Internal control

The Board encourages a culture of integrity and openness. The Group has an organisational structure with clear lines of accountability and authority across its worldwide operations, supported by appropriate reporting procedures. Each of the regional businesses is accountable to the CEO and is managed within the strategic guidelines and delegated authorities adopted by the Board. The Executive Team, chaired by the CEO and comprising the Executive Directors, regional heads and functional heads, meets regularly to discuss issues facing the Group.

Control procedures have been established in each of the Group’s operations to safeguard the Group’s assets from loss or misuse and to ensure appropriate authorisation and recording of financial transactions. All acquisition and investment decisions are subject to disciplined investment appraisal processes. Risk management procedures are in place for the Group’s operations, including its energy marketing and trading activities, which are overseen by the Global Commodities Risk Committee. This Committee comprises Executive Directors and Senior Managers, and is chaired by the CFO. The Group Treasury function operates under defined policies and the oversight of the CFO and the Head of Corporate Finance and Treasury.

Executive management submits an annual corporate budget and plan to the Board for approval. The budget and plan for each business unit is the quantified assessment of its planned operating and financial performance for the next financial year, together with a revision of the budget for the current year. Group management reviews the plans with each operational team. The individual plans are based on key economic and financial assumptions and incorporate an assessment of the risk and sensitivities underlying the projections.

Monthly performance and financial reports are produced for each business unit, with comparisons to budget. Reports are consolidated for overall review by the Executive Team, together with forecasts for the income statement and cash flow. Detailed reports are presented to the Board on a regular basis.

Each business unit is subject to regular performance reviews with Group management during the year. Actual results and forecasts for the year are compared to budget. Key operational and financial results are reviewed together with the risk profile and business environment of the reporting unit.

Investment projects are subject to formal review and authorisation procedures with designated levels of authority, including a review by the Investment Commitment Committee (ICC) chaired by the CEO and comprising the Executive Team. Major projects are subject to Board review and approval.

The Company has a Disclosure Committee which is chaired by the Company Secretary and is comprised of representatives from the Internal Audit, Corporate Communications, Operations and Engineering, Company Secretariat, Business Control and External Reporting teams. It reviews the Annual Report, the Summary Annual Report and the Results Brief.

As outlined in the Annual Report there is a continuous process for identifying, evaluating and managing the key risks faced by the Group. Activities are co-ordinated by the Executive Team. The CFO retains overall responsibility, on behalf of the Board, for ensuring that the systems for identifying and assessing significant risks are adequate, that appropriate control systems and other mitigating actions are in place, and that residual exposures are consistent with the Group strategy and objectives.

The Board reviews the effectiveness of established internal controls through the Audit Committee, which receives reports from management, Internal Audit, and the external auditor on the systems of internal control and risk management arrangements.

Following completion of the Combination, internal control and risk management have been embedded into the combined operations of the business.

The Board confirms that the actions it considers necessary have been or are being taken to remedy such failings and weaknesses as it has determined to be significant from its review of the system of internal control. This has involved considering the matters reported to it and developing plans and programmes that it considers reasonable in the circumstances.