BT 2010 Annual Report Download - page 82

80 BT GROUP PLC ANNUAL REPORT & FORM 20-F
this document was approved. The processes are in accordance with
the Revised Guidance for Directors on the Combined Code
published by the Financial Reporting Council (the Turnbull
Guidance).
Risk assessment and evaluation takes place as an integral part of
BT’s annual strategic planning cycle. We have a detailed risk
management process, culminating in a Board review, which
identifies the key risks facing the group and each business unit. This
information is reviewed by senior management as part of the
strategic review. Our current key risks are summarised in Review of
the Year – Our Risks on pages 36 and 37.
The key features of the enterprise-wide risk management and
internal control process comprise the following procedures:
senior executives collectively review the group’s key risks and
have created a group risk register describing the risks, owners
and mitigation strategies. This is reviewed by the
Operating
Committee
before being reviewed and approved by the Board
the lines of business carry out risk assessments of their
operations, create risk registers relating to those operations, and
ensure that the key risks are addressed
senior executives with responsibilities for major group operations
report quarterly with their opinion on the effectiveness of the
operation of internal controls in their area of responsibility
the group’s internal auditors carry out continuing assessments of
the quality of risk management and control, report to
management and the
Audit Committee on the status of specific
areas identified for improvement and 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 financial year. It reviews reports from the
internal and external auditors and reports its conclusions to the
Board. The
Audit Committee has carried out these actions for the
2010 financial year.
Joint ventures and associates, which BT does not control, have not
been dealt with as part of the group risk management process and
are responsible for their own internal control assessment.
The Board has approved the formal statement of matters which
are reserved to it for consideration, approval or oversight. It has
also approved the group’s corporate governance framework, which
sets out the high level principles by which BT is managed and the
responsibilities and powers of the
Operating Committee and the
group’s senior executives. As part of this framework, the
development and implementation of certain powers relating to
group-wide policies and practices are reserved to identified senior
executives.
In the 2009 financial year, we undertook a comprehensive
re-evaluation of our management of major contracts and as a result
have implemented enhanced due diligence in contract bidding, a
new governance structure to monitor contract delivery and to
identify commercial, financial or operational risks, and greater
focus on managing the cost base including our key suppliers. An
independent contract review team now undertakes reviews of our
most significant contracts and monitors compliance with our
governance standards. These further developments in our
management of contract risk have applied throughout the 2010
financial year.
US Sarbanes-Oxley Act of 2002
BT has securities registered with the US Securities and Exchange
Commission (SEC). As a result, we must comply with those
provisions of the Sarbanes-Oxley Act applicable to foreign issuers.
BT GROUP PLC ANNUAL REPORT & FORM 20-F
may invite participants on whose behalf it holds shares to direct it
how to vote in respect of those shares, and if there is an offer for
the shares or other transaction which would lead to a change of
control of BT, participants may direct it to accept the offer or
agree to the transaction. In respect of shares held in the BT Group
Employee Share Ownership Trust, the trustee abstains from
voting those shares, and if there is an offer for the shares the
trustee is not obliged to accept or reject the offer but will have
regard to the interests of the participants, may consult them to
obtain their views on the offer and may otherwise take the action
with respect to the offer it thinks fair:
we are not aware of any agreements between shareholders
that may result in restrictions on the transfer of shares or on
voting rights
no person holds securities carrying special rights with regard to
control of the Company
proxy appointment and voting instructions must be received
by the registrars not less than 48 hours before a general
meeting (see also page 161)
the amendment of BT’s articles of association requires
shareholder approval in accordance with legislation in force
from time to time
the powers of the directors are determined by UK legislation
and the articles of association. They are authorised to issue and
allot shares, and to undertake purchases of BT shares subject
to shareholder approval at the AGM
BT Group plc is not party to any significant agreements that
take effect, alter or terminate upon a change of control
following a takeover
we do not have any agreements with directors providing for
compensation for loss of office or employment that occurs
because of a takeover. There is similarly no such provision in
standard contracts for employees.
Financial instruments
Details of the financial risk management objectives and policies of
the group and exposure to interest risk, credit risk, liquidity risk and
foreign exchange are given in note 32 on pages 137 to 144.
Internal control and risk management
The Board is responsible for the group’s systems of internal control
and risk management and for reviewing each year 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 process in place for
reviewing BT’s systems of internal control includes procedures
designed to identify and evaluate failings and weaknesses, and, in
the case of any categorised as significant, procedures exist to
ensure that necessary action is taken to remedy the failings.
The Board also takes account of significant social, environmental
and ethical matters that relate to BT’s businesses and reviews
annually BT’s corporate responsibility policy. The company’s
workplace practices, specific environmental, social and ethical risks
and opportunities and details of underlying governance processes
are dealt with in the Review of the year – Our resources on
page 18.
We have enterprise-wide risk management processes for
identifying, evaluating and managing the significant risks faced by
the group. These processes have been in place for the whole of the
2010 financial year and have continued up to the date on which
REPORT OF THE DIRECTORS BUSINESS POLICIES