Ubisoft 2006 Annual Report Download - page 157

REPORT OF THE CHAIRMAN OF THE BOARD OF DIRECTORS
145
6
Internal control procedures
Definition and objectives
of internal control
Ubisoft has adopted the definition of internal control
contained in the AFEP/MEDEF report on corporate gover-
nance in France.
According to this definition, the objective of internal
control is to:
ensure that the actions taken and operations carried out
by the company’s management, as well as the conduct of
individuals, comply with the existing laws and regulations,
the policies established by the corporate bodies and the
company's own values, standards and rules;
ensure the accuracy and reliability of the accounting,
financial and management data conveyed to the corporate
bodies;
prevent and manage risk resulting from the company's
activity and the risk of error or fraud.
The procedures put in place form an internal operational
framework which the company can develop into real risk
management tools.
The objective of risk management and internal control
procedures is to:
identify potential risks that can impact the company’s
performance and undermine its strategic and financial
objectives,
assess the actions that must be taken to control these
risks,
monitor the actions taken and measure their effective-
ness.
The main risks identified by general management (cf. 6.2
below) have been mapped out based on the following steps:
identification of all the company’s activities;
assessment of risks and of their impact on each of the
company’s activities;
classification of risks by priority;
assessment of the quality of the controls and preventa-
tive measures.
This descriptive analysis is part of a dynamic process that,
in the long run, will enable Ubisoft to assess the relevance
and effectiveness of its internal control procedures. The
group drew on the recommendations made by the Autorité
des marchés financiers (AMF) in its report published on
January 22, 2007 and on the internal control guidelines for
listed companies.
The preparation of this report is based on the control
methods described below and on the verifications carried
out at the request of the group’s general management by
the Internal Audit Department and other support depart-
ments.
Principal risks
In carrying out its activities, the group is exposed to a num-
ber of risks. An analysis of the principal risks, their impact
on the company’s accounts and the main measures taken to
manage them is presented in the chapter of the reference
document entitled “Risk Factors”.
These risks include:
1Risk related to product strategy and brand positioning and
management
2Risk related to market developments and the success of
next-gen consoles
3Risk related to a top game being delayed or getting off to a
poor start
4Risk related to recruitment and retention of talented
employees
6.2
6.2.1
6.2.2
Rules of procedure
The Board of Directors adopted its rules of procedure at its
meeting of July 27, 2004.
These procedures provide, among other things, for the abi-
lity to use videoconferencing. The videoconferencing equip-
ment used must have technical features that ensure genuine
participation in the Board meeting and allow the Board’s
deliberations to be broadcast continuously.
The rules of procedure were amended on December 5, 2006
in order to add a “compensation” article concerning direc-
tors’ fees.
The rules of procedure may be consulted by shareholders at
the company’s business address or at the registered office.
Main topics discussed
during the fiscal year
The work of the Board of Directors during the fiscal year
primarily consisted of the following:
reviewing and approving the half-yearly and annual
financial statements for the fiscal year ended March 31,
2006;
reviewing and approving the forecast financial state-
ments;
reviewing the Ubisoft group’s strategic issues;
reviewing collective agreements in accordance with
Article L. 225-38 of the French Commercial Code.
In accordance with Article L. 823-17 of the French
Commercial Code, the auditors were invited to attend
Board meetings at which the accounts were drawn up and
reviewed. The Board met 12 times during FY 2006/07.
6.1.6
6.1.5