BT 2002 Annual Report Download - page 54

Corporate governance
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-
effective relationship is maintained. It recommends to the
Board the auditors' fees for their audit services. The Group
Finance Director and the 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 Sir Anthony
Greener. Further details about the Committee are included
in the Report on directors' remuneration.
Committee membership is identi®ed in the table of
directors on pages 48 and 49.
Internal control and risk management
The Board is responsible for the group's systems of internal
control and risk management and for reviewing the
effectiveness 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.
The Board also takes account of signi®cant social,
environmental and ethical matters that relate to BT's
businesses. The company's workplace practices, speci®c
environmental, social and ethical risks and opportunities
and details of underlying governance processes are dealt
with in the Our people and Our commitment to society
sections of this report.
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 2002
®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 the group and 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 55 and 56 of this document.
The key features of the risk management process
comprise the following procedures:
&senior executives, led by the group's Risk Manager,
review the group's key risks and have created a group risk
register. This is reviewed by the Management Council before
being presented to the Board and approved by the Audit
Committee;
&the 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 Chief Executive receives annual reports from senior
executives with responsibilities for major group operations
with their opinion on the effectiveness 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 effective risk management in the lines of
business operations;
&the Audit Committee, on behalf of the Board, considers
the effectiveness of the operation of internal control
procedures in the group during the ®nancial year. This
follows consideration of the matter by the Management
Council. The Audit Committee reviews reports from the
Operating 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 2002 ®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, ®nancial performance and speci®c major
investment activities. As explained in the Report on
directors' remuneration, we also maintain contact, when
appropriate, through the chairman of the Remuneration
Committee and appropriate senior executives to discuss
overall remuneration policies and plans. Contact with
institutional shareholders (and ®nancial analysts, brokers
and the press) is controlled by written guidelines to ensure
the protection of share price sensitive information that has
not already been made available generally to the company's
shareholders.
We are continuing our policy that shareholders vote on
the annual report at the AGM.
The Board has also decided that shareholders should
again this year be asked to vote on the directors' and senior
executives' remuneration policy, as set out on pages 57 to
61 in the Report on directors' remuneration.
It is part of our policy to involve our shareholders fully in
the affairs of the company and to give them the opportunity
at the AGM to ask questions about the company's activities
and prospects and to vote on every substantially different
BT Group Annual Report and Form 20-F 2002 53