Holiday Inn 2007 Annual Report Download - page 32

30 IHG Annual Report and Financial Statements 2007
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 considers that the Company has complied with the Code
requirements throughout the year ended 31 December 2007.
As InterContinental Hotels Group PLC’s shares are also listed
on the New York Stock Exchange (NYSE), the Company is subject
to the rules of the NYSE, US securities laws and the rules of
the Securities and Exchange Commission (SEC). As required
by the SEC, a statement outlining the differences between the
Company’s corporate governance practices and those followed
by US companies may be found on the Company’s website at
www.ihg.com/investors under corporate governance/
NYSE differences.
Control environment
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 Operating
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 auditor.
The Board has conducted a review of the effectiveness of the
system of internal control during the year ended 31 December 2007,
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 completed to
identify, evaluate and test key financial controls across all
our business units. This enabled appropriate representations
regarding the effectiveness of internal financial controls to
be made in the Company’s Annual Report on Form 20-F for
the December 2006 year end, in compliance with these US
obligations, and will enable similar representations to be
made in the Company’s 2007 Annual Report on Form 20-F.
With regard to insurance against risk, it is not practicable to
insure against every risk to the fullest extent. While the insurance
market has eased in some areas, certain risks, eg natural
catastrophe, remain difficult to insure both as to breadth and cost
of coverage. 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 Board
The Board’s current composition of the Non-Executive Chairman,
three Executive and seven Non-Executive Directors meets the
requirement of the Combined Code for at least half the Board,
excluding the Chairman, to be independent Non-Executive
Directors. In the Board’s view, all of the current Non-Executive
Directors are independent.
The Board is responsible to the shareholders for the strategic
direction, development, performance and control of the Group.
It therefore approves strategic plans and capital and revenue
budgets. It reviews significant investment proposals and the
performance of past investments and maintains an overview
and control of the Group’s operating and financial performance.
It monitors the Group’s overall system of internal controls,
governance and compliance. The Board ensures that the
necessary financial and human resources are in place for
the Group to meet its objectives. The Board has established
a schedule of matters which are reserved for its attention
and decision. These may be found on the Company’s website.
The Board adopts objective criteria for the appointment of
Directors, and the roles of the Chairman and of the Chief Executive
have been defined in writing and approved by the Board.