BT 2009 Annual Report Download - page 74

ADDITIONAL INFORMATION FINANCIAL STATEMENTS REPORT OF THE DIRECTORS BUSINESS AND FINANCIAL REVIEWS OVERVIEW
72 BT GROUP PLC ANNUAL REPORT & FORM 20-F
significant direct or indirect shareholdings (refer to page 74);
BT Group plc Annual Report & Form 20-F; and
appointment and replacement of directors (refer to page 155).
The disclosures which are not covered elsewhere in this Report
include the following:
BT has two employee share ownership trusts which hold BT
shares for the purpose of satisfying awards made under the
various employee share plans. The trustee of the BT Group
Employee Share Investment Plan may invite participants on
whose behalf it holds shares to direct it how to vote in respect of
those shares, and if there is an offer for the shares or other
transaction which would lead to a change of control of BT,
participants may direct it to accept the offer or agree to the
transaction. In respect of shares held in the BT Group Employee
Share Ownership Trust, the trustee abstains from voting those
shares, and if there is an offer for the shares the trustee is not
obliged to accept or reject the offer but will have regard to the
interests of the participants, may consult them to obtain their
views on the offer and may otherwise take the action with
respect to the offer it thinks fair;
we are not aware of any agreements between shareholders that
may result in restrictions on the transfer of shares or on voting
rights;
no person holds securities carrying special rights with regard to
control of the Company;
proxy appointment and voting instructions must be received by
the registrars not less than 48 hours before a general meeting
(see also page 153);
the amendment of BT’s articles of association requires
shareholder approval in accordance with legislation in force from
time to time;
the powers of the directors are determined by UK legislation and
the articles of association. They are authorised to issue and allot
shares, and to undertake purchases of BT shares subject to
shareholder approval at the AGM;
we are not party to any significant agreements that take effect,
alter or terminate upon a change of control following a takeover;
and
we do not have any agreements with directors or employees
providing for compensation for loss of office or employment that
occurs because of a takeover.
Financial instruments
Details of the financial risk management objectives and policies of
the group and exposure to interest risk, credit risk, liquidity risk and
price risk are given on page 45 and note 33 on pages 130 to 135.
Internal control and risk management
The Board is responsible for the group’s systems of internal control
and risk management and for reviewing each year the effectiveness
of those systems. Such systems are designed to manage, rather
than eliminate, the risk of failure to achieve business objectives;
any system can provide only reasonable and not absolute assurance
against material misstatement or loss. The process in place for
reviewing BT’s systems of internal control includes procedures
designed to identify and evaluate failings and weaknesses, and, in
the case of any categorised as significant, procedures exist to
ensure that necessary action is taken to remedy the failings.
The Board also takes account of significant social, environmental
and ethical matters that relate to BT’s businesses and reviews
annually BT’s corporate responsibility policy. The company’s
workplace practices, specific environmental, social and ethical risks
and opportunities and details of underlying governance processes
are dealt with in the Business review – Our people.
We have enterprise-wide risk management processes for
identifying, evaluating and managing the significant risks faced by
the group. These processes have been in place for the whole of the
2009 financial year and have continued up to the date on which
this document was approved. The processes are in accordance with
the Revised Guidance for Directors on the Combined Code
published by the Financial Reporting Council (the Turnbull
Guidance).
Risk assessment and evaluation takes place as an integral part of
BT’s annual strategic planning cycle. We have a detailed risk
management process, culminating in a Board review, which
identifies the key risks facing the group and each business unit. This
information is reviewed by senior management as part of the
strategic review. Our current key risks are summarised in Business
review – Principal risks and uncertainties.
The key features of the enterprise wide risk management process
comprise the following procedures:
senior executives collectively review the group’s key risks and
have created a group risk register describing the risks, owners
and mitigation strategies. This is reviewed by the
Operating
Committee
before being reviewed and approved by the Board;
the lines of business carry out risk assessments of their
operations, create risk registers relating to those operations, and
ensure that the key risks are addressed;
senior executives with responsibilities for major group operations
report quarterly with their opinion on the effectiveness of the
operation of internal controls in their area of responsibility;
the group’s internal auditors carry out continuing assessments of
the quality of risk management and control, report to
management and the
Audit Committee on the status of specific
areas identified for improvement and promote effective risk
management in the lines of business operations; and
the
Audit Committee , on behalf of the Board, considers the
effectiveness of the operation of internal control procedures in
the group during the financial year. It reviews reports from the
internal and external auditors and reports its conclusions to the
Board. The
Audit Committee has carried out these actions for the
2009 financial year.
New subsidiaries acquired during the year have not been included
in the above risk management process. They will be included for the
2010 financial year. Joint ventures and associates, which BT does
not control, have not been dealt with as part of the group risk
management process and are responsible for their own internal
control assessment.
The Board has approved the formal statement of matters which
are reserved to it for consideration, approval or oversight. It has
also approved the group’s corporate governance framework, which
sets out the high level principles by which BT is managed and the
responsibilities and powers of the
Operating Committee and the
group’s senior executives. As part of this framework, the
development and implementation of certain powers relating to
group-wide policies and practices are reserved to identified senior
executives.
In the light of the issues which arose in BT Global Services during
2009 as discussed on page 10 the management team are
implementing a number of process improvements. Some of these
were in place by the end of 2009; the rest are being implemented
in 2010. These include undertaking more regular contract reviews
to assess commercial risks and opportunities as part of a
strengthened contract governance process that combines
REPORT OF THE DIRECTORS BUSINESS POLICIES
REPORT OF THE DIRECTORS