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Statement on Internal Control
Introduction
Paragraph 15.26(b) of the Main Market Listing Requirements (the “Listing Requirements”) of Bursa Malaysia Securities Berhad
(“Bursa Malaysia”) requires the Board of Directors of public listed companies to include in its Annual Report a “statement about
the state of internal control of the listed issuer as a group”. The Board of Directors of Malaysia Smelting Corporation Berhad (the
“Board”) is committed to maintaining a sound system of internal control in the Group and is pleased to provide the following
statement, which outlines the nature and scope of internal control of the Group during the financial year ended 31 December 2011.
Board responsibility
The Board acknowledges its responsibility for maintaining a sound system of internal control to safeguard Shareholders’
investment and the Group’s assets and for reviewing its adequacy and integrity. The system of internal control covers not only
financial controls but operational and compliance controls and risk management procedures.
In view of the limitations inherent in any system of internal controls, the system is designed to manage, rather than to eliminate,
the risk of failure to achieve the Group’s corporate objectives. Accordingly, it can only provide reasonable but not absolute
assurance against material misstatement or loss.
Following the publication of the Statement on Internal Control: Guidance for Directors of Public Listed Companies (the “Internal
Control Guidance”) by the Task Force on Internal Control in December 2001, the Board confirms that there is an ongoing process
for identifying, evaluating and managing significant risks faced by the Group. The Board, through its Audit Committee, regularly
reviews the results of this process. The Board confirms that this process is in place for the year under review and that it accords
with the Internal Control Guidance.
The Board has established key policies on the Group’s risk management and internal control systems, including those establish in
material joint ventures and associated companies, for the purpose of this statement.
Risk management framework
The Board fully supports the contents of the Internal Control Guidance and with the assistance of the Internal Audit function and
external service providers, continually reviews the adequacy and integrity of the risk management process in place.
Management is responsible for the management of risks, including developing, operating and monitoring the system of internal
control and for providing assurance to the Board that it has done so in accordance with the policies adopted by the Board. Further
independent assurance is provided by the Internal Audit function, which operates across the Group, and supported by internal
audit co-sourcing arrangements with external service providers, as appropriate.
The Board believes that maintaining a sound system of internal control is founded on a clear understanding and appreciation of
the following key elements of the Group’s risk management framework:
• A risk management structure which outlines the lines of reporting and responsibility at the Board, Audit Committee and
Management levels have been established;
• Identification of principal risks (present and potential) faced by operating units in the Group and Management’s plans to
mitigate or manage these risks. The identification process is driven by the Audit Committee with assistance from Group
Internal Audit function and external consultants. For each principal risk, the assessment process considers the potential
impact and likelihood of occurrence, effectiveness of controls in place (if any), and action plans taken to manage those risks
to the desired level. A database of these risks and controls has been created to produce a risk register and individual risk
profiles for the major business units;
• Risk appetite and parameters (qualitative and quantitative) for the Group and individual business units have been articulated
so as to gauge acceptability of risk exposure;
• Issuance of a Risk Management Policy and Guidelines Document for the Group. The document offers practical guidance to
employees on risk management issues; and
• Preparation of action plans to address risk and control issues on an ongoing basis.
The Board considers that the risk management framework is robust, but will still subject the framework to continuous improvement,
taking into consideration better practices and the changing business environment.
MALAYSIA SMELTING CORPORATION (43072-A) • ANNUAL REPORT 2011 65