Holiday Inn 2003 Annual Report Download - page 18

16 InterContinental Hotels Group 2003
CORPORATE GOVERNANCE
COMBINED CODE COMPLIANCE
The Board is committed to compliance with the principles set
out in the Combined Code on Corporate Governance (‘the
Code’) and, in the opinion of the Board, the Company, since
its listing, and Six Continents PLC prior to the Separation, have
complied with the Code requirements as they apply for the
15 month period to 31 December 2003.
Revisions have recently been made to the Code for companies
with a financial year beginning on or after 1 November 2003.
Although compliance with the revised Code is not yet required,
it has been decided to present this report having regard to the
changes, as far as possible.
The Board is responsible for the Group’s system of
internal control and risk management and for reviewing its
effectiveness. In order to discharge that responsibility, the
Board has established the procedures necessary to apply
the Code, including clear operating procedures, lines of
responsibility and delegated authority.
Business performance is managed closely and in particular,
the Board, the Executive Committee and the Regional
Executive Committees have established processes, as part
of the normal good management of the business, to monitor:
• strategic plan achievement, through a comprehensive
series of Group and regional strategic reviews;
• financial performance, within a comprehensive financial
planning and accounting framework;
• capital investment performance, with detailed appraisal
and authorisation processes; and
• risk management, (through an ongoing process, which has
been in place up to the date of the accounts) providing
assurance through reports from both the Head of Risk
Management and the Head of Internal Audit that the
significant risks faced by the Group are being identified,
evaluated and appropriately managed, having regard
to the balance of risk, cost and opportunity.
In addition, the Audit Committee receives:
• reports from the Head of Internal Audit on the work carried
out under the annual internal audit plan, including an annual
report on the operation of the monitoring processes set out
above to support the Board’s annual statement on internal
control; and
• reports from the external auditors.
The Board has conducted a review of the effectiveness
of the system of internal control during the period ended
31 December 2003, taking account of any material
developments which have taken place since the year end.
The review was carried out through the monitoring process
set out above, which accords with the Turnbull Guidance. The
system of internal control is designed to manage, rather than
eliminate, the risk of failure to achieve business objectives and
it must be recognised that it can only provide reasonable and
not absolute assurance against material misstatement or loss.
In that context, the review, in the opinion of the Board, did not
indicate that the system was ineffective or unsatisfactory.
To comply with the Group’s US obligations, arising from the
Sarbanes-Oxley Act 2002, a project has been established
to identify, evaluate and test critical internal financial controls
across all our business units. This should enable representations
to be made regarding the effectiveness of internal financial
controls in time for the 2005 deadline for compliance.
With regard to insurance against risk, it is not practicable to
insure against every risk to the fullest extent. The insurance
market remains difficult both as to breadth and cost of coverage
and in some cases external insurance is not available at all or
not at an economic price. The Group regularly reviews both the
type and amount of external insurance that it buys, bearing in
mind the availability of such cover, its price and the likelihood
and magnitude of the risks involved.
BOARD AND COMMITTEE STRUCTURE
To support the principles of good corporate governance, the
Board and Committee structure operates as set out below. The
structures and method of operation of all the main IHG PLC
Committees reflect the practices of Six Continents PLC prior
to Separation.
THE BOARD
The Board is responsible to the shareholders for the good
standing of the Company, the management of its assets
for optimum performance and the strategy for its future
development. Seven regular Board meetings are scheduled
each year and further meetings are held as needed. Six Board
meetings were held during 2003 since the Company was listed
in April 2003. These were attended by all directors with the
exception that Messrs Kugler, Larson, Prosser and Webster
could not attend one meeting each and Sir Howard Stringer
could not attend two meetings. The fact that a number of
non-executive directors were unable to attend all scheduled
Board and related Committee meetings throughout the period
was unavoidable during the first year of the Company’s
operations and in no way detracts from the level of commitment
of those individuals to the Company. It did not prove possible
during the Company’s first year to schedule certain meetings
on dates available to all concerned, as a result of the
appointment of new directors with existing commitments.
All directors are briefed by means of comprehensive papers in
advance of Board meetings and by presentations at meetings.
Their understanding of the Group’s operations is enhanced
by regular business presentations outside Board meetings