Risk Management and Internal Control
The Audit Committee is responsible for reviewing the effectiveness of the Group's system of internal control.
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 misstatement or loss.
The Board has established a clear organisational structure with defined authority levels. The day-to-day running of the Group’s business is delegated to the Executive Directors of the Company. The Executive Directors visit each operating unit on a regular basis and meet with both operational and finance management and staff.
Key financial and operational measures relating to revenues, cash and receivables are reported on a weekly basis. Detailed management accounts and KPIs are prepared monthly using a robust proprietary reporting system to collect and analyse financial data in a consistent format. Monthly results are measured against both budget and half year reforecasts which have been approved and reviewed by the Board. All capital expenditure above pre-defined amounts must be supported by a paper prepared by business management.
All financial data is taken directly from the trial balances of each business held in their local ERP systems and re-analysed and formatted into a separate Group management reporting system, operated by the Group finance department. There is no re-keying of financial data and very limited use is made of spreadsheets by the Group businesses to report monthly financial results. The Group finance department continues to develop the functionality of this management reporting system to provide greater insights into the activities of the Group’s businesses. The Group’s internal auditor regularly audits the base data at each business to ensure it is collected by the management reporting system.
As part of the year end close process each business is required to complete a self-assessment which evaluates their financial control environment in the business designed to identify weaknesses in controls. These assessments are critically reviewed by the Group’s Internal Audit Manager and a summary for each business is prepared for the Audit Committee. In addition, senior management of each business are required to confirm their adherence with Group accounting policies, processes and systems of internal control by means of a representation letter addressed to the Audit Committee.
The risks and uncertainties which are currently judged to have the most significant impact on the Group's long term performance are set out in the Annual Report & Accounts 2016.