The Audit Committee
The membership of the Audit Committee is set out within the Audit Committee Report. The Audit Committee report which describes the Audit Committee's work in discharging its responsibilities, is set out within the Audit Committee Report.
Risk Management and Internal Control
The Board has overall responsibility for establishing and maintaining a system of risk management and internal control, and for reviewing its effectiveness. This system is designed to manage, rather than eliminate, the risks facing the Group and safeguard its assets. No system of internal control can provide absolute assurance against material misstatement or loss. The Group's system is designed to provide the Directors with reasonable assurance that problems are identified on a timely basis and are dealt with appropriately.
The Audit Committee assists the Board in reviewing the effectiveness of the Group's system of internal control, including financial, operational and compliance controls, and risk management systems. The key features of the Group's system of internal control are set out below.
|Strategy and financial reporting|
- comprehensive strategic planning and forecasting process
- annual budget approved by the Board
- monthly operating financial information reported against budget
- key trends and variances analysed and action taken as appropriate
- accounting policies and procedures formulated and disseminated to all Group operations
- cover the application of accounting standards, the maintenance of accounting records and key financial control procedures
- operating companies and corporate offices maintain internal controls and procedures appropriate to their structure and business environment
- compliance with Group policies on items such as authorisation of capital expenditure, treasury transactions and the management of intellectual property
- common accounting policies and procedures and financial reporting software used in financial reporting and consolidation
- significant financing and investment decisions reserved to the Board, including guarantees and indemnities
- Board monitors policy and control mechanisms for managing treasury risk
|Risk assessment and management|
- continuous process for identifying, evaluating and managing any significant risks
- risk management process designed to identify the key risks facing each business
- reports made to Board on how those risks are managed
- each major Group Business Unit produces a "risk map" to identify key risks, assess the likelihood of risks occurring, their impact and mitigating actions
- Board reviews insurance and other measures used in managing risks across the Group
- Board notified of major issues and makes an annual assessment of how risks have changed
Reviewing the Effectiveness of Internal Contol
The internal control system is monitored and supported by the Group's internal audit function, which conducts reviews of Vesuvius' businesses and reports objectively both on the adequacy and effectiveness of the system of internal control and those businesses' compliance with Group policies and procedures. The Audit Committee receives reports from the Group Head of Internal Audit and reports to the Board on the results of its review.
As part of the Board's process for reviewing the effectiveness of the system of internal control, iit delegates the following matters to the Audit Committee to be carried out during the year:
- Review of external and internal audit work plans
- Consideration of reports from management, internal audit and external audit on the system of internal control and any significant control weaknesses
- Discussions with management on the actions taken on problem areas identified by Board members, in internal audit reports or in external audit management letters
At the year-end, following the review by the Audit Committee of internal financial controls and of the processes covering other controls, the Board evaluated the results of the internal control and risk management procedures conducted by senior management. This included a self-certification exercise by which senior financial, operational and functional management throughout the Group certified the effectiveness of the system of internal control within the business area for which they were responsible, together with their compliance throughout the year with the Group's policies and procedures.
Consequently, in accordance with the provisions of the Code, the Directors confirm that they have reviewed the effectiveness of the Group's system of internal control and that the necessary actions have been taken to remedy any control weaknesses identified during the year. Since the date of this review there have been no significant changes in internal controls or other matters which could significantly affect them.
Executive Compensation and Risk
All of the independent Non-executive Directors serve on both the Audit and Remuneration Committees. They therefore bring their experience and knowledge of the activities of each committee to bear when considering the critical judgements of the other. This means that the Directors are in a position to consider carefully the impact of incentive arrangements on the Group's risk profile and to ensure the Group's remuneration policy and programme is structured so as to accord with the long-term objectives and risk appetite of the Company.
Share Capital and Voting
Disclosure of the information regarding share capital, the authorisation received by Directors at the AGM regarding the issue of shares and the authority to purchase own shares, is contained in the Directors' Report. There are no restrictions on voting contained in the Company's Articles of Association. Further details are set out in the Directors' Report.
Relations with Shareholders
The Board is committed to communicating with shareholders and stakeholders in a clear and open manner, and seeks to ensure effective engagement through the Company's regular communications, the AGM and other investor relations activities. The Company undertakes an ongoing programme of meetings with investors, which is managed by the Chief Executive and Chief Financial Officer. The majority of meetings with investors are led by them. However, the Chairman, Senior Independent Director and Committee Chairs remain open for discussion with shareholders on matters under their areas of responsibility, either through contacting the Company Secretary or directly at the AGM. All Directors are expected to attend the Company's AGM, providing shareholders with the opportunity to question them about issues relating to the Group, either during the meeting or informally afterwards.
The Company reports its financial results to shareholders twice a year, with the publication of its Annual and Half-Yearly Financial Reports. It also issues two further trading updates each year with the publication of its Interim Management Statements. In conjunction with these announcements, presentations or teleconference calls are held with institutional investors and analysts. Recordings of these will be made available on the Group's website (www.vesuvius.com) along with hard copies of any presentation materials issued.