Annual report 2007 - Torotrak

Corporate Governance - continuedRisk Management and Internal ControlsThe Board is ultimately responsible for the Group's system of internal control and meets annually to formally review theeffectiveness of such controls. The control systems are designed to manage, rather than eliminate, various risks of failureto achieve the Company and Group's objectives and therefore are only able to provide reasonable and not absolute,assurance against material misstatement or loss.There is a comprehensive system of financial reporting with monthly performance reports presented to the Board. Theannual budget and the business plan, upon which the budget is based, is reviewed and approved by the Board.There is a continuous process for identifying, evaluating and managing the significant risks the Group faces, which hasbeen in place for the year under review and up to the date of approval of the financial statements. This process is regularlyreviewed by the Board and accords with the Turnbull guidance.Major commercial, technological and financial risks are formally assessed during the annual business planning process,which normally takes place in the last quarter of the financial year. The Board monitors exposure to key business risksand progress towards achieving strategic aims.The Executive Committee, which consists of the executive directors and senior management of subsidiaries, meetsregularly to monitor and control operations. Performance is reviewed, risks & opportunities identified, financial and otherimplications assessed and corrective actions agreed as necessary.Given the Group's scale of operations and centralisation of activities, the Board does not consider it necessary to have adedicated internal audit function. Instead it has chosen to date to contract out such activities as necessary on a projectby project basis.Relations with ShareholderThe Chairman, Chief Executive and Finance Director are the principal points of contact for shareholders. David MacKay asSenior Independent Director is available to shareholders where normal channels of communication may not beappropriate. The Company gives high priority to communications with shareholders by means of an active investorrelations programme, which includes a rolling programme of meetings with institutions and private investor intermediaries.A section of the Company’s web site is dedicated to Investors, the use of which is strongly encouraged. The Company isalso encouraging shareholders to consider greater use of electronic communication which will be quicker, effective, moreenvironmentally friendly and help the Company save printing and mailing costs. A proposal will be put to shareholdersat the Annual General Meeting on 19 July 2007 to accept ongoing Company reports and appropriate notifications inelectronic form.All shareholders are welcomed to the Company's Annual General Meeting which the Board considers to be an importantforum for investor communication, notice of which is contained within this Annual Report on pages 58 to 60. In particular,the meeting provides an opportunity for investors to meet with the Board and chairmen of the committees.24Annual Report and Financial Statement 2007