National Grid 2015 Annual Report Download - page 175

Because of its inherent limitations, internal control over financial
reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are
subject to risk that controls may become inadequate because of
changes in conditions, or that the degree of compliance with the
policies or procedures may deteriorate.
Management evaluation of the effectiveness of the Company’s
internal control over financial reporting was based on the revised
Internal Control-Integrated Framework (2013) issued by the
Committee of Sponsoring Organizations of the Treadway
Commission. Based on this evaluation, management concluded
that our internal control over financial reporting was effective as
at31 March 2015.
PricewaterhouseCoopers LLP, which has audited our consolidated
financial statements for the year ended 31 March 2015, has also
audited the effectiveness of our internal control over financial
reporting. Their attestation report can be found on page 85.
During the year, there were no changes in our internal control over
financial reporting that have materially affected, or are reasonably
likely to materially affect, it.
Risk factors
Management of our risks is an important part of our internal control
environment, as we describe on pages 38 to 41. In addition to the
principal risks listed we face a number of inherent risks that could
have a material adverse effect on our business, financial condition,
results of operations and reputation, as well as the value and
liquidity of our securities.
Any investment decision regarding our securities and any forward-
looking statements made by us should be considered in the light
ofthese risk factors and the cautionary statement set out on the
inside back cover. An overview of the key inherent risks we face
isprovided below.
Disclosure controls
Working with management, including the Chief Executive and
Finance Director, we have evaluated the effectiveness of the design
and operation of our disclosure controls and procedures as at
31March 2015. Our disclosure controls and procedures are
designed to provide reasonable assurance of achieving their
objectives, however, the effectiveness of any system of disclosure
controls and procedures has limitations including the possibility of
human error and the circumvention or overriding of the controls
and procedures.
Even effective disclosure controls and procedures provide only
reasonable assurance of achieving their objectives. Based on the
evaluation, the Chief Executive and Finance Director concluded
that the disclosure controls and procedures are effective to provide
reasonable assurance that information required to be disclosed
inthe reports that we file and submit under the Exchange Act
isrecorded, processed, summarised and reported as and
whenrequired and that such information is accumulated and
communicated to our management, including the Chief Executive
and Finance Director, as appropriate, to allow timely decisions
regarding disclosure.
Internal control over financial reporting
Our management, including the Chief Executive and Finance
Director, has carried out an evaluation of our internal control over
financial reporting pursuant to the Disclosure and Transparency
Rules and Section 404 of the Sarbanes-Oxley Act 2002. As
required by Section 404, management is responsible for
establishing and maintaining an adequate system of internal control
over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f)
under the Exchange Act).
Our internal control over financial reporting is designed to provide
reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes
inaccordance with generally accepted accounting principles.
Internal control and risk factors
Risk factors
Potentially harmful activities
Aspects of the work we do could potentially harm employees,
contractors, members of the public or the environment.
Potentially hazardous activities that arise in connection with our
business include the generation, transmission and distribution of
electricity and the storage, transmission and distribution of gas.
Electricity and gas utilities also typically use and generate
hazardous and potentially hazardous products and by-products.
In addition, there may be other aspects of our operations that are
not currently regarded or proved to have adverse effects but could
become so, such as the effects of electric and magnetic fields.
A significant safety or environmental incident, or the failure of
oursafety processes or of our occupational health plans, as well
as the breach of our regulatory or contractual obligations or our
climate change targets, could materially adversely affect our
results of operations and our reputation.
We commit significant resources and expenditure to process
safety and to monitoring personal safety, occupational health
andenvironmental performance, and to meeting our obligations
under negotiated settlements.
We are subject to laws and regulations in the UK and US
governing health and safety matters to protect the public and our
employees and contractors, who could potentially be harmed by
these activities as well as laws and regulations relating to pollution,
the protection of the environment, and the use and disposal of
hazardous substances and waste materials.
These expose us to costs and liabilities relating to our operations
and properties, including those inherited from predecessor
bodies, whether currently or formerly owned by us, and sites
usedfor the disposal of our waste.
The cost of future environmental remediation obligations is often
inherently difficult to estimate and uncertainties can include the
extent of contamination, the appropriate corrective actions and
our share of the liability. We are increasingly subject to regulation
in relation to climate change and are affected by requirements to
reduce our own carbon emissions as well as to enable reduction
in energy use by our customers.
If more onerous requirements are imposed or our ability to recover
these costs under regulatory frameworks changes, this could
have a material adverse impact on our business, reputation,
results of operations and financial position.
Additional Information
NATIONAL GRID ANNUAL REPORT AND ACCOUNTS 2014/15 173