Punch Taverns plc 2011 Annual Report

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Punch Taverns plc
Annual Report and Financial Statements 2011
Corporate governance statement continued
Evaluation
The Board undertakes formal and rigorous annual
evaluation of its own performance and that of its
Committees and individual Directors.
During the period the Board undertook a formal evaluation of
its own performance and that of its Committees and individual
Directors. The Board considered that the best means of
effectively undertaking this process was a combination of
self- and peer-assessment. This process was led by the Chairman
except in relation to his own performance as Chairman, which
was led by the Senior Independent Non-executive Director.
The results of such reviews are discussed by the Board and
any appropriate action plan agreed.
Re-election
All Directors are submitted for re-election at regular
intervals subject to continued satisfactory performance.
Under the Company’s Articles of Association all new Directors
are required to stand for election at the first AGM after their
appointment. Following their appointments, Stephen Billingham
and Steve Dando will stand for election at the Company’s
forthcoming AGM. The Articles also require all Directors who
held office at the time of the two preceding AGMs, and who
did not retire at either of them, to stand for re-election. This
requirement will be satisfied as the Company has decided to
comply with the Code’s recommendation on annual re-election
and accordingly all other Directors – Ian Dyson, Ian Fraser,
Mark Pain and Roger Whiteside – will stand for re-election
at the forthcoming AGM. The biographical details of each
Director can be found on pages 22 to 23 of this report.
Risk management and internal control
The Board is responsible for determining the nature
and extent of the significant risks it is willing to take in
achieving its strategic objectives. The Board maintains
sound risk management and internal control systems.
The Audit and Risk Committee regularly reviews the effectiveness
of the Company’s system of internal controls to ensure the
effectiveness of those controls in order to safeguard shareholders’
interests and Company assets and guarantee that robust financial
reporting processes are in place, and reports to the Board that
it has done so. Such systems, including controls for financial,
operational, compliance and risk management matters, are
designed to manage rather than eliminate the risk of failure to
achieve the Company’s strategic objectives. However, it should
be recognised that these systems can only provide reasonable
and not absolute assurance against material misstatement or loss.
To enable the Company to identify, evaluate and manage
the significant risks of the Group, the Company has an
ongoing process, in the form of a risk management framework
(the Company’s Risk Register), which is regularly reviewed and
updated by the Board. The processes are in accordance with
the guidance of the Turnbull Committee and have been in place
for the whole of the period and up to the date of this report.
The Board has established, with a view to providing effective
internal control, the following key procedures:
• regular Board meetings to consider the schedule of matters
reserved for the Board;
• a formal annual review of corporate strategy, including regular
reviews of risks facing the business;
• a Company Risk Register which identifies the key risks facing
the business and how these risks are monitored and managed
on an ongoing basis;
• an established organisational structure with clearly defined
lines of responsibility and delegation of authority;
• documented and enforced policies and procedures;
• appointment of staff of the necessary calibre to fulfil their
allotted responsibilities;
• comprehensive budgets and forecasts, approved by the Board,
reviewed and revised on a regular basis, with performance
monitored against them and explanations obtained for
material variances;
• a detailed investment approval process, requiring Board
approval for major projects (post investment appraisals are
conducted and are reviewed by the Board);
• an Internal Audit function which performs continuous
assessments of the quality and effectiveness of risk
management and the internal control environment;
• an Audit and Risk Committee of the Board, comprising
independent Non-executive Directors, which considers
significant financial control matters as appropriate;
• regular reporting by the Audit and Risk Committee to the
Board of Directors regarding internal audit, control updates
and any changes to accounting policies and any accounting
and legal developments;
• documented fraud and whistleblowing policies and procedures,
regular review of current whistleblowing regulations, and
reporting of any whistleblowing incidents to the Audit and
Risk Committee;
• a regular review of treasury policies and activities by the
Audit and Risk Committee;
• an established programme of management and staff
development and succession planning; and
• formal financial reporting processes for preparation of the
consolidated accounts.
Using this monitoring process, the Audit and Risk Committee,
on behalf of the Board, has conducted a review of the
effectiveness of the system of internal control during the
period and has considered the material developments which
have taken place since the year end. The Board satisfied that
the review demonstrated that the Company’s internal control
system is effective.
Audit and Risk Committee and auditors
The Board has established formal and transparent
arrangements for considering how it should apply the
corporate reporting and risk management and internal
control principles and for maintaining an appropriate
relationship with the Company’s auditor.
During the period, following the departure of Ian Wilson,
Tony Rice became a member of the Audit and Risk Committee
and was subsequently replaced by Ian Dyson following the
demerger, to ensure that the Committee remained quorate.
The Committee is made up of three Non-executive Directors,
two of whom are independent and at least one of whom has
recent and relevant financial experience. The terms of reference
of the Committee can be found on the Company’s website
www.punchtaverns.com.
During the period the Audit and Risk Committee held seven
scheduled committee meetings, the attendance of which is
detailed in the table on page 27.
Senior management, including the Finance Director, Company
Secretary and internal and external auditors may be invited to
attend for part or all of each meeting. The internal and external
auditors have unrestricted access to the Audit and Risk
Committee and its Chairman.