Huawei 2013 Annual Report Download - page 128

Establishment of the Internal Control System
Huawei has designed and implemented an internal
control system based on its organizational structure
and operational model. The internal control
framework and its related management system
apply to all business and financial processes of the
company and its subsidiaries and business units.
The system of internal controls is based on the
COSO model, which consists of five components:
Control Environment, Risk Assessment, Control
Activities, Information & Communication, and
Monitoring. The internal control system also
includes internal controls for financial statements
to ensure that the financial statements are true,
complete, and accurate.
Control Environment
A control environment is the foundation for an
internal control system. Huawei is dedicated
to maintaining a corporate culture of integrity,
placing a high value on business ethics, and strictly
complying with laws and regulations. Huawei
has established BCG to define the company’s
standards for acceptable conduct. Huawei also
provides training programs, requires all employees
to acknowledge their understanding of and
commitment to complying with the BCG, and
asks all employees to sign the BCG on a regular
basis. Huawei has a well-established governance
structure with clear authority delegation and
accountabilities. The governance structure is
comprised of the BOD, its committees, Group
Functions, and multi-level administrative teams.
Huawei has clearly defined roles and responsibilities
for its teams to ensure checks and balances. The
CFO of Huawei is in charge of internal control
management. The Business Control Dept identifies
areas for improvement, reports improvements
made in terms of internal controls to the CFO
of Huawei, and assists the CFO in building the
internal control environment. The Internal Audit
Dept independently monitors and assesses the
effectiveness of internal controls for all operational
activities.
Risk Assessment
Huawei has established a dedicated internal control
and risk management department to regularly
assess risks related to all business processes around
the globe. This department identifies, manages,
and monitors significant risks, forecasts potential
risks caused by changes in both the internal
and external environments, and submits risk
management strategies along with risk mitigation
measures for decision making. All process owners
are responsible for identifying, assessing, and
managing business risks and taking internal control
measures accordingly. Huawei has established a
mechanism for improving internal controls and risk
controls in order to efficiently manage critical risks.
Control Activities
Huawei has established the Global Process
Management System (GPMS) and the Business
Transformation Management System (BTMS),
released the global Business Process Architecture
(BPA), and appointed Global Process Owners
(GPOs) based on the BPA. As the role responsible
for building processes and internal controls,
GPOs identify Key Control Points (KCPs) and the
Separation of Duties Matrix for each process
and apply them to all regions, subsidiaries, and
business units. GPOs organize monthly compliance
tests on the KCPs to continuously monitor the
effectiveness of internal controls and publish test
reports. GPOs optimize processes and internal
127
Corporate Governance Report