Internal control

The Board encourages a culture of integrity and openness. The Group has an organisational structure with clear lines of accountability and authority across its worldwide operations, supported by appropriate reporting procedures. Each of the regional businesses is accountable to the CEO and is managed within the strategic guidelines and delegated authorities adopted by the Board. An Executive Management Team, chaired by the CEO and comprising the Executive Directors and functional heads, meets regularly to discuss issues facing the Group.

Control procedures have been established in each of the Group's operations to safeguard the Group's assets from loss or misuse and to ensure appropriate authorisation and recording of financial transactions. All acquisition and investment decisions are subject to disciplined investment appraisal processes. Risk management procedures are in place for the Group's operations, including its energy marketing and trading activities, which are overseen by the Global Commodities Risk Committee, which comprises Executive Directors and Senior Management, and is chaired by the CFO. The Group Treasury function operates under defined policies and the oversight of the Treasury Committee, which is chaired by the CFO.

Executive management submits an annual corporate plan to the Board for approval. The plan for each business unit is the quantified assessment of its planned operating and financial performance for the next financial year, together with strategic reviews for the following four years. Group management reviews the plans with each operational team. The individual plans are based on key economic and financial assumptions and incorporate an assessment of the risk and sensitivities underlying the projections.

Monthly performance and financial reports are produced for each business unit, with comparisons to budget. Reports are consolidated for overall review by Executive Management, together with forecasts for the income statement and cash flow. Detailed reports are presented to the Board on a regular basis.

Each business unit is subject to regular performance reviews with Group management during the year. Actual results and forecasts for the year are compared to budget. Key operational and financial results are reviewed together with the risk profile and business environment of the reporting unit.

These are subject to formal review and authorisation procedures with designated levels of authority, including a review by the Investment Committee (ICOM) chaired by the CEO and comprising the Executive Directors and Senior Managers. Major projects are subject to Board review and approval. Further information on our investment process is available in our Group overview.

The Company has a Disclosure Committee which is chaired by the Company Secretary and is comprised of members from the Internal Audit, Corporate Communications, Global Resources, Operations and Engineering, Company Secretariat and External Financial Reporting departments. It reviews the Annual Report, the Summary Annual Report and the Results Brief.

As outlined in the Annual Report 'Our approach to risk and risk management' there is a continuous process for identifying, evaluating and managing the key risks faced by the Group. Activities are co-ordinated by the Risk Committee, which is chaired by the CFO, and has responsibility, on behalf of the Board, for ensuring the adequacy of systems for identifying and assessing significant risks, that appropriate control systems and other mitigating actions are in place, and that residual exposures are consistent with the Group strategy and objectives.

The Board reviews the effectiveness of established internal controls through the Audit Committee, which receives reports from management, the Group's Internal Audit function and the external auditor on the systems of internal control and risk management arrangements.

The Internal Audit department reviews the effectiveness of internal controls and risk management through a work programme, which is based on the Group's objectives and risk profile and is agreed with the Audit Committee. Findings are reported to Operational and Executive Management and the Audit Committee.

Business Unit Managers provide annual self-certification statements of compliance with procedures. These statements give assurance that controls are in operation and confirm that programmes are in place to address any weaknesses in internal control. The certification process embraces all areas of material risk. The Internal Audit department reviews the statements on behalf of the Disclosure Committee and reports any significant issues to the Audit Committee.