AAK Annual Report 2017

85 Control environment AAK’s organization is designed to facilitate quick decision-making. Operational decisions are therefore made at business area or subsidiary level, while decisions about strategies, acquisitions and RYHUULGLQJ ¿QDQFLDO LVVXHV DUH WDNHQ E\ WKH FRPSDQ\¶V %RDUG DQG Group management team. The organization is characterized by clear division of responsibilities and effective and established man- agement and control systems, covering all units within AAK. 7KH EDVLV IRU WKH LQWHUQDO FRQWURO UHODWLQJ WR ¿QDQFLDO UHSRUWLQJ consists of an overall control environment in which the organiza- tion, decision-making routes, authorities and responsibilities have been documented and communicated in management documents, VXFK DV $$.¶V ¿QDQFLDO SROLF\ UDZ PDWHULDO SXUFKDVLQJ SROLF\ WKH PDQXDO RQ ¿QDQFLDO UHSRUWLQJ DQG WKH DXWKRUL]DWLRQ UXOHV VHW E\ WKH &(2 $$.¶V ¿QDQFH IXQFWLRQV DUH LQWHJUDWHG WKURXJK D joint consolidation system and joint accounting instructions. The *URXS¶V ¿QDQFH XQLW ZRUNV FORVHO\ DQG HIIHFWLYHO\ ZLWK WKH FRQWURO - OHUV RI VXEVLGLDULHV LQ UHODWLRQ WR \HDU HQG ¿QDQFLDO VWDWHPHQWV DQG reporting. $V D VXSSOHPHQW WR WKH LQWHUQDO FRQWURO XQGHU D VSHFL¿F SODQ DQ annual audit of some units in the Group is carried out on a rotating basis by the Group’s central Finance Department, in collabora- WLRQ ZLWK DQ LQGHSHQGHQW LQWHUQDWLRQDO DFFRXQWLQJ ¿UP $$. KDV decided not to set up a separate review function (internal audit), DV WKH IXQFWLRQV PHQWLRQHG DERYH IXO¿O WKLV WDVN ZHOO $OO RI $$.¶V subsidiaries report on a monthly basis. These reports form the ba- VLV IRU WKH *URXS¶V FRQVROLGDWHG ¿QDQFLDO UHSRUWLQJ (DFK OHJDO XQLW KDV D FRQWUROOHU ZKR LV UHVSRQVLEOH IRU WKH ¿QDQFLDO PDQDJHPHQW RI HDFK EXVLQHVV DUHD DQG IRU HQVXULQJ WKH ¿QDQFLDO UHSRUWV DUH FRU - rect, complete and delivered in time for consolidated reporting. Risk assessment and risk management Through its international presence, the AAK Group is exposed to a number of different risks. Risk management within the Group is UXQ LQ DFFRUGDQFH ZLWK ¿[HG SROLFLHV DQG SURFHGXUHV ZKLFK DUH UH - viewed annually by AAK’s Board. Risks relating to commodities are managed using the Group’s raw material purchasing policy. Risks relating to currency, interest and liquidity are mainly governed by $$.¶V ¿QDQFH SROLF\ 7KH *URXS¶V FUHGLW SROLF\ GLUHFWV WKH PDQDJH - ment of credit and contract risks. Effective risk management unites operational business development with the requirements of owners and other stakeholders for improvements in control and long-term value. Risk management aims to minimize risks, but also to ensure that opportunities are utilized in the best possible way. Risk man- DJHPHQW FRYHUV WKH IROORZLQJ DUHDV RI ULVN VWUDWHJLF ULVNV UHODWLQJ WR WKH PDUNHW DQG VHFWRU FRPPHUFLDO RSHUDWLRQDO DQG ¿QDQFLDO risks, compliance with external and internal regulatory frameworks DQG ¿QDQFLDO UHSRUWLQJ 7KH PDLQ FRPSRQHQWV RI ULVN DVVHVVPHQW DQG PDQDJHPHQW DUH LGHQWL¿FDWLRQ HYDOXDWLRQ PDQDJHPHQW UH - porting, follow-up and control. For further information about AAK’s risk management, please see Note 3. Control activities 7KH ULVNV LGHQWL¿HG UHODWLQJ WR ¿QDQFLDO UHSRUWLQJ DUH KDQGOHG YLD the company’s control activities. These control activities aim to prevent, identify and correct errors and discrepancies. Control ac- tivities take the form of manual controls, such as reconciliation and stocktaking, automatic controls via the IT systems and general con- WUROV RI WKH XQGHUO\LQJ ,7 HQYLURQPHQW 'HWDLOHG ¿QDQFLDO DQDO\VHV of the result and follow-up against budgets and forecasts supple- PHQW WKH RSHUDWLRQ VSHFL¿F FRQWUROV DQG SURYLGH RYHUDOO FRQ¿UPD - tion of the quality of the reporting. Information and communication 7R HQVXUH WKH FRPSOHWHQHVV DQG DFFXUDF\ RI LWV ¿QDQFLDO UHSRUWLQJ the Group has adopted guidelines for information and commu- QLFDWLRQ DLPHG DW HQVXULQJ UHOHYDQW DQG VLJQL¿FDQW H[FKDQJH RI information within business operations, both within each unit and to and from management and the Board. Policies, handbooks and ZRUNLQJ SUDFWLFHV UHODWLQJ WR WKH ¿QDQFLDO SURFHVV DUH FRPPXQL - cated between the management and employees, and are available in electronic format and/or printed format. The Board receives regular feedback on internal control from the Audit Committee. To ensure that external information is correct and complete, AAK has an information policy adopted by the Board, which states what is to be communicated, by whom and in what way. Follow-up The effectiveness of the process for risk assessment and execution of control activities is followed up continuously. The follow-up cov- ers both formal and informal procedures, which are used by those responsible at each level. The procedures include follow-up of UHVXOWV DJDLQVW EXGJHWV DQG SODQV DQDO\VHV DQG NH\ ¿JXUHV 7KH %RDUG UHFHLYHV PRQWKO\ UHSRUWV DERXW WKH *URXS¶V ¿QDQFLDO SRVLWLRQ DQG GHYHORSPHQW 7KH FRPSDQ\¶V ¿QDQFLDO VLWXDWLRQ LV GLVFXVVHG at each Board meeting, and the management team analyzes the ¿QDQFLDO UHSRUWLQJ DW GHWDLOHG OHYHO RQ D PRQWKO\ EDVLV At Audit Committee meetings, the Committee follows up the ¿QDQFLDO UHSRUWLQJ DQG UHFHLYHV UHSRUWV IURP WKH DXGLWRUV DERXW their observations. Policy documents AAK has a number of policies for the operations of the Group and LWV HPSOR\HHV 7KHVH LQFOXGH Ethics policy Ethical guidelines for the Group have been drawn up with the aim of clarifying the Group’s fundamental approach to ethical issues, both within the Group and externally with regard to customers and suppliers. Finance policy 7KH *URXS¶V ¿QDQFH IXQFWLRQ ZRUNV LQ DFFRUGDQFH ZLWK LQVWUXF - tions adopted by the Board, which provide a framework for how the *URXS¶V RSHUDWLRQV VKDOO EH ¿QDQFHG DQG IRU KRZ IRU H[DPSOH currency and interest risks are to be handled. Information policy The Group’s information policy is a document describing the Group’s general principles for the publication of information. Environmental policy The Group’s environmental policy provides guidelines for environ- mental work within the Group.