CAHYA MATA SARAWAK ANNUAL REPORT 2016

A N N U A L R E P O R T 2 0 1 6 Section 06 Governance 77 Cahya Mata Sarawak Berhad • All major business commitments or investments will be subject to review in accordance with the procedures set out in the GLOA Manual so as to ensure that all such investments meet the risk appetite and investment criteria determined by the Board and that Division’s operating budget. • A performance management system has been implemented wherein individual performance of key executives will be monitored against agreed targets (Key Performance Indicators) to strengthen accountability control and to instill a stronger performance culture. • Monitoring of monthly results against budget through the monthly operations review meetings with subsidiaries with major variances being followed up and management action taken, where necessary. • An independent Audit Committee comprising non-executive members of the Board, all being independent directors. • Regular internal audit activities to assess the adequacy of internal control, integrity of financial information provided and the extent of compliance with established procedures. • An emphasis on the quality and ability of employees with continuing education, training and development being actively encouraged through a wide variety of programs. • All significant contracts and legally enforceable agreements are vetted by the Group’s Legal Department. The Board is not aware of any significant weaknesses in internal control that resulted in material financial losses during the current financial year. The above control arrangements being in place provide reasonable assurance to the Board that the structure of control is appropriate to the Group’s operations and that risks are managed to an acceptable level throughout the Group’s diverse businesses. Such arrangements, however, do not eliminate the possibility of human error or deliberate circumvention of control procedures by employees or others. The Group will continue to take measures to strengthen the internal control and risk management environment. Internal Control and Risk Management System Effectiveness The Board has received assurances from the Group Executive Director, Group Managing Director and the Group Chief Financial Officer that the Group’s risk management and internal control system is operating adequately and effectively, in all material aspects. The Board maintains oversight of its interests in associate companies through representations on the respective Boards of the associate companies and the receipt of quarterly financial reports thereon. This allows the Group’s interests to be served. While the Board does not regularly review the risk management and internal control system of its associate companies as it does not have direct control over their operations, these representations also provide the Board with information to assess the performance of the Group’s investments. The Board is of the view that the risk management and internal control system of the Group for the year under review and up to the date of issuance of the financial statements is adequate and effective. Review of this Statement As required by Para 15.23 of the MMLR, the external auditors have reviewed the Statement. Based on the review, the external auditors have reported to the Board that nothing has come to their attention that causes them to believe that the Statement is inconsistent with their understanding of the processes adopted by the Board in reviewing the adequacy and integrity of the risk management and internal control systemwithin the Group. This Statement was approved by the Board on 14 March 2017. STATEMENT ON RISK MANAGEMENT AND INTERNAL CONTROL