BAM Abbreviated Annual Report 2011 - Siteseeing in the world of ...

On the one hand, the operating companies are very
diverse – in relation to their specific sectors and
geographical areas of operation – and, on the
other hand, they also show a significant number
of joint, Group-wide elements.
Risk management philosophy
In line with the Group’s control framework,
risk management is largely placed within the
individual operating companies as part of their
policy-related and operational processes.
As an additional measure, the Group operates
an in-house control framework based on COSO
(the Committee of Sponsoring Organizations of
the Treadway Commission), which focuses on
the reliability of financial information.
General control measures
The Group’s risk management and control
systems involve the use of various instruments. One
general control instrument consists of instructions from
the Group to the management of the operating
companies. These instructions set out such matters as
limits for commitments with regards to investments and
the acceptance of new projects. These guidelines also
define the powers invested in the operating company
managers and lay down quality requirements for
fundamental control measures. These management
instructions are reassessed annually and modified if
necessary.
A second general control instrument consists of the
guidelines for the organisation of the financial reports
compiled by the operating companies, and for the
procedures to be followed in connection with those
reports.
A third general control instrument employed by the
Group involves budgeting, reporting and (internal) audit
systems. The entire Group uses uniform guidelines and
accounting policies, which serve as the basis for all
financial and management reporting.
As part of the extensive quarterly reports, which include
detailed monitoring of the forecast results and results
already achieved by the operating companies, the
operating companies provide interim reports on any
deviations from the expected financial results and
movements in cash positions, supply of work, turnover
and results.
Besides general control measures, the Group has also
implemented specific measures focused primarily on
risks relating to market, reputation, safety, projects,
currency, credit, debtors, interest and liquidity positions.
These risks are discussed in greater detail either below or
on page 123 of the financial statements, along with the
control measures that the Group has taken.
External auditor’s management letter on internal
control systems
In 2011, as in previous years, the external auditor audited
and tested several aspects of the Group’s internal control
systems. The auditor’s main finding is that the quality of
the internal control systems at the Group’s operating
companies is generally good and developing in a positive
way. However, the external auditor also feels that some
improvements are required in the internal control
systems of a limited number of the Group’s operating
companies. In addition, the auditor advised the Group to
focus its attention in particular on the outsourced
application management of a software package that is
widely used within the Group.
Market risk
Royal BAM Group generates income in various
geographical markets, carrying out a range of different
types of activities. The Group’s financial performance
depends partly on the economic climate in the countries
in which Royal BAM Group operates.
Consumer confidence in the housing market is one of the
factors that determine the state of the property sector
and – to a lesser extent – the construction and
mechanical and electrical services sector as a whole in
the Netherlands. The debates about whether mortgage
interest should be tax-deductible and about the
affordability of owning one’s own home are key factors
that affect consumer confidence. There are structural
vacancy levels on the commercial property market,
especially where office space is concerned. These issues
can result in an increase in the stock of unsold units and
impairments on the property portfolio. The control
measures implemented to reduce the risks are described
under project risks.
The effects of the economy on the Group’s turnover are
limited in many cases – especially in the infrastructure
sector – because the contracts in question are awarded
by government bodies. The Group has also benefited
further because of recent government incentive schemes
in the form of additional spending. Government bodies
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2011