Chairman's report on Internal Control
In accordance with Article 117 of the French Financial Securities Act of 1 August 2003, and the provisions of Article L. 225-37 of the Commercial Code, as amended on 3 July 2008 (law No 2008-649), the object of this report is to describe the organization of the work of the Board of Directors, and the internal control procedures adopted by Groupe SEB for the year ended 31 December 2009.
This report, drawn up under the supervision of the Chairman, is essentially based on the coordinated work of the Group’s Audit and Organization department, in liaison with the Finance department and the main corporate support functions and operational management. It also takes account of consultations with the Audit Committee and the Statutory auditors.
This report was approved by the Board of Directors on 19 February 2010.
In accordance with the new provisions of the law of 3 July 2008 which requires each company to identify to which Corporate Governance Code it abides by, Groupe SEB hereby indicates that it abides by the AFEP-MEDEF Corporate Governance Code of December 2008.
The Group's internal control function
In the course of its operations and in pursuit of its business strategy, Groupe SEB is exposed to a number of risks and unknown factors, both internal and external. To ackle this situation, it has set up an organization and procedures, the aim of which is to identify, quantify, anticipate and manage these risks in order to reduce their negative impact as much as possible and thus help to achieve the Company’s operational and strategic goals.
The internal control system is a process defi ned and implemented by the Group under its own responsibility to ensure:
- compliance with laws and regulations;
- application of instructions and guidelines, and conformity with the Group’s internal practices;
- the proper functioning of the Company’s internal processes;
- the quality, integrity and relevance of its internal and external information, particularly fi nancial information;
- organizational adaptation to changes in standards and regulations;
- consistency between identifi ed risks, objectives and expected benefits;
- reduced exposure to risks of fraudulent behaviour;
- prevention, and if necessary punishment of unethical conduct.
As with any control system, it can not provide an absolute guarantee that these risks are totally eliminated.
Groupe SEB is an international entity, whose organization is fi rstly divided into geographical zones for continents, each with their own ranges of products to sell. In addition, operations are organized by activity, covering specific product lines and commercial brand. This mode of operating depends on decentralization of operational responsibilities and extensive delegation.
But in parallel, to guarantee effi cient overall management, Groupe SEB applies clearly-defi ned operational and delegation rules. It also benefits from a well-established corporate culture which is rooted in shared fundamental values that foster an ethical working environment: high-quality work, mutual respect, team spirit, loyalty and thoroughness.
The internal control process is based on a structured Quality Management System defi ning twelve key functional areas which integrate the demands and requirements of Sustainable Development.
A signatory of the Global Compact since 2003, Groupe SEB supports the values set out in this document and promotes them throughout the Company. The Group Human Resources Department states in is guiding principles that: “The Group is a community of men and women who share the same objectives and values.”
Against this background, Groupe SEB enjoins all its employees to uphold ethical standards and act in accordance with them.
The integrity of the control function is also assured by an internal control manual, detailing the main internal control guidelines for each Group structure
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use of a delegation manual and defi nition of power limits;
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internal control rules governing commercial operations, the management of customer credit and settlement methods, relations with banking institutions, payroll management, purchasing control, financial asset management and the protection of corporate property and assets;
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respect for rules governing division of responsibilities;
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policies applying to insurance cover and hedging;
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financial reporting audit principles.
The risk analysis and internal control processes use two basic tools:
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An annual top-down review and analysis of the main risks. In 2009 this process was retargeted to focus on the Group Executive Committee members, the Director of legal affairs and the Director of IT systems, who were interviewed individually to help identify and analyze the top ten risks that Groupe SEB is or could be exposed to. Estimating a probability, an impact and a degree of preparation for the Group to be ready to manage each of these risks enables us to establish an annual map of the major risks for Groupe SEB;
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A bottom-up process involving self-evaluation questionnaires, based on processes. These are sent out to each operational entity and are designed to identify possible weak points and encourage the practice of self-evaluation at all levels, with a view to making Group operations more efficient.
In 2009 the self-assessment process was completed as in previous years, with one questionnaire every two years for each Group entity.
Added to these two methods of evaluation are regular internal audits of all entities and of all the Group’s functions, as well as the annual and half-yearly reviews carried out by the Statutory auditors.
A crisis prevention and management procedure was also established in 2009, defi ning the composition of a crisis unit. Its purpose is to be able to detect and manage potential crisis situations before they become too serious.
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