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Report on corporate governance and ownership structure as of December 31, 2015 Page 23 of 45
Adjustment to the provisions of SOX is compulsory for Luxottica Group since it is listed on the NYSE, and therefore it
has represented and represents a significant motivation for the Group to continually improve its ICFR System.
In particular, in the process of adjusting to SOX, Luxottica intended not only to comply with a regulation but has also
taken a real opportunity to improve its administrative and financial governance and the quality of its internal control
system in order to make it more systematic, consistently monitored and methodologically better defined and
documented.
Main features of the internal control and risk management system in relation to the financial reporting process
System Structure and Phases
(I) Structure and Phases
As mentioned above, the structure of the ICFR System was defined consistently with the model provided by the COSO
Internal Control - Integrated Framework (the so-called “COSO Report”), which establishes 5 components:
a) control environment inside the organization (Internal Environment);
b) assessment of the risks that could compromise the achievement of corporate goals (Risk Assessment);
c) control activities for the reduction of risks (Control Activities);
d) the information system represented by the exchange of information between top management and operating
staff (Information and Communication);
e) monitoring activities over time of the quality and results of internal controls (Monitoring Activities).
Following its revision in 2013, the COSO Report introduced a total of 17 principles that make up the fundamental
elements of each of the 5 components of the model with the aim of creating an efficient internal control system.
In particular, in compliance with the ICFR System:
i. for the most important companies of the Group (so-called Material Control Units) controls were designed and
their effectiveness was assessed both at general/cross level (entity level controls) and at the level of each
operational/administrative process;
ii. for the smaller companies, which were however still significant, especially when considered in the aggregate
(so-called Material When Aggregated), the assessment was performed on the general effectiveness level of the
control system.
Anti-fraud Programs & Controls
Among the cross level controls, the controls to reduce the risk of fraud are particularly important. To this end, Luxottica
has developed Anti-Fraud Programs & Controls derived from an in-depth risk assessment which, after mapping the
possible ways in which fraud could be committed, defined the necessary controls to reduce the risk of fraud and/or
allowing its identification. This “anti-fraud” system is constantly updated and improved.
Enterprise Risk Management
With regard corporate risk management, since 2011 an Enterprise Risk Management process has been implemented