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The Company has adopted a governance framework that reflects the principles of the Code.
There is a formal schedule of matters reserved for the board’s decision and there is a clear division of the respective responsibilities of the chairman and chief executive. The board has delegated to the chief executive wide powers for the day-to-day management of the Company. It has also delegated to committees of the board the duty to advise and make recommendations to the full board in specialised areas these are: the Audit committee, the remuneration committee, the nominations committee and the Finance committee. The role, duties and responsibilities of these board committees are clearly defined in their respective terms of reference.
Specific responsibilities are delegated to our four committees – audit on page 50 of the Annual Report 2010, remuneration on page 48 of the Annual Report 2010, nominations on page 46 of the Annual Report 2010 and finance on page 45 of the Annual Report 2010.
To maintain control and direction over strategic, financial, operational and compliance issues, the board has put in place formally defined lines of responsibility and delegation of authority.
Established procedures are geared to identify, evaluate and manage significant risks and to monitor the Group's businesses and performance.
This framework is reviewed annually and is designed to safeguard shareholders' investments and the Group's assets, while ensuring that proper accounting records are maintained. Senior management is responsible for making sure that controls and procedures are enforced and that the board is informed of any risks and control issues that arise.
The board confirms that there is an ongoing process for identifying, evaluating and managing the significant risks faced by the Company. The process has been in place throughout the year and up to the date of approval of this year's annual report. It is regularly reviewed by the board and accords with the guidance set out in the Turnbull Guidance.
The directors acknowledge that they are responsible for the Group's system of internal control, for setting policy on internal control and for reviewing the effectiveness of internal control. The role of management is to implement board policies on risk and control. The system of internal control is designed to manage rather than eliminate the risk of failure to achieve business objectives and can only provide reasonable, and not absolute, assurance against material misstatement or loss.
We oversee a culture of strong control and risk management. This is reflected in:
As part of its risk oversight role, the board satisfies itself that the necessary steps are taken to foster a culture of risk-adjusted decision-making throughout the Group. The board strives to ensure that risk management is an integral component of the Group's corporate strategy, culture and value generation process. The board's view is that risk management should be neither an impediment to the conduct of business nor a mere supplement to the Group's overall compliance programme.
The risk management process is reviewed by the audit committee on behalf of the board and monitored regularly by the chief executive, supported by the company secretary.
The Company's risk management reporting provides knowledge of current and emerging risks, trends and opportunities that may colour strategic decisions. We communicate with regulators, Government, non-governmental organisations and other bodies who have opinions about our business, its future and effects.
In January 2010, Rank's then external auditors assisted in undertaking an assurance mapping exercise in relation to the top 23 risks identified on Rank's risk register and the results were reported to February 2010's audit committee meeting.
Following a review of the results of the assurance mapping exercise and having regard to the fact that the Group, having stabilised, had now entered a new phase, the board was of the view that the execution of the Group's strategic objectives should be the primary risk focus. To that end work started on a new externally facilitated risk assessment exercise in June 2010. In order to bring a fresh perspective to the exercise, the external facilitation was conducted by a firm who had not previously assisted Rank in a risk assessment exercise.
At its meetings in June and July 2010, the board considered and discussed its appetite for risk going forward. In recent years, due to the legacy business difficulties that Rank had faced and due to the global credit crisis, it had been appropriate to maintain a low risk appetite in order to maximise shareholder value.
However, in recognition of the fact that the Group had a stable business operation, the board was of the view that a greater degree of risk could be taken when appropriate. Given that Rank operates in an industry which is subject to government intervention, there would be a tendency towards a lower risk appetite than in some other businesses.
In September 2010, individuals from the firm engaged to facilitate the risk assessment exercise interviewed a selected number of employees from the Group's operations and support functions.
In October 2010, the executive committee participated in an externally facilitated risk assessment workshop to consider the risks identified at the individual interviews and to rank them. Individual risk owners were then asked to develop mitigating actions, risk indicators and measurement criteria. A summary risk profile and action plans for the top ten risks were presented to the committee in December 2010 and reviewed by the board in January 2011.
During 2011 the executive committee will review the agreed measurement criteria for the risk indicators identified for the top ten risks on a quarterly basis and report to the board thereafter.
The Group has an internal audit function that reports to the finance director. Detailed control procedures exist throughout the operations of the Group and compliance is monitored by management, internal auditors and, to the extent they consider necessary to support their audit report, the external auditors. Additionally, a separate compliance function monitors day-to-day adherence to the provisions of the Gambling Act 2005 and other licensing obligations. During the year, reports were submitted to the Audit committee from the internal audit team summarising the work planned and undertaken, recommending improvements and describing the actions taken by management. The risk-driven annual internal audit plan was also presented for approval by the Audit committee.
The Audit committee has reviewed the effectiveness of the system of internal control during the year ended 31 December 2010. This has included consideration of the Group-wide risk assessment and the reports from the Group's internal audit function. The Audit committee has also considered reports from the external auditors. The Audit committee has reported the results of its work to the board. The board has considered these reports when undertaking its review of the effectiveness of the Group’s system of internal control.
The Company maintains an active dialogue with its institutional shareholders and city analysts through a planned programme of investor relations and regular meetings are held with principal shareholders. The outcome of these meetings is reported to the whole board to ensure that it keeps in touch with shareholder opinion. The programme includes formal presentations of the interim and the full-year results. All shareholders are welcome to attend the Annual General Meeting and private investors are encouraged to take advantage of the opportunity given to ask questions. The chairmen of the audit, remuneration and nominations committees attend the Meeting and are available to answer questions, as appropriate. A summary presentation of the Group’s results and development plans is given by the chief executive at the Annual General Meeting prior to the commencement of the formal business of that meeting.
The principal method of communicating with all our shareholders is via our corporate website, www.rank.com. Information can be provided in paper format but only when shareholders specifically request this.
Shareholders may also use electronic means to vote – or appoint a proxy to vote on their behalf – at the annual and other general meetings of the Company.
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