BT 2001 Annual Report Download - page 54

Corporate Governance
Project Director. The Committee develops the group’s strategy,
for Board approval, and oversees its implementation. It also
¢nalises, before Board approval, annual operating and capital
expenditure plans and budgets, reviews operational activities
and agrees and monitors group-wide policies, where these are
not reserved to the Board.
The Nominating Committee, consisting of the Chairman, the
Joint Deputy Chairmen and three other non-executive directors,
recommends to the Board appointments of all directors. To
ensure an appropriate balance of expertise and ability, it has
agreed, and regularly reviews, a pro¢le of the skills and
attributes required from the non-executive directors as a whole.
This pro¢le is used to assess the suitability as non-executive
directors of candidates put forward by the directors and outside
consultants. Candidates short-listed for appointment are met by
the Committee before it recommends an appointment to the
Board.
The Audit Committee, comprising solely non-executive
directors, is chaired by Sir Anthony Greener. It reviews BT’s
systems of internal control and risk management, considers the
company’s published ¢nancial reports for statutory compliance
and against standards of best practice and recommends to the
Board appropriate disclosure in these reports. The Board takes
responsibility for disclosures on internal control in the annual
report. The Audit Committee also reviews annually the
performance of the company’s auditors to ensure that an
objective, professional and cost-e¡ective relationship is
maintained. It recommends to the Board the auditors’ fees for
their audit services. The Group Finance Director and the Group
Commercial Director and Secretary attend Committee meetings.
Each year, the Committee sets aside time to seek the views of
the company’s auditors in the absence of executives.
The Remuneration Committee comprises solely
non-executive directors and is chaired by Lord Marshall.
Sir Anthony Greener will chair the Committee after Lord
Marshall’s retirement. Further details about the Committee are
includedintheReport on directors’ remuneration.
Committee membership is identi¢ed in the table of
directors on pages 49 and 50.
Internal control and risk management
The Board is responsible for the group’s systems of internal
control and risk management and for reviewing the e¡ectiveness
of those systems. Such systems are designed to manage, rather
than eliminate, the risk of failure to achieve business objectives;
any system can provide only reasonable and not absolute
assurance against material misstatement or loss.
BT has processes for identifying, evaluating and managing
the signi¢cant risks faced by the group. These processes have
been in place for the whole of the 2001 ¢nancial year and have
continued up to the date on which this document was approved.
The processes are in accordance with the guidance for directors
published in the UK in September 1999.
Risk assessment and evaluation takes place as an integral
part of the group’s annual strategic planning cycle. The group
has a detailed risk management process which identi¢es the
key risks facing each business unit. This information is
reviewed by senior management as part of the strategic review.
The group’s current key risks are summarised on pages 57 to 61
of this document.
The key features of the risk management process comprise
the following procedures:
&the group’s lines of business carry out risk assessments of
their operations, have created registers relating to those
risks, and ensure that the key risks are addressed. Lines of
business audit committees monitor the standards of internal
controls in the lines of business;
&senior management report regularly to the Group Finance
Director on the operation of internal controls in their area of
responsibility;
&the annual strategy review process includes consideration of
major business risks;
&the Chief Executive receives annual reports from senior
executives with responsibilities for major group operations
with their opinion on the e¡ectiveness of the operation of
internal controls during the ¢nancial year;
&the group’s internal auditors carry out continuing
assessments of the quality of risk management and control;
they also promote e¡ective risk management in the lines of
business’ operations;
&the Audit Committee, on behalf of the Board, considers the
e¡ectiveness of the operation of internal control procedures
in the group during the ¢nancial year. This follows the
consideration of the matter by the Executive Committee at a
preceding meeting. The Audit Committee reviews reports
from the Executive Committee, from the internal auditors and
from the external auditors and reports its conclusions to the
Board. The Audit Committee has carried out these actions
for the 2001 ¢nancial year.
Material joint ventures and associates, which BT does not
control, outside the UK have not been dealt with as part of
the group for the purposes of this internal control
assessment.
Relations with shareholders
Senior executives, led by the Chief Executive and Group
Finance Director, hold meetings with the company’s principal
institutional shareholders to discuss the company’s strategy,
54 BT Annual report and Form 20-F