2568.11 kb - Compass Group

30 Compass Group PLC Annual Report 2007Directors’ ReportCorporate governancecontinuedGroup’s performance and position and toensure compliance with relevant legislation,regulation and best practice including thatrelated to social, environmental and ethicalmatters. The systems provide reasonable, notabsolute, assurance against materialmisstatement or loss. Such systems arereviewed by the Board to deal with changingcircumstances.A summary of the key financial risks inherentin the Group’s business is given on page 16.Risk assessment and evaluation is an integralpart of the annual planning cycle. Eachbusiness documents the strategic objectivesand the effectiveness of the Group’s systemsof internal control. As part of the review, eachsignificant business and function has beenrequired to identify and document eachsignificant risk, together with the mitigatingactions implemented to manage, monitor andreport to the management on the effectivenessof these controls. Senior managers are alsorequired to sign bi-annual confirmations ofcompliance with key procedures and to reportany breakdowns in, or exceptions to, theseprocedures. Summarised results have beenpresented to senior management (includingto the Executive Committee) and to the AuditCommittee. These processes have been inplace throughout the financial year ended30 September 2007 and have continued to thedate of this report. The Board has reviewedthe effectiveness of the Group’s system ofinternal control for the year under review anda summary of the principal control structuresand processes in place across the Group is setout below.Control environmentWhilst the Board has overall responsibility forthe Group’s system of internal control and forreviewing its effectiveness, it has delegatedresponsibility for the operation of the internalcontrol and risk management programme tothe Executive Committee. The detailedreview of internal control has been delegatedto the Audit Committee. The management ofeach business is responsible for internalcontrol and risk management within its ownbusiness and for ensuring compliance with theGroup’s policies and procedures. Eachbusiness has appointed a risk champion whoseprimary role in such capacity is to ensurecompliance by local management with theGroup’s risk management and internalcontrol programme. The internal and theexternal auditors have reviewed the overallapproach adopted by the Group towards itsrisk management activities so as to reinforcethese internal control requirements.Control proceduresThe Board reviews its strategic plans andobjectives on an annual basis and approvesGroup company budgets and strategies inlight of these. Control is exercised at Groupand business level through the Group’s MAPprocess and monthly monitoring ofperformance by comparison with budgets,forecasts and cash targets and by regular visitsto Group companies by the Group ChiefExecutive and the Group Finance Director.Group businesses approve and submit riskreports for the Board on a bi-annual basis,summarising the key risks facing theirbusinesses and the controls in place to managethose risks. These reports, together withreports on internal control and departures, ifany, from established Group proceduresprepared by the internal and externalauditors, are reviewed by the Group FinanceDirector and the Audit Committee. The Groupcompanies also submit bi-annual risk andinternal control assurance letters to the GroupFinance Director on internal control and riskmanagement issues, with comments on thecontrol environment within their operations.The Group Finance Director summarisesthese submissions for the Audit Committeeand the Chairman of the Audit Committeereports to the Board on any matters that havearisen from the committee’s review of the wayin which risk management and internalcontrol processes have been applied.The Board has formal procedures in place forapproval of investment and acquisitionprojects, with designated levels of authority,supported by post investment review processesfor selected acquisitions and major capitalexpenditure. The Board considers social,environmental and ethical matters in relationto the Group’s business and assesses thesewhen reviewing the risks faced by the Group.The Board is conscious of the effect suchmatters may have on the short- and long-termvalue of the Company. The external auditorsof the Company and the Director of InternalAudit attend Audit Committee meetings andreceive its papers. The report of the AuditCommittee is set out on page 28 and theAudit Committee members meet regularlywith the Director of Internal Audit and theexternal auditors without the presence ofexecutive management.There were no changes to the Company’sinternal control over financial reporting thatoccurred during the year ended 30 September2007 that have affected materially, or arereasonably likely to affect materially, theCompany’s internal control over financialreporting.Compliance statementThe Company applied all of the principles setout in section 1 of the Code for the periodunder review and has throughout the yearcomplied with the detailed provisions set outtherein.The Company’s auditors, Deloitte & ToucheLLP, are required to review whether the abovestatement reflects the Company’s compliancewith the nine provisions of the Code specifiedfor its review by the Listing Rules of the UKListing Authority and to report if it does notreflect such compliance. No such report hasbeen made.Communications with shareholdersThe Company places considerableimportance on communication with itsshareholders, including its employeeshareholders. The Group Chief Executiveand the Group Finance Director are closelyinvolved in investor relations and a seniorexecutive has day-to-day responsibility forsuch matters. The views of the Company’smajor shareholders are reported to the Boardby the Group Chief Executive and the GroupFinance Director as well as by Sir RoyGardner (who remains in contact with the10 largest shareholders) and discussed at itsmeetings. The Annual Report and Accountsare available to all shareholders either inpaper form or electronically and can beaccessed via the Company’s website atwww.compass-group.com.There is regular dialogue with institutionalshareholders and this has been extended toinclude private shareholders through theAnnual General Meeting and meetingswith the United Kingdom ShareholdersAssociation. Contact with institutionalshareholders (and with financial analysts,brokers and the media) is controlled bywritten guidelines to ensure the protection ofshare price sensitive information that has notalready been made generally available to theCompany’s shareholders. Contact is alsomaintained, when appropriate, withshareholders to discuss overall remunerationplans and policies. The Group’s preliminaryand interim results, as well as allannouncements issued to the London StockExchange, are published on the Company’swebsite at www.compass-group.com. TheCompany issues regular trading updates andwill issue interim management statements tothe market and these, together with copies ofpresentations and interviews with the GroupChief Executive and Group Finance Directorare, and will be, posted on the Company’swebsite. The Notice of Meeting is circulated