Lenovo 2014 Annual Report Download - page 62

60 Lenovo Group Limited 2013/14 Annual Report
CORPORATE GOVERNANCE REPORT
Control Effectiveness
The Board, through the Audit Committee of the Company, conducts a continuous review of the effectiveness of the
internal control system operating in the Company and considers it to be adequate and effective. The review covers all
material controls, including financial, operational and compliance controls, and risk management functions. The Board
is not aware of any significant areas of concern which may affect the shareholders. The Board is satisfied that the
Company has fully complied with the code provisions on internal controls as set forth in the Corporate Governance
Code.
Enterprise Risk Management
At Lenovo, risk is defined as a potential action, event or circumstance that could impact the Company’s ability,
favorably or unfavorably, to meet its strategic goals. Risk is an inherent part of the Company and needs to be
understood and managed properly to provide a foundation for the Company’s sustained growth. In line with the
commitment to deliver sustainable value, Lenovo has implemented an Enterprise Risk Management (ERM) framework
to proactively manage risks.
Lenovo’s ERM framework is effected by Lenovo’s Board of Directors and management team, and is applied in strategy
setting and across all major functions of the Company. It involves:
• The ERM team, who is responsible to design, implement, review, and update Lenovo ERM framework.
• All Lenovo major functions, where risk ownership is established via the appointment of ERM Champions in each
function.
Within this framework, critical and major risks of the business functions, especially in view of the changing business
environment, are identified and assessed to determine the appropriate risk mitigation plans to be implemented. These
are monitored and reviewed by each business function as well as at the group level. With the insurance function
embedded within ERM team, risk transfer options, where available, are also explored with the business functions for
more effective risk management. At least annually, these influential risks are highlighted to the Audit Committee, along
with the status of actions taken to manage these risks.
The ERM framework covers all types of risks faced by the Company, both external and internal, and has helped
enhance the Company’s efforts to provide strong support for our rapid growing business, across all markets. During
the year, there was continued strong focus at the business level to address the fast changing industry trends. At the
operational level, risk management was also strengthened to improve the robustness of our supply chain.
This framework will continue to be strengthened, so as to create a robust risk management culture which safeguards
the value of the Company.
External Auditor
Independence of External Auditor
The Group’s external auditor is PricewaterhouseCoopers (“PwC”), who is remunerated mainly for its audit services
provided to the Group. The Company has adopted a policy on engagement of the external auditor for non-audit
services, under which the external auditor is required to comply with the independence requirements under the Code
of Ethics for Professional Accountants issued by the Hong Kong Institute of Certified Public Accountants. The external
auditor may provide certain non-audit services to the Group given that these do not involve any management or
decision making functions for and on behalf of the Group; do not perform any self assessments; and do not act in an
advocacy role for the Company. The engagement of the external auditor for permitted and approved non-audit services
shall be approved by the Audit Committee if the value of such non-audit services is equal to or above US$320,000.
During the year, PwC provided audit and insignificant non-audit services to the Group.