East Thames Group Limited Financial Statements 3
REPORT OF THE BOARD, continued
Identification and evaluation of key risks Management responsibility has been clearly defined for the identification, evaluation and control of significant risks. The Group has an overall Risk Management Strategy which is reviewed annually and produces Group and individual subsidiary risk maps which identify key risks linked to our Strategic Plan. These risks are scored in terms of impact (including reputational image) and probability both in terms of the initial risk and the residual risk once adequate control measures are in place. We have undergone a major transformational change programme internally during the course of the year which has seen major changes to the executive staff structure. Changes to our approach to monitoring risk have been agreed as a result of these changes and will be implemented during 2008-09. There is a formal and on-going process of management review in each area of the Group’s activities. This process is co-ordinated through a quarterly reporting framework to the Group Risk Management and Audit Committee/Boards which review changes to the risk map on an on-going basis. The Group Executive and Officer Risk Management Panel regularly consider reports on significant risks facing the Group. The Group Chief Executive/relevant Managing Director are responsible for reporting to the respective Board(s) any significant changes affecting key risks. Monitoring and corrective action A process of control self assessment and regular management reporting on control issues provides hierarchical assurance to successive levels of management and to the Board. This process continues to be developed to ensure a rigorous approach and includes action for ensuring that corrective action is taken in relation to any significant control issues. Control environment and control procedures The Board retains responsibility for a defined range of issues covering strategic, operational, financial and compliance issues including treasury strategy and new investment projects. The Board has adopted the National Housing Federation 2004 Code of Governance
– Competence and Accountability. Adherence to the code has been reviewed to ensure that the Group continues to comply and is at the forefront of best practice. It is used as a basis for the Group’s policies with regard to quality, integrity and ethics and is supported by a framework of policies and procedures, with which employees must comply. These cover issues such as delegated authority, segregation of duties, accounting, treasury management, health and safety, data and asset protection and fraud prevention and detection. Information and financial reporting systems Financial reporting procedures include detailed budgets for the year ahead and forecasts for subsequent years. These are reviewed and approved by the Board. The Board also regularly reviews key performance indicators to assess progress towards the achievement of key business objectives, targets and outcomes. As part of our current change programme, a Chief Executive Support Unit has been established which will coordinate our approach to performance management and to measuring the critical success factors of the business. The internal control framework and the risk management process are subject to regular review by Internal Audit who are responsible for providing independent assurance to the Board via its Group Risk Management and Audit Committee. The Group Risk Management and Audit Committee considers internal control and risk regularly during the year.
Fraud The Board has established a fraud policy which covers the prevention, detection and reporting of fraud along with the recovery of assets. The Group operates a zero tolerance policy in relation to theft and fraud and reports all such confirmed instances to the relevant authorities. The Fraud Register is reviewed on an on-going basis through the Group’s Group Risk Management and Audit Committee and annually by the Board.