Holiday Inn 2012 Annual Report Download - page 57

OVERVIEW BUSINESS REVIEW GOVERNANCE
GROUP FINANCIAL
STATEMENTS
PARENT COMPANY
FINANCIAL STATEMENTS OTHER INFORMATION
Corporate governance 55
For further details on the Group’s risk management system and 2013
risk factors see pages 38 to 44.
Board annual review of internal controls and risk management
The Board conducted a review of the effectiveness of the system
of internal controls and risk management during the year ended
31 December 2012. This covered all material controls, including
financial, operational and compliance controls, the principal risks
affecting the Group, the risk management systems, and also took
into account any material developments since the year end.
Whilst areas for continuous improvement have been identified and
actions initiated as a result of the Group’s processes, no significant
shortcomings have been identified from the 2012 risk assessments.
Internal controls and managing risk
The system of internal controls and risk management aims to
support the delivery of our strategy by managing the risk of failing to
achieve business objectives. As such it must be recognised that it can
only provide reasonable and not absolute assurance.
The Group continues to insure against risks but certain risks 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. Our approach to risk management, key risk mitigating
activities and the principal risk factors that could affect the Group
are set out on pages 38 to 44.
Risk register
In 2012, the Audit Committee was satisfied that the Group has an
effective risk management system and the Executive Committee,
Audit Committee and the Board reviewed and agreed the major risks
affecting the Group.
Global internal audit plan
Annually the Audit Committee discusses the internal audit plan and
approves its nature and scope for the forthcoming year. This plan
is reviewed on a quarterly basis to ensure coverage of emerging
risks. The Audit Committee then instructs Global Internal Audit
to undertake an agreed schedule of audits during which the
effectiveness of the Group’s internal controls are assessed.
Global Internal Audit (GIA) Effectiveness Review
During the year a GIA Effectiveness Review was carried out and
reported to the Audit Committee. The review contained input from
auditees, external auditors and senior management and assessed
GIA against the Institute of Internal Auditors (IIA) Standards. The
following conclusions were highlighted:
• the GIA audit methodology standards are aligned to IIA Standards
and recognise best practice;
• the dynamic risk assessment and assurance mapping processes
enable GIA to effectively identify and monitor emerging risks; and
• working in collaboration with other Group functions has
increased effectiveness of audits and reduced duplication.
The Audit Committee therefore concluded that during the year the
Group’s systems of internal controls and risk management, including
the internal audit activities, were operating effectively.
Financial reporting controls
The key financial controls across all our business units have been
identified and evaluated, in particular, to comply with our US
obligations, arising from the Sarbanes-Oxley Act 2002. This has
enabled appropriate representations regarding the effectiveness
of internal financial controls to be made in the Company’s Annual
Report on Form 20-F.
Engagement
Shareholder relations
The Board takes its responsibility to represent and promote the
interests of its shareholders seriously and believes it is very
important to fully engage with its shareholders. Details of
shareholder profiles as at 31 December 2012 can be found
on page 137.
Shareholder engagement
The Board has engaged with shareholders in a number of ways
during 2012, which included:
• half-year and full-year formal reporting;
• presentations by the Chief Executive and Chief Financial Officer
to institutional investors, analysts and the media following results
announcements;
• a programme of meetings throughout the year with major
institutional shareholders;
• telephone conferences after the release of first and third quarter
results; and
• meeting the shareholders face-to-face and responding to
questions at the Annual General Meeting.
To enable as many shareholders as possible to access conferences
and presentations, telephone dial-in facilities are made available
in advance and live audio webcasts are made available after the
presentation, together with associated data and documentation.
These can be found at www.ihgplc.com/investors under
financial library.
Currently around 30 sell-side research analysts publish research on
the Group; their details are available at www.ihgplc.com/investors
under analysts’ details.
Meetings with major institutional shareholders
A programme of meetings throughout the year is arranged with
major institutional shareholders. These meetings provide an
opportunity to discuss, using publicly available information, the
progress of the business, its performance, plans and objectives.
The Chairman, the Senior Independent Director and other
Non-Executive Directors are available to meet with major
shareholders to understand their issues and concerns and to
discuss governance and strategy.
Board shareholder updates
Facilitated, structured meetings are encouraged with shareholders
and any new Director is available for meetings with major
shareholders as a matter of course.
A formal external review of shareholder opinion is presented to the
Board on an annual basis and both the Executive Committee and the
Board receive regular updates on shareholder relations.
Annual General Meeting (AGM)
Additionally, the AGM provides a useful forum for one-to-one
communication with private shareholders, many of whom are also
guests in our hotels. At the AGM, shareholders receive presentations
on the Company’s performance and may ask questions of the Board,
including the Chairman and Chairmen of the Committees.
Re-engaging with lost shareholders
We continue to be supported by ProSearch to locate shareholders
who have failed to keep their details up-to-date. To date the
programme has been very successful and many asset reunifications
have been made.
Engagement on remuneration matters
Details of the Remuneration Committee’s engagement with
shareholders is set out on page 61.