Reuters Group PLC Annual Report and Form 20 ... - Thomson Reuters

22 Reuters Group PLC Annual Report and Form 20-F 2002Statement of directors’ responsibilitiesFinancial reportingThe directors are required by UK company law to prepare financialstatements for each financial year, which give a true and fair view ofthe state of the affairs of the company and the Group as at the end ofthe financial year and of the loss and cash flows of the Group for theperiod. Reuters Group is also required to prepare financial statementsand provide additional disclosures in accordance with the requirementsof the SEC.The Group has complied with both UK and US disclosure requirementsin this report in order to present a consistent picture to all shareholders.In preparing the financial statements, applicable accounting standardshave been followed, suitable accounting policies have been used andapplied consistently and reasonable and prudent judgments andestimates have been made.The directors have reviewed the Group’s budget and cash flowforecast for the Group and the company for the year to 31 December2003 and outline projections for the subsequent year in the light ofthe Group’s financial position and borrowing facilities at 31 December2002. On the basis of this review the directors are satisfied that theReuters Group is a going concern and have continued to adopt thegoing concern basis in preparing the financial statements.Risk management and internal controlsThe directors acknowledge their responsibility for the Group’s systemof internal control and confirm they have reviewed its effectiveness.In doing so, the Board has taken note of the Turnbull guidance fordirectors on internal control, Internal Control: Guidance for Directorson the Combined Code, which is applicable to all UK listed companies.The Board confirms that it has adopted a process for identifying,evaluating and managing significant risks the Group faces. Thisprocess, which accords with the Turnbull guidance, has been in placefor the full financial year and is ongoing. The overall internal controlsystem includes written policies and control procedures, clearly drawnlines of accountability and delegation of authority, and comprehensivereporting and analysis against approved budgets. There are supportingpolicies and procedures for reporting and management of controlbreakdowns. The Board considers that the control system is appropriatelydesigned to manage, rather than eliminate, the risk of failure toachieve business objectives and can only provide reasonable andnot absolute assurance against material misstatement or loss. Theconcept of reasonable assurance recognises that the cost of a controlprocedure should not exceed the expected benefits.Using a common risk management framework throughout theorganisation, each of the principal business and functional unitsidentifies the significant risks that could impede the achievementof their objectives and records them in a ‘Risk Register’. For eachsignificant risk, line managers document an overview of the risk,consider the effectiveness of the current controls in place and identifyany improvement actions required. In addition to the continuousmonitoring processes embedded within the business, the GroupOperating Committee monitors all significant operating risks. Thereis also a regular schedule of Group Risk Registers (covering significantoperational, financial and strategic risks) submitted twice a year forreview to the Group Management Committee and the Audit Committee.A common risk assessment process has also been adopted as an integralpart of major programmes such as the restructuring programme.Instinet and TSI, which are both listed on Nasdaq, have their ownsystems of risk management and internal controls on which theyeach report publicly to their shareholders. The boards of Radianz andFactiva, which include Reuters representatives, have responsibility foradopting processes for identifying, evaluating and managing significantrisks in their respective businesses. Reuters assessment of the mainrisks relating to its affiliate companies are considered by the membersof the Group Management Committee and included where requiredin the Chief Executive’s report to the Audit Committee.In addition to the self-assessment and management review procedures,the company monitors its internal financial control system through aprogramme of internal audits. Internal auditors independently reviewthe controls in place to manage significant risks and report to theAudit Committee twice a year. The Audit Committee reviews theassurance procedures, including compliance controls, on a biannualbasis and reports their findings to the Board.The Group’s external auditors, PricewaterhouseCoopers, haveaudited the financial statements and have reviewed the work ofinternal auditors and the internal control systems to the extent theyconsider necessary to support their audit report. The Audit Committeehas met internal auditors and PricewaterhouseCoopers to discuss theresults of their work.During 2002, the directors were not aware of any control failures thatresulted in a material loss to the Group.Disclosure controls and proceduresWithin the 90-day period prior to the filing of this report, an evaluationwas carried out under the supervision and with the participation ofReuters management, including the Chief Executive and FinanceDirector, of the effectiveness of the design and operation of theGroup’s disclosure controls and procedures which are defined as thosecontrols and procedures designed to ensure that information requiredto be disclosed in reports filed under the Securities Exchange Actof 1934 is recorded, summarised and reported within specific timeperiods. As of the date of the evaluation, the Chief Executive andFinance Director concluded that the design and operation of thesedisclosure controls and procedures were effective. No significant changeswere made in the Group’s internal controls or in other factors thatcould significantly affect these controls subsequent to their evaluation.By order of the BoardRosemary MartinCompany Secretary24 February 2003In connection with the preparation of the statement on internal controlin this report, the Group Management Committee formally considersthe operation and effectiveness of Reuters risk management andinternal control systems. This review includes consideration of selfassessmentreports from line management and covers each of themost significant risks faced and how well these are controlled andmanaged. The Chief Executive and Chief Operating Officer report onthe results of this review to the Audit Committee. Since October 2002a Disclosure Committee, chaired by the Chief Executive, has alsosupported the process by reviewing disclosure controls and procedures.