Pg 108 - Berjaya Corporation Berhad

Statement on Internal ControlThe Board of Directors of Berjaya Sports Toto Berhad (“BTOTO”or “the Group”) recognises that it is responsible for the Group’ssystem of internal control and for reviewing its adequacy andintegrity. Notwithstanding that, in view of the limitations that areinherent in any system of internal control, the Group’s systemcan only provide reasonable but not absolute assurance againstmaterial misstatement or loss, as it is designed to manage ratherthan eliminate the risk of failure to achieve business objectives.The Board’s primary objective and direction in managing theGroup’s principal business risks are to enhance the Group’s abilityto achieve its business objectives. In order to achieve theseobjectives, the Board has identified, evaluated and managedthe significant risks being faced by the Group by monitoringthe Group’s performance and profitability at its Board meetings.The management of the Group as a whole is assigned to theExecutive Directors.The Company has established a Risk Management Committee(“RMC”) with the intention to further enhance the Group’ssystem of internal control and be in line with the Malaysian Codeof Corporate Governance. The RMC together with the auditcommittee are entrusted to ensure more effective and efficientidentification, evaluation, management and reporting of theGroup’s risks. During the financial year ended 30 April 2008, theRMC held 5 meetings to review the reports tabled by the RiskManagement Working Committee (“RMWC”) made up of all headsof departments of the principal subsidiary company. The RMChad evaluated and monitored the progress of any risk factors andinternal control matters relating to the operations raised by theRMWC. The members of the RMC are Tan Sri Dato’ Thong YawHong (Chairman), Tan Sri Dato’ Jaffar bin Abdul, Mohamed Salehbin Gomu, Datuk Robert Yong Kuen Loke and Seow Swee Pin(who replaced Mr. Ng Foo Leong after his retirement during theyear). The RMC terms of reference include, inter alia:• To ensure that the strategic context of the risk managementstrategy is complete;• To determine the overall risk management processes;• To establish effectiveness of risk management process;• To establish risk reporting mechanism;• To ensure that the short and long term risk managementstrategy, framework and methodology are implemented andconsistently applied by all business units;• To ensure that risk management processes are integratedinto all core business processes;• To establish business benefits;• To ensure alignment and coordination of assurance activityacross the organisation; and• To act as steering committee for the group wide riskmanagement programme.The Board has assigned the Audit Committee with the duty ofreviewing and monitoring the effectiveness of the Group’s systemof internal control. The Audit Committee receives assurancereports from the internal auditors on findings from their visits tothe operating units, as well as from the external auditors on areasfor improvement identified during the course of their statutoryaudit. The Board reviews the minutes of the Audit Committee’smeetings. The Report of the Audit Committee is set out on pages22 to 23 of the Annual Report.The various scheduled management meetings and the reviewof financial and operations reports coupled with the ‘close tooperations’ policy employed by the Executive Directors andmanagement provide the platform for timely identification of theGroup’s risks and systems to manage those risks. The ExecutiveDirectors update the Board on any significant matters whichrequire the latter’s attention.The management of the Group’s individual operating units isassigned to local management who are accountable for theconduct and performance of their businesses within the agreedbusiness strategy. At Sports Toto Malaysia Sdn Bhd, the Group’sprincipal subsidiary company, operations are divided into regionsand areas due to dispersed locations of agents’ outlets. Regionaland area offices are staffed by experienced personnel to ensurethat the operations of the outlets are well controlled and in linewith the operating procedures. Similarly, the overseas operations,namely Prime Gaming Philippines, Inc. group and InternationalLottery & Totalizator Systems, Inc. group are being managed byexperienced personnel in their respective country offices. Regularreporting on performance of their businesses are provided tothe Executive Directors of BTOTO who are assigned to managethe respective overseas operations. In addition, the ExecutiveDirectors in charge also made field visits to these overseasoperations as well as to conduct periodic performance reviewmeetings with the management personnel, thus ensuring thebusiness plans and targets are met.The key features of BTOTO’s system of internal control include:• Clear organisation structure with defined reporting lines;• Capable workforce with clear job descriptions, andcontinuous training efforts;• Monitoring mechanisms in the form of financial andoperations reports, and scheduled management meetings;• Formal employee appraisal system which enables appraisalof employees and rewarding employees based onperformance;• Formal operating and draw procedures which set out theexpected standards for its operations;• Surprise checks on agents to ensure compliance with theGroup’s policies and procedures;• Physical security and systems access controls;• Independent assurance on the system of internal controlfrom regular internal audit visits;• Business continuity planning; and• Succession planning to ensure that key positions in theGroup are always being held by capable employees whoare well aware of the Group’s risks, and operating policiesand procedures.The Board remains committed towards operating a sound systemof internal control and therefore recognises that the system mustcontinuously evolve to support the type of business and sizeof operations of the Group. As such, the Board, in striving forcontinuous improvement will put in place appropriate actionsplans, when necessary, to further enhance the Group’s systemof internal control.Berjaya Sports Toto Berhad (9109-K) Annual Report 2008 27