Download Annual Report 2006 - Foskor

CORPORATE REVIEWBOARD AND BOARD SUB-COMMITTEESAll directors have unlimited access to the adviceand services of the Group Secretary, who isresponsible to the Board for ensuring that Boardprocedures are followed.and non-quantifiable risks (e.g. reputation).5. Risk management is a process that iscontinual and evolving in nature so that itremains dynamic and relevant to the businessas business changes over time.Our phosphate rockis returned to theearth in the form offertilizer.The Board has established the following subcommitteesto assist in the discharge of itsduties:• Human Resources• Technical• Audit & RiskThe Board Audit & Risk Committee comprisesfour non-executive directors and the President/CEO. The Chief Financial Officer andrepresentatives from the external auditors,internal auditors and management attend themeetings of the Committee.The Committee is authorised by the Board toaccess any internal audit report and financialinformation and can instruct the managementof Foskor, the internal auditors or the externalauditors to conduct any investigation or studyas it deems necessary. Both the internal andexternal auditors have unrestricted access tothe Committee, which meets at least once everyquarter. The Board Audit & Risk Committeeoperates in accordance with a formalised BoardAudit & Risk Committee Charter.Management has reviewed the Annual FinancialStatements with the Board Audit & RiskCommittee and the external auditors. The qualityand appropriateness of the accounting policieswere fully discussed with the external auditors.The Board Audit & Risk Committee considersthe Annual Financial Statements of Foskor(Pty) Limited and its subsidiaries to be a fairrepresentation of its financial position, resultsof operations and cash flow information for theyear ended 31 March 2006.RISK MANAGEMENTFoskor’s risk management philosophy is:1. Risk management does not equate to riskavoidance.2. To create and enhance shareholder value, riskhas to be borne.3. We do not seek to avoid risk but to understandit properly, manage it effectively and evaluateit in the context of the reward that is beingearned.4. Equal attention is paid to both quantifiableLike all commodity exporters, the Group isvulnerable to the exchange rate. Its effortsto reduce its vulnerability are affected by thecurrent high cost of strategic raw materials,which increases logistical and operationscosts. The recent restructuring and operationalcontinuous improvement efforts are utilised tomanage this risk.The system of risk management and internalcontrol is intertwined with the company’soperating activities to provide assurance thatenterprise-wide policies and procedures are inplace to address all forms of risk identified asinherent to the company’s activities. We followa combined assurance concept to manageenterprise-wide risk.In 2001 Foskor introduced an integrated riskmanagement system in order to comply withgood corporate governance in line with King2 Commission recommendations. This systemhas been continuously upgraded and in 2006Foskor intends to intensify its risk managementefforts by streamlining the risk methodology andtraining all staff in its proper implementation.In the new financial year Foskor intends utilisingproactive data analysis tools to better managethe fraud risks from a prevention, detection andresponse perspective. This will help to identifyfraud red flags, hidden or masked relationships,and fraud control weaknesses.INTERNAL CONTROL AND INTERNALAUDITTo meet its responsibility with respect to providingreliable and accurate financial information, theGroup maintains financial and operating systemsof internal control. These controls are designedto provide reasonable assurance regarding theachievement of organisational objectives withrespect to:• the effectiveness and efficiency of operations;• the safeguarding of the company’s assets(including assets);• compliance with applicable laws, regulationsand supervisory requirements;12