BP 2014 Annual Report Download - page 67

Corporate governance
International advisory board
BP’s international advisory board (IAB) advises the chairman, group chief
executive and the board on geopolitical and strategic issues relating to the
company. This group has an advisory role and meets twice a year, with
one meeting held jointly with the main board. Between meetings IAB
members remain on hand to provide advice and counsel when needed.
The IAB is chaired by BP’s previous chairman, Peter Sutherland. Its
membership in 2014 included Kofi Annan, Lord Patten of Barnes, Josh
Bolten, President Romano Prodi, Dr Ernesto Zedillo and Dr Javier Solana.
The chairman and chief executive attend meetings of the IAB. Issues
discussed during the year included emerging geopolitical issues which
could impact BP’s business, developments in Russia, the Middle East and
North Africa, the liberalization of Mexico’s oil and gas sector and the US
mid-term election cycle.
Internal Control Revised Guidance
for Directors (Turnbull)
In discharging its responsibility for the company’s risk management and
internal control systems under the UK Corporate Governance Code, the
board, through its governance principles, requires the group chief
executive to operate with a comprehensive system of controls and internal
audit to identify and manage the risks that are material to BP. The
governance principles are reviewed periodically by the board and are
consistent with the requirements of the UK Corporate Governance Code
including principle C.2 (risk management and internal control).
The board has an established process by which the effectiveness of the
system of internal control (which includes the risk management system) is
reviewed as required by provision C.2.1 of the UK Corporate Governance
Code. This process enables the board and its committees to consider the
system of internal control being operated for managing significant risks,
including strategic, safety and operational and compliance and control
risks, throughout the year. Material joint ventures★ and associates★ have
not been dealt with as part of the group in this process.
As part of this process, the board and the audit, Gulf of Mexico and safety,
ethics and environment assurance committees requested, received and
reviewed reports from executive management, including management of
the business segments, corporate activities and functions, at their regular
meetings.
In considering the systems, the board noted that such systems are
designed to manage, rather than eliminate, the risk of failure to achieve
business objectives and can only provide reasonable, and not absolute,
assurance against material misstatement or loss.
During the year, the board through its committees regularly reviewed with
executive management processes whereby risks are identified, evaluated
and managed. These processes were in place for the year under review,
remain current at the date of this report and accord with the guidance on
the UK Corporate Governance Code provided by the Financial Reporting
Council. In December 2014 the board considered the group’s significant
risks within the context of the annual plan presented by the group chief
executive.
A joint meeting of the audit and safety, ethics and environment assurance
committees in January 2015 reviewed a report from the group head of
audit as part of the board’s annual review of the risk management and
internal control systems. The report described the annual summary of
group audit’s consideration of the design and operation of elements of
BP’s system of internal control over significant risks arising in the
categories of strategic and commercial, safety and operational and
compliance and control, and considered the control environment for the
group. The report also highlighted the results of audit work conducted
during the year and the remedial actions taken by management in
response to significant failings and weaknesses identified.
During the year, these committees engaged with management, group
head of audit and other monitoring and assurance providers (such as the
group ethics and compliance officer, head of safety and operational risk
and the external auditor) on a regular basis to monitor the management of
risks. Significant incidents that occurred and management’s response to
them were considered by the appropriate committee and reported to the
board.
In the board’s view, the information it received was sufficient to enable it
to review the effectiveness of the company’s system of internal control in
accordance with the Internal Control Revised Guidance for Directors
(Turnbull).
Subject to determining any additional appropriate actions arising from
items still in process, the board is satisfied that, where significant failings
or weaknesses in internal controls were identified during the year,
appropriate remedial actions were taken or are being taken.
★ Defined on page 252. BP Annual Report and Form 20-F 2014 63