National Grid 2016 Annual Report Download - page 31

Our internal control and risk management processes
comply with the requirements of the UK Corporate
Governance Code. They are also the basis of our
compliance with obligations set by Sarbanes-Oxley
and other internal assurance activities.
Internal control over financial reporting
We have specific internal mechanisms to govern the
financial reporting process and the preparation of the
Annual Report and Accounts. Our financial controls
guidance sets out the fundamentals of internal control over
financial reporting, which are applied across the Company.
Our financial processes include a range of system,
transactional and management oversight controls.
In addition, our businesses prepare detailed monthly
management reports that include analysis of their results,
along with comparisons to relevant budgets, forecasts and
prior year results. These are presented to, and reviewed
by, senior management within our Finance function.
These reviews are supplemented by quarterly performance
reviews, attended by the CEO and Finance Director.
These reviews consider historical results and expected
future performance and involve senior management from
both operational and financial areas of the business.
Each month, the Finance Director presents a consolidated
financial report to the Board.
As part of our assessment of financial controls in previous
years, we identified a number of weaknesses in our US
financial control framework. We are making progress
in remediating these weaknesses. For more information,
including our opinion on internal control over financial
reporting, see page 183.
Our internal control process
We have a number of processes to support our internal
control environment. These processes are managed by
dedicated specialist teams, including risk management,
ethics and compliance management, corporate audit
and internal controls, and safety, environment and health.
Oversight of these activities is provided through regular
review and reporting to the appropriate Board committees
as outlined in the Corporate Governance section on
p a g e s 4 6 – 67.
Reviewing the effectiveness of our internal control
and risk management
Each year the Board reviews the effectiveness of
our internal control systems and risk management
processes covering all material systems, including
financial, operational and compliance controls, to make
sure they remain robust. The latest review covered the
financial year to 31 March 2016 and the period to the
approval of this Annual Report and Accounts. It included:
• the Certificate of Assurance from the CEO to the Board
following consideration by the Audit Committee, which
provides overall assurance around the effectiveness
of our risk management and internal controls systems;
• where appropriate, assurance from our committees,
with particular reference to the reports received from the
Audit, and Safety, Environment and Health Committees
on reviews undertaken at their meetings; and
• assurances about the certifications required under
the Sarbanes-Oxley Act 2002 (Sarbanes-Oxley)
as a result of our US reporting obligations.
The Board evaluated the effectiveness of management’s
processes for monitoring and reviewing internal control
and risk management. It noted that no significant failings
or weaknesses had been identified by the review and
confirmed that it was satisfied the systems and processes
were functioning effectively.
29National Grid Annual Report and Accounts 2015/16
Strategic Report
Internal control and risk management