Loreal 2011 Annual Report Download - page 63

61REGISTRATION DOCUMENT − L’ORÉAL 2011
Corporate governance
2
Internal Control procedures (Report of the Chairman of the Board of Directors onInternal Control)
The other means of internal communication
Meetings are regularly organised aimed at passing on
information about orientations of the General Management
to managers of the subsidiaries. The Functional Divisions also
coordinate their networks of experts through seminars and
training sessions.
2.5.2.3. Risk management
In order to ensure the sustainability of its development and the
achievement of its objectives, the Group strives to anticipate
and manage the risks to which it is exposed in its different areas
of activity. These risks have been identified in the section 1.8 .
on pages 17 to 24 and the systems put in place to better
anticipate and handle risks are mentioned. In addition, the
Internal Rules of the Board of Directors specify the role played
by the Audit Committee which “must make sure that the General
Management has at its disposal the means to enable it to
identify and manage the economic, financial and legal risks
facing the Group inside and outside France in carrying out its
routine and exceptional operations”.
On the basis of the work by the Internal Audit Department, the
analysis of major accounting and financial risks, in conjunction
with the processes used by subsidiaries, makes it possible to
identify Internal Control improvements and update the Group’s
standards (see Management standards in paragraph2.5.4.2.
hereafter).
Risk mapping
The risk mapping project concerning all L’Oréal’s activities
initiated in2010 was finalised in2011. This process of identification
and analysis of the significant risks and processes enhances the
knowledge of the Group’s risks by formalising and consolidating
the work already achieved to date. The results of this work were
presented to the Audit Committee in November2011.
2.5.2.4. Control activities
The measures recommended by the Group
In each area of activity, the recommended measures with regard
to the key control points are determined by the Functional
Divisions concerned.
♦In the area of Human Resources, the requirements related
to personnel management specify the documents to
be provided to employees, the way to book and report
headcount and personnel charges, the procedures for
recruitment, training and appraisal and the rules to be
observed in the field of payroll management.
♦In the area of purchasing, the Purchasing Code of Ethics has
been updated: “Nos achats au quotidien” (“Our everyday
purchases”) is now the practical and ethical guide providing
guidelines for each employee in relationships with our
suppliers. The standard for “Management of suppliers” and
tender procedures specify the conditions for competitive
tendering and for the registration of the main suppliers. The
general terms of purchase are used as the framework for
transactions with suppliers. The “Purchase Commitments
and Order Management” standard, which requires an
approval prior to commitment, is aimed at facilitating and
strengthening control of the spending and investments of
Group entities.
♦In the area of safety and quality, procedures relating to
the protection of persons, property and data set out the
principles for covering industrial and logistical risks relating
to organisation and safety. Production quality standards
define rules governing the quality of products, for all stages
from creation to production and distribution. Almost all the
factories are ISO9001-certified as far as their production is
concerned, ISO14001-certified for their environmental policy
and OHSAS1800-certified (or equivalent certification) for
their safety policy.
♦In the area of the Supply Chain, the main assignments
consist in defining and applying the sales planning process,
customer demand management, development and control
of customer service, particularly through management of
physical order fulfilment, application of the general terms
of sale, the follow-up of orders, management of customer
returns and customer disputes as well as accounts receivable
collection procedures. Measures are also recommended
for the management of distribution centres and inventories,
subcontracting, product traceability, business continuity
plan and transport.
♦In the field of Information Systems, the Group has an
Information Systems Security Policy. Based on the
international ISO27001 standard, this policy covers the
main topics of Information Systems security, describing the
general principles to be applied for each of them. It enables
all the Group’s Information Systems teams, and by extension
all the employees, to share clear objectives, good practices
and levels of control adapted to the risks incurred. This
policy is accompanied by an information systems security
audit programme conducted by an outside firm. It is also
supplemented by an Information and Communication
Technologies code of conduct, and a code of conduct for
the correct use of social media.
♦In the legal area, the Legal Charter reaffirms the obligation to
comply with local legislation and notably sets out the internal
principles for signature on behalf of the Company, the
general and specific rules relating to contracts, trademark
law, intellectual property law, company law and competition
law. A training tool and a practical guide concerning the
issues related to competition law define the principles to be
complied with and provide answers to any questions which
employees may have in this area.
♦In the Insurance field, the Group’s choice is to only have
recourse to first-rate insurers. The Insurance Charter issues a
reminder that the Group mainly uses integrated worldwide
programmes to cover all its entities notably against third
party liability, damage to property and operating losses
resulting from an insured event. With regard to insurance of
its customer risk, coverage is put in place inasmuch as this is
permitted by local conditions. The results of audits performed
by insurance companies in factories and distribution centres
are used to improve the Internal Control of these entities.