Electrolux 2003 Annual Report Download - page 84

82 Electrolux Annual Report 2003
Corporate Governance
Internal control and risk management
The Board of Directors has the overall responsibility for establishing
an effective system of internal control and risk management. The
responsibility for maintaining an effective control environment and
operating the system for internal control and risk management is
delegated to the President and CEO.
The management at varying levels is responsible for this within
their respective areas of responsibility. The limits of this responsi-
bility are set out in Delegation of Authority documents and in other
Group requirements, such as policies and procedures, including
the Electrolux Workplace Code of Conduct, Code of Ethics, and
manuals, including the minimum internal control requirements
based on Group process-descriptions, e.g., the six core pro-
cesses. These internal requirements in combination with laws and
external regulations form the control environment and create the
basis for the internal control and risk-management process. All
employees, including process/risk/control owners, are account-
able for compliance with these requirements set by the Group.
The Internal Audit function, Management Assurance & Special
Assignments, performs independent objective assurance and con-
sulting activities, and has the task of bringing a systematic approach
to the evaluation and improvement of the effectiveness of risk man-
agement, control and governance processes. The head of this func-
tion has dual reporting lines to the President and CEO and the Audit
Committee for assurance activities, while other activities are reported
to the Head of Group staff Controlling, Accounting, Taxes, Auditing.
The internal control and risk-management process includes five
key activities, i.e., assess risk, develop control strategy, monitor,
improve, and inform and communicate.
Assessing risks
Assessing risks includes identifying, sourcing and measuring
business risks, i.e., strategic, operational, commercial, financial,
and compliance risks, as well as identifying opportunities that
ensure long-term creation of value.
Developing control strategies
The decision as to which control strategy to apply depends on the
nature of the risk and the results from a cost-benefit analysis, within
the requirements set by the Group. Control strategies for managing
risks may include insuring, outsourcing, hedging, prohibiting, divest-
ing, reducing risk through detective and preventative internal control
procedures, acceptance, exploitation, reorganization and redesign.
Monitoring procedures
The effectiveness of the infrastructure for assessing risks and
executing control strategies is monitored continuously. Monitoring
involves both formal and informal procedures applied by manage-
ment and process/risk/control owners, including reviews of results
in comparison with budgets and plans, analytical procedures, and
key performance indicators.
In addition, various tools including self-assessments and risk
surveys are used within the Group. In order to identify and evaluate
controls, within the information security area and the transactional
and reporting processes, reporting units within the Group applies
control self-assessment since 2002. Risks are graded by a simple
color system to ensure easy internal benchmarking and tracking
of improvements.
Management and process/risk/control owners are assisted by
the internal and external assurance providers in the evaluation
of the effectiveness of the process.
Continuous improvement
Activities within the internal control and risk-management process
are continuously evaluated to provide a basis for improvements.
Evaluation involves internal and external benchmarking.
Inform and communicate
The process generates valuable information regarding business
objectives, risks and control strategies. Communicating on a timely
basis throughout the Group contributes to ensuring that the right
business decisions are made. In 2003, the Group implemented a
representation process in which Group Management signs a
representation letter stating their opinion regarding internal control
over financial reporting as well as disclosure controls and proce-
dures.The Board of Directors and management have established
the following committee and Board to support the process.
• The Audit Committee reviews the adequacy and effectiveness
of internal controls regarding financial reporting and disclosure
controls and procedures. The Audit Committee reviews internal
audit reports prepared by the Internal Audit function, Manage-
ment Assurance & Special Assignments.
• The Risk Management Board supports risk-management deci-
sions at Group level. The Board consists of the President and
CEO, the Head of Group staff Legal Affairs and the Head of
Group staff Controlling, Accounting, Taxes, Auditing.
Electrolux Group Code of Ethics
In February 2004, the Board of Directors adopted the Electrolux
Group Code of Ethics. It outlines both prescriptive and proscrip-
tive ethical standards, which are to be strictly followed by all
employees and Board members of the Electrolux Group, in all
markets and at all times.
The Code formalizes the principles by which the Group con-
ducts its relations with employees, shareholders, business part-
ners and other interests. Electrolux encourages suppliers, sales
agents, consultants and other business partners to adopt these
principles.
The Electrolux Group Code of Ethics is published on the
Group’s website, www.electrolux.com/corpgov
Financial reporting and disclosure
The Group has a policy of full and fair disclosure to ensure that
the market receives timely and comprehensive information on an
equal basis. A disclosure policy according to the Sarbanes-Oxley
Act of 2002 was adopted by the Audit Committee during 2003.
Financial information is issued regularly in the form of:
• quarterly reports, published as press releases
• the Electrolux Annual Report
• an annual report on Form 20-F, and quarterly reports under
Form 6-K, which are filed with the US Securities and
Exchange Commission
• press releases on news and all important matters which
could materially affect the share price
• telephone conferences with analysts, investors and media
on the day of publication of the quarterly and full-year results,
as well as in connection with release of important news
• meetings with financial analysts and investors worldwide
All reports and press releases are published simultaneously on
the Group’s website, www.electrolux.com/ir