Philips 2009 Annual Report Download - page 104

and to take corrective action where necessary. These
audit committees are also involved in determining the
desired company-wide internal audit planning as approved
by the Audit Committee of the Supervisory Board. An in-
depth description of Philips’ corporate governance
structure can be found in chapter 10, Corporate
governance, of this Annual Report.
Strategic risks Financial risks
Compliance risks
Operational risks
Corporate Governance
Philips Business Control Framework
Philips General Business Principles
Philips Business Control Framework
The Philips Business Control Framework (BCF), derived
from the Committee of Sponsoring Organizations of the
Treadway Commission (COSO) framework on internal
control, sets the standard for risk management and
business control in Philips. The objectives of the BCF are
to maintain integrated management control of the
company’s operations, in order to ensure integrity of the
financial reporting, as well as compliance with laws and
regulations.
As part of BCF, Philips implemented a global standard for
internal control over financial reporting (ICS). The ICS,
together with Philips’ established accounting procedures,
is designed to provide reasonable assurance that assets
are safeguarded, that the books and records properly
reflect transactions necessary to permit preparation of
financial statements, that policies and procedures are
carried out by qualified personnel, and that published
financial statements are properly prepared and do not
contain any material misstatements. ICS has been
deployed in all main reporting units, where business
process owners perform an extensive number of
controls, document the results each quarter, and take
corrective action where necessary. ICS supports sector
and functional management in a quarterly cycle of
assessment and monitoring of its control environment.
Findings of management’s evaluation are reported to the
Board of Management.
As part of the Annual Report process, management’s
accountability for business controls is enforced through
the formal issuance of a Statement on Business Controls
and a Letter of Representation by sector and functional
management to the Board of Management. Any
deficiencies noted in the design and operating
effectiveness of controls over financial reporting which
were not completely remediated are evaluated at year-
end by the Board of Management. The Board of
Management’s report, including its conclusions, regarding
the effectiveness of its internal control over financial
reporting, can be found in section 11.2, Management’s
report on internal control, of this Annual Report.
Philips General Business Principles
The Philips General Business Principles (GBP) govern
Philips’ business decisions and actions throughout the
world, applying equally to corporate actions and the
behavior of individual employees. They incorporate the
fundamental principles within Philips for doing business.
The intention of the GBP is to ensure compliance with
laws and regulations, as well as with Philips’ norms and
values.
The GBP are available in most of the local languages and
are an integral part of the labor contracts in virtually all
countries where Philips has business activities.
Responsibility for compliance with the principles rests
primarily with the management of each business. Every
country organization and each main production site has a
compliance officer. Confirmation of compliance with the
GBP is an integral part of the annual Statement on
Business Controls that has to be issued by the
management of each business unit. The GBP incorporate a
whistleblower policy, standardized complaint reporting
and a formal escalation procedure.
6 Risk management 6.2 - 6.2
104 Philips Annual Report 2009