Holiday Inn 2009 Annual Report Download - page 42

40 IHG Annual Report and Financial Statements 2009
Corporate governance
2009 saw an increased focus on corporate governance by external
regulators in the wake of the global economic recession and
perceived shortfalls in governance standards in the financial
services sector.
Although not directly affected by the proposals arising from the
Walker Review of Corporate Governance of UK Banking Industry,
IHG takes its corporate governance responsibilities seriously and
aims to implement and uphold robust and responsible business
processes and policies throughout the Group. The Board continues
to observe recommendations arising from current regulatory
scrutiny and aims to implement any relevant changes proposed
by the Financial Reporting Council following their review of the
Combined Code on Corporate Governance (Combined Code).
This section of the Annual Report describes IHG’s approach
towards control, risk management and compliance in accordance
with current regulatory standards.
Combined Code compliance
The Board is committed to compliance with the principles set out
in the Combined Code, available at www.frc.org.uk, and considers
that the Company has complied with the Combined Code’s
requirements throughout the year ended 31 December 2009.
As InterContinental Hotels Group PLC’s shares are also listed on the
New York Stock Exchange (NYSE), the Company is subject to the rules
of the NYSE, US securities laws and the rules of the Securities and
Exchange Commission (SEC). As required by the SEC, a statement
outlining the differences between the Company’s corporate
governance practices and those followed by US companies may
be found on the Company’s website at www.ihgplc.com/investors
under corporate governance/NYSE differences.
Control environment
The Board is responsible for the Group’s system of internal
control and risk management and for reviewing its effectiveness.
In order to discharge that responsibility, the Board has
established the procedures necessary to apply the Combined
Code, including clear operating procedures, lines of responsibility
and delegated authorities.
Business performance is managed closely and, in particular,
the Board, the Executive Committee and the Regional Operating
Committees have established processes, as part of the normal
good management of the business, to monitor:
• strategic plan achievement, through a comprehensive series
of Group and regional strategic reviews;
• financial performance, within a comprehensive financial
planning and accounting framework;
• capital investment performance, with detailed appraisal and
authorisation processes; and
• risk management (through an ongoing process, which has been
in place up to the date of the accounts), providing assurance
through reports from the Head of Global Risk Management,
the Head of Global Internal Audit, and, as appropriate, from
management, that the significant risks faced by the Group are
being identified, evaluated and appropriately managed, having
regard to the balance of risk, cost and opportunity.
In addition, the Audit Committee reviews:
• regular reports from management, Global Internal Audit and
the external auditor on the effectiveness of systems for internal
control, financial reporting and risk management;
• the timeliness and effectiveness of corrective action taken
by management; and
• material financial and non-financial risks.
The Board has conducted a review of the effectiveness of the
system of internal control during the year ended 31 December
2009. This covered all material controls, including financial,
operational and compliance controls, and risk management
systems, and took into account any material developments since
the year end.
The review was carried out through the monitoring process set
out above, which accords with the Turnbull Guidance. The system
of internal control is designed to manage, rather than eliminate,
the risk of failure to achieve business objectives and it must be
recognised that it can only provide reasonable and not absolute
assurance against material misstatement or loss. Whilst areas
for improvement in internal control have been identified and
actions initiated as a result of the above process, no significant
shortcomings in internal control have been identified from the
annual assessment.
To comply with the Group’s US obligations, arising from the
Sarbanes-Oxley Act 2002, the key financial controls across all
our business units have been identified and evaluated. This has
enabled appropriate representations regarding the effectiveness
of internal financial controls to be made in the Company’s Annual
Report on Form 20-F, in compliance with these US obligations.
With regard to insurance against risk, it is not practicable to insure
against every risk to the fullest extent. Whilst the insurance market
has eased in some areas, certain risks remain difficult to insure
both as to breadth and cost of coverage. In some cases external
insurance is not available at all or not at an economic price.
The Group regularly reviews both the type and amount of external
insurance that it buys, bearing in mind the availability of such
cover, its price and the likelihood and magnitude of the risks
involved. The key risk factors that could affect the Group are set
out in the Business Review on pages 32 to 34.