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Frontken Corporation Berhad (651020-T)
ANNUAL REPORT
2016
Statement On Risk Management
And Internal Control
(cont’d)
Risk Management Framework (cont’d)
Details of specific risks are recorded in individual risk registers, covering the risk description, causes of risk, risk consequences,
internal controls implemented by Management to address the causes of risk, Management’s assessment of the effectiveness
of internal controls and the residual risk rating, i.e. the balance of risk after considering the effects of controls deployed to
mitigate the risk.
The action plans that Management has taken and/or is taking to mitigate the risks to acceptable levels are reported by
the RMUs to the Audit Committee and the outcome is documented in the Audit Committee meeting minutes. For each
of the business risks identified, a risk owner is entrusted to ensure appropriate actions are taken to mitigate the risk to an
acceptable level within specified timeline. The Risk Coordinator of the Group, when reviewing the risk update by business
units, enquires into the status of action plans undertaken by Management of the business units concerned. During the
financial year, a risk update was conducted by the various business units and companies in the Group with the outcome
reported to the Audit Committee and the Board for further comments.
Internal Control System
The Group’s internal control system comprises the following key elements:-
•
an organisation structure with clearly defined lines of responsibilities and appropriate levels of delegation and authority,
including financial limits of authority in approving transactions/activities as well as mandate to operate bank accounts.
The structure also sets out clear reporting lines and segregation of duties for key processes like strategic management,
operations, sales and collections, procurement and payment, human resource, capital expenditure, research and
development, financial reporting, corporate affairs, and investments;
•
a process of hierarchical reporting which provides a documented and auditable trail of accountability, with appropriate
sign-off by personnel entrusted with the responsibilities;
•
an annual budgetary exercise that requires all business units and companies in the Group to formulate financial budgets
which are then consolidated into a Group budget, presented to the Board for comments and approval. Quarterly
review of the Group’s performance against budget is carried out at Board meetings where explanations on significant
variances are furnished by Management. Management meetings at operational level are conducted to review financial
performance against business plans and monitor the respective business unit’s performance against budget;
•
significant changes in business development are reported by Management to the Board at scheduled meetings. This
oversight review enables the Board to evaluate and monitor the Group’s business performance vis-à-vis its corporate
objectives;
•
the Audit Committee, which is entrusted by the Board to oversee the Company’s financial reporting process, in particular
the quarterly and annual announcements of the Group’s financial performance, meets at least quarterly to review the
announcements, seeks clarification and explanations from Management before recommending the announcements to
the Board for approval;
•
internal policies and procedures on key business processes are formalised in writing for adherence across the Group.
These policies and procedures serve as guidance to enable compliance by personnel with internal control requirements
and applicable laws and regulations;
•
structured whistle-blower policies and procedures are formalised in writing to enable employees of the Group to
raise genuine concerns about suspected improprieties on matters of financial reporting, non-compliance with laws
and regulations, malpractices or unethical business conduct within the Group at the earliest opportunity and in an
appropriate way without fear of reprisal; and
•
where issues arise that affect the reliability and integrity of financial information of any business unit, special audits are
commissioned by the Audit Committee or Senior Management, as the case may be, to assist the Board in fulfilling its
oversight responsibilities.