Annual Report and Financial Statements 2011

32 | GOVERNANCE | Directors’ Report on Corporate Governance

provides a forum, both formal and informal, for investors to meet and discuss issues with Directors and senior management of the Company.

At its Annual General Meeting, the Company complies with the provision of the Code relating to the disclosure of proxy votes, the separation of resolutions and the attendance of the Committee Chairmen. The results of the votes cast at the Annual General Meeting are posted on the Company’s website.

Following the announcement of the first phase of the Company’s Strategic Review, the Company’s Executive Chairman and Chief Financial Officer met with a number of the Company’s largest shareholders. The feedback from these meetings was circulated to the Board. Unattributable feedback from a number of the Company’s shareholders, facilitated by the Company’s brokers, is also presented to the Board following management’s year-end results presentations.

Electronic communications Copies of the 2011 Annual Report and Financial Statements, the Notice of Annual General Meeting, other corporate publications, press releases and announcements are available on the Company’s website. Shareholders are encouraged to take advantage of the provisions allowing the Company to communicate electronically.

Internal control The Board has overall responsibility for the Group’s system of internal control and for reviewing its effectiveness on a regular basis. Management’s role is to implement and operate the Board policies on risk and risk management. The system of internal control is 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 errors, losses or fraud.

The Company, as required by the FSA Listing Rules, complied with the Code provisions on internal control for the year ended 31 December 2011.

The procedures that the Directors have established are designed to provide effective control within the Group and accord with the Internal Control Guidance for Directors on the Code issued by the Institute of Chartered Accountants in England and Wales “Internal Control: Guidance for Directors on the Combined Code” (the Turnbull Guidance). Such procedures have been in place throughout the year and up to 23 March 2012, the date of approval of the Annual Report and Financial Statements. A high-level overview of the ongoing process for identifying, evaluating and managing significant risks including social, environmental and ethical issues is detailed below. This process is regularly reviewed by the Board to ensure it complies with the Turnbull Guidance.

Control environment The Group is committed to the highest standards of business conduct and seeks to maintain these standards across all areas of the business. The Group has in place appropriate procedures for the

reporting and resolution of activities that do not meet the required standards of business conduct.

The Group has an appropriate organisational structure for planning, executing, controlling and monitoring business operations in order to achieve its objectives. The structure is designed to provide clear responsibilities and a control framework for key areas of the Group’s business.

Operational responsibility rests with the Chief Executive and is devolved through a documented executive structure with clearly delegated and appropriate levels of authority. Members of Group Management are, therefore, accountable for the operation of the systems of internal controls within the Group’s business.

Business risks The identification of major business risks is carried out by the Board in conjunction with management and procedures to control these risks, where possible, are reviewed and agreed.

Quarterly reports are prepared by each area of the business, covering all key locations. These quarterly reports include issues of material business risk which are discussed in detail by the Group Management which includes both Executive Directors. All significant items identified are reported to the Board on a regular basis.

The key risks facing the Group at the year end and the mitigating actions assigned to these risks are detailed in the Business Review on page 13.

Monitoring and corrective action The Company has a formal compliance function which, in addition to providing regulatory advice to the business, has undertaken compliance monitoring and performed a number of regulatory inspections in 2011. A separate Internal Audit department conducted regular monitoring of various business areas in line with a plan agreed annually with the Audit, Risk & Compliance Committee. Any issues of significance are brought to the attention of the Board by the Internal Audit, Risk & Compliance departments and through the regular reporting process. Planned corrective actions are independently monitored for timely completion and reviewed by the Audit, Risk & Compliance Committee.

The Audit, Risk & Compliance Committee reviews the effectiveness of the operation of the Risk, Compliance and Internal Audit departments at least twice each year.

Independence of the auditor The Board has in place rigorous systems for ensuring the independence, objectivity and effectiveness of the Group’s auditor and has satisfied itself that during the year no aspect of its work was impaired on these grounds. In maintaining a clear perception of independence and balancing that with the best interests of the Group, the Board has a clear policy that it follows when considering the award of non-audit work to the Group’s auditor. The policy applied during 2011 is detailed below.

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