This principle requires that the Company has an established system of risk oversight and management and internal controls.
Oversight of the Risk Management System
The Board oversees the establishment, implementation, and annual review of the Company’s Risk Management System. Management has established and implemented the Risk Management System for assessing, monitoring and managing all risks, including material business risks, for the Group (including sustainability risk). The Managing Director and Company Secretary have declared, in writing to the Board, that the financial reporting risk management and associated compliance and controls have been assessed and found to be operating effectively. The operational and other risk management compliance and controls have also been assessed and found to be operating effectively.
The Audit Committee analyses the status of material business risks to the Board on a half yearly basis. Further details of the Company’s risk management policy and internal compliance and control system are available on the Company’s website.
Each business operational unit is responsible and accountable for implementing and managing the standards required by the program.
Material business risks for the Company may arise from such matters as actions by competitors, government policy changes, environment, occupational health and safety, property, financial reporting, and the purchase, development and use of information systems.
Risk Management and Compliance and Control
The Board is responsible for the overall internal control framework, but recognises that no cost effective internal control system will preclude all errors and irregularities. The Board’s policy on internal controls is comprehensive, details of which are available on the Company’s website. It comprises the Company’s internal compliance and control systems, including:
- operating unit controls – operating units confirm compliance with financial controls and procedures including information systems controls detailed in procedures manuals; and
- investment appraisal – guidelines for capital expenditure include annual budgets, detailed appraisal and review procedures, levels of authority and due diligence requirements where businesses are being acquired or divested.
Comprehensive practices have been established to ensure:
- capital expenditure and revenue commitments above a certain size obtain prior Board approval;
- financial exposures are controlled. Further details of the Company’s policies relating to interest rate risk management, currency risk management and credit risk management are included in notes 5 and 26 to the financial statements;
- occupational health and safety standards and management systems are monitored and reviewed to achieve high standards of performance and compliance with regulations;
- business transactions are properly authorised and executed;
- the quality and integrity of personnel;
- financial reporting accuracy and compliance with the financial reporting regulatory framework; and
- environmental regulation compliance.
Quality and Integrity of Personnel
Compliance with policies in the Ethical Standards Manual is obtained from all operating units.
The Executive Chairman and the Company Secretary have provided assurance in writing to the Board that the Company’s financial reports are founded on a sound system of risk management and internal compliance and control which implements the policies adopted by the Board.
Monthly actual results are reported against budgets approved by the Directors and revised forecasts for the year are prepared regularly.
The Group is committed to achieving a high standard of environmental performance. The Board aims to ensure that the Group and associated investments’ environmental policies are adhered to and are in compliance with all relevant environmental legislation. The Group’s operations are not subject to any significant environmental regulations in respect of its activities under Commonwealth or State legislation, or Mauritanian legislation.
There are two management shares on issue in the Company.
The voting rights applying to the management shares are contained in paragraph 4.5 of the Company’s constitution. The holder of the management shares when present in person or by proxy or attorney at any general meeting of the Company is on a poll or any resolution entitled to as many votes as shall together with votes which the holder may exercise in respect of the shares held solely by him in his own capacity and not as trustee, attorney or otherwise as shall institute thirty per centum (30%) of the votes given personally or by proxy or attorney on such resolution.
The terms of the management shares have not changed during the current financial year.
Charter Pacific has a number of strategic medium and long-term investments and is constantly reviewing additions to that portfolio. As a consequence of its investment approach the Board considers the ongoing inclusion of the management shares as part of its capital structure to be appropriate and beneficial for shareholders for the following reasons:
- because of the long-term nature of the Company’s investment activities the true value of its investments are not always reflected in its share price which could lead, in other structures, to takeover activity at less than fair value;
- provides the Company with a stable governance structure to move forward whilst it has a relatively small capital base; and
- allows capital to be raised without destabilising the management and Board structure.
The Board believes that the Company is fully compliant with Principle 7 and its recommendations.