risks and ensure the implementation ofappropriate systems to manage these risks.The management has its Group Risk Management Committee led bythe Chief Executive Offi cer with the responsibility to identify the risksfaced by the CompanyThe approval of the Board for this statement was obtained on25 February 2010.