Directors' Responsibilities and Internal Control
The directors are responsible for the Group's system of internal control, which covers financial, operational and compliance controls together with risk management. Whilst no system can provide absolute guarantee and protection against material loss, the system is designed to give the directors reasonable assurance that problems can be identified promptly and remedial action taken as appropriate. The directors, through the board's review of risk and the work of the audit Committee, have reviewed the effectiveness of the system of internal control for the accounting period under review and consider that it accords with revised guidance. There were no material weaknesses in the Group's system of internal control relating to financial control during the year. The key features of the Group's internal control system are:
Control Environment
A key factor in the Group’s approach to internal control is the recognition of the need for risk awareness and the ownership of risk management by executives at all levels. Each operating division has its own Board. A Statement of Group Policies and Procedures sets out the responsibilities of these Divisional Boards, including authority levels, reporting disciplines and responsibility for risk management and internal control. Certain activities, including treasury, taxation, insurance, pension and legal matters are controlled centrally with reports reviewed by the Board as appropriate.
Back to topRisk Identification and Review
Key identified risks, both financial and non financial (the latter including environmental, social and governance “ESG” risks), are reviewed by the Board as well as at Operating Board level on an ongoing basis, with a formal annual review of risks and controls taking place, supported by the Group’s Controls Assurance provider.
The Divisional Operating Boards also review each division’s performance, strategy and risk management. Annual compliance statements on internal control are certified by each Divisional Board. A Treasury Review Committee meets regularly to review the adequacy of the Group’s facilities against potential utilisation and commitments, as well as to monitor and manage the Group’s exposure to interest rate and currency movements.
Financial Reporting
There is a comprehensive Group-wide system of financial reporting. Figures reported include profit, cash flows, capital expenditure, balance sheet and relevant performance indicators. Each operating division prepares an annual budget which is approved by the Board. Thereafter a formal re-forecasting exercise is undertaken at least twice during the year. Actual monthly results are monitored against budget, forecasts and the previous year’s results. Any significant variances are investigated and acted upon as appropriate.
Back to topInvestment Appraisal
There are clearly defined investment guidelines for capital expenditure. All such expenditure is subject to formal authorisation procedures, with major proposals being considered by the Board. Post investment appraisals are conducted for all material capital projects.
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