Annual Report 2011 - Analist.be

6. Risk management and internal controlThe Board of Directors of GBL is responsible for assessingrisks inherent to GBL group and the effectiveness of internalcontrol.On risk management and internal control, the Belgianlegislative framework consists of the law of 17 December 2008(application of European Directive 2006/43 on statutory auditsof corporate annual accounts) and the law of 6 April 2010 (theso-called Corporate Governance Act). The 2009 Code alsolays down provisions on corporate governance.The IFRS 7 likewise defines additional constraints with regardsto management of risks related to financial instruments.Since 2006, GBL formalized its internal control and riskmanagement systems based on the COSO (1) model.The COSO methodology is based on five areas: the controlenvironment, risk analysis, control activities, information andcommunication, and supervision and monitoring.6.1.3. Risk cultureGBL aims to invest in companies that offer potential oflong-term value creation. New opportunities and portfoliomanagement are monitored continuously at the highest level(see “Strategic Risk”, page 145). The disinvestment policy aimsto divest investments deemed to have reached maturity whilerespecting the group’s financial balance.6.1.4. Professional ethicsGBL has adopted a Charter and Code of Professional Ethicswith a view to ensuring honest, ethical and law-abidingconduct as well as respect for good governance principles onthe part of the group’s Directors and staff in the exercise oftheir duties.6.1.5. Adapted measures to ensure appropriate competenceThe Nomination and Remuneration Committee reviewscandidacies and seeks to ensure that the Board of Directorsmaintains a satisfactory balance in terms of its members’competences, knowledge and experience, particularly infinance, accounting and investment.6.1. Control environment6.1.1. The Company’s objectiveGBL’s primary objective is to create value for its shareholders.GBL strives to develop a portfolio of investments focusingon a small number of industrial companies that are leaderon their markets, in which it can play its role as a long-termprofessional shareholder. This portfolio is meant to evolveover time depending on the companies’ development andmarket opportunities. GBL invests and disinvests accordingto its objectives of value creation and maintaining a solidfinancial structure.Internal control at GBL aims to provide reasonable assuranceabout achievement of the objectives of compliance with lawsand regulations and the reliability of accounting informationand financial reporting.Generally speaking, it helps ensure the safeguarding of assetsand control and optimisation of transactions. Like any controlsystem, it can provide only a reasonable assurance that therisks of errors or fraud are totally controlled or eliminated.6.1.2. Role of the management bodiesGBL has a Board of Directors, a Standing Committee, aNomination and Remuneration Committee and an AuditCommittee. Their respective modes of functioning aredescribed from page 134 to page 137.The Audit Committee is in charge in particular of checkingthe effectiveness of the Company’s internal control and riskmanagement systems. In this context, the Audit Committeealso monitors proper application of a whistle blowingprocedure. Half its members, all of whom are designatedby the Board, are independent Directors. The Chairmanof the Audit Committee may not be the Chairman of theBoard of Directors.The Board of Directors conducts regular evaluations – atintervals of no more than three years – of its size, compositionand performance, as well as the performance of itsCommittees. It also examines regularly in this context theinteraction between non-executive Directors and the ExecutiveManagement.A recruitment process suited to the profiles sought,appropriate training and a remuneration and evaluation policybased on the achievement of targets combine to ensure thecompetence of GBL’s staff.6.2. Risk analysisGBL set up a formal risk analysis and evaluation processin 2006.In 2011, the Audit Committee reviewed and updated the mainrisks with which GBL is confronted. They are outlined below.The current level of control of these risks (see “Controlactivities” below) appears sufficient and no additionalmeasures are required.Based on developments in the economic sphere, the portfolioor the control environment, the Audit Committee will re-assessthe risks involved and their level of control, and if need be willensure that management puts in place a remediation plan.Corporate governance statement(1) COSO (Committee of Sponsoring Organisations) is a private non-governmental international body recognised on matters of governance, internal control, risk managment and financial reportingAnnual Report 2011 143