Annual Report 2012 - Development Securities PLC

Internal control
The Directors acknowledge their responsibility for
reviewing the effectiveness of the Group’s system of
internal control to safeguard shareholders’ investments
and protect the Company’s assets. The Directors
acknowledge that they are responsible for determining
the nature and extent of the significant risks the
Company is willing to take in achieving its strategic
objectives. The operational, financial and compliance risk
controls are designed to manage rather than eliminate
the risk of failure to achieve business objectives and can
only provide reasonable and not absolute assurance
against material misstatement or loss. The Board has
conducted a thorough risk assessment of the business,
identifying risks, their potential impact, likelihood of
occurrence, controls and mitigating actions, together with
early warning systems and further actions which need to
be implemented.
Detailed below is a description of the Group’s internal
control and risk management used in the process of
preparing the Consolidated financial statements.
The regular process of identifying, evaluating and
managing significant corporate risks has been delegated
by the Board to a Risk Committee, consisting of M H
Marx as Chairman, C J Barwick, M S Weiner, G Prothero
and two senior managers, R C McCubbine and D A K
Trench. During the period there has been at least one
Non-executive Director in attendance at meetings of the
Risk Committee.
The Committee meets quarterly during the year to
ensure that the Group’s risk management procedures are
comprehensive and appropriate for the current economic
climate, regulatory requirements and business
operations. The Committee’s remit includes all of the
Group’s subsidiaries and those joint ventures and
associates which are administered by the Company.
Risks arising from externally managed joint ventures are
managed at the boards of the joint venture companies.
In view of the increased number and complexity of these
joint ventures the Risk Committee is in the process of
deliberating the best strategy to identify, monitor and
mitigate the risks arising out of these joint ventures in
respect of the Group’s exposure. The minutes of the
Committee’s deliberations are reviewed by the Board.
In addition to the activities of the Risk Committee, a risk
evaluation on each significant prospective development,
investment or joint venture opportunity is evaluated by
the Board, and for development opportunities, the risks
are evaluated by an internal independent Project Review
Committee. The Executive Directors regularly evaluate
the Group’s risk-weighted development exposure, which
is then considered by the Board. All necessary actions
Corporate Governance
have been or are being taken to remedy any weaknesses
acknowledged from the quarterly reviews. No significant
failings were identified over the period.
A ‘whistleblowing policy’ has been prepared and
issued to all staff in the Group, outlining arrangements
by which they may, in confidence, raise concerns about
possible improprieties in matters of financial reporting
or other issues.
HW Fisher & Company were appointed as the
Company’s internal auditors in 2010. In this capacity HW
Fisher & Company report to the Audit Committee. They
attend meetings of the Risk Committee, and from these
meetings, and discussions with management, they
identify areas of potential weakness or improvement in
the Group’s financial controls. They propose an agenda
of work to the Audit Committee, at least annually, and
devise and implement appropriate work programmes,
independently of management.
The Board has conducted a review of the
effectiveness of the system of internal control for the
period ended 29th February 2012 and to the date of this
report, and considers that there is a sound system of
internal control which accords with the Turnbull Report,
Internal Control: Guidance for Directors on the Combined
Code. The Board is satisfied that there is an ongoing
process for identifying, evaluating and managing the
Group’s significant risks including financial, operational
and compliance controls and that it is regularly reviewed.
Takeover Directive
Details of the required disclosure under the Takeover
Directive can be found in the Directors’ Report on pages
46 to 51 and the Remuneration Report on pages 57 to
64 and are incorporated herein by cross reference.
Statement of Directors’ responsibilities
The Directors are responsible for preparing the Annual
Report, the Remuneration Report and the financial
statements in accordance with applicable law and
regulations.
Company law requires the Directors to prepare
financial statements for each financial year. Under this
law, the Directors have prepared the Group financial
statements in accordance with International Financial
Reporting Standards (IFRSs) as adopted by the
European Union, and the Parent company financial
statements in accordance with United Kingdom
Generally Accepted Accounting Practice (United
Kingdom Accounting Standards and applicable law).
Under company law the Directors must not approve the
financial statements unless they are satisfied that they
give a true and fair view of the state of affairs of the
Development Securities PLC / Annual Report 2012 55