Singapore Airlines 2005 Annual Report Download - page 33

SIA Annual Report 04/05 31
Statement on Risk Management
1. EMPHASIS ON EFFECTIVENESS OF RISK CONTROLS
Recent events in other countries and other organisations where controls and back-up systems failed, underline the
need to ensure that risk reduction measures put in place are effective and regularly maintained. Following the
establishment of the risk framework and the implementation of structured risk controls, SIA continued to improve
on risk management by reviewing and validating the effectiveness of the risk reduction measures implemented.
2. REVIEW OF EFFECTIVENESS OF RISK CONTROLS
Requirement to Test or Simulate Risk Controls
Within the Risk Management Process, business units are required not only to develop risk prevention and risk
mitigation controls, but to review the effectiveness of these controls as well. As part of this review, business units
were required to test these controls or to simulate failures to verify that the controls are effective. Risk owners are
required to further improve the risk controls if the results show weakness or inadequacy.
Structured Review on Effectiveness
To reinforce the emphasis on effectiveness, the oversight risk committees at various levels reviewed risk controls
put in place by risk owners. At the highest level, the Audit & Risk Committee of the Board reviewed controls of
various top risks of the Group, while correspondingly, the respective Risk Management Committees reviewed the
management of key risks of their Companies, without duplicating the work of the Audit & Risk Committee.
3. ENHANCEMENT OF RISK POLICIES
In addition to ensuring effectiveness of risk reduction measures, SIA also reviewed and updated risk policies and
guidelines to make sure that the overall control environment remains relevant and appropriate. These reviews
include the following:
Guidelines on Managing Risks of Outsourcing
In view of the increased level of outsourcing, guidelines were issued in relation to managing the risks arising from
outsourcing of activities and functions.
Policy for the Rotation of Sensitive Job Positions
This policy was set up to reduce SIA's exposure to risks such as fraud, bribery, collusion with a third party or pilferage
by the job holder. In consideration of the many changes in job functions, the policy was updated to ensure relevance
in the current circumstances.
Fraud Prevention Policy and Procedures
The Policy and accompanying procedures provide guidance on detection, reporting and investigation for fraud
within SIA and the subsidiaries. A review and update is in progress to ensure its effectiveness and to enhance the
scope and application.
Corporate Policies on Banking and Borrowing Activities
Corporate policies in relation to banking transactions and borrowing activities were reviewed and updated.
Lenders to SIA are to note that all bank transactions undertaken by any Group Company must be properly authorised,
including the opening of new bank accounts and any proposed credit facilities. Each Group Company has its own
approval limits and procedures for every banking transaction, having regard to the nature of the transaction
concerned. These approval limits and procedures are updated from time to time and are available on request. The
bankers of each Group Company should always verify, in accordance with the verification process set out in the
applicable procedures, that the transaction is properly authorised.