Philips 2012 Annual Report Download - page 85

7 Risk management 7.1 - 7.1
Annual Report 2012 85
As part of the BCF, Philips has 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.
The findings of management’s evaluation are reported to
the Executive Committee and the Supervisory Board
quarterly.
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 Executive Committee. 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 Executive Committee. The Executive
Committee’s report, including its conclusions regarding
the effectiveness of internal control over financial
reporting, can be found in section 12.1, 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 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. All compliance officers operate under
the supervision of the GBP Review Committee.
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.
The global implementation of the One Philips Ethics
hotline seeks to ensure that alleged violations are
registered and dealt with consistently within a company-
wide system. To drive the practical deployment of the
GBP, a set of directives has been published, which are
applicable to all employees. There are also separate
directives which apply to specific categories of employees
(e.g. the Supply Management Code of Ethics and Financial
Code of Ethics, refer to www.philips.com/gbp).
To seek to ensure compliance with the highest standards
of transparency and accountability by all employees
performing important financial functions, the Financial
Code of Ethics contains, amongst other things, standards
to promote honest and ethical conduct, as well as full,
accurate and timely disclosure procedures in order to
avoid conflicts of interest.
Both the Finance and Supply Management Code of Ethics
are signed on an annual basis by the relevant employees,
to confirm their awareness of and compliance with, the
respective codes.
In 2012 a global internal communications program was
launched in support of the roll out of the updated version
of the GBP Directives and the Philips Whistleblower
Policy, reflecting the effect of recent developments in the
area of business ethics (UK Bribery Act, Dodd-Frank Act,
UN Guiding Principles on Human Rights). This
communication program, addressing the 5,000 highest-
ranking employees, was developed to support local
management in their communications about the updated
GBP Directives, thereby ensuring a consistent “tone at
the top”. Moreover, GBP dilemma training was provided
for Philips Executives, while the 5,000 highest-ranking
employees were enrolled on a dedicated GBP e-training
course. The GBP dilemma training tool has been made
available to all GBP Compliance Officers in support of
local training activities.
The GBP self-assessment process is fully embedded in an
automated workflow application (ICS) supporting Sector,
Market and functional management in monitoring internal
controls. Management of reporting entities are required
to answer these questions before year-end and report
their findings. Embedding GBP self-assessments in ICS
seeks to ensure that GBP compliance is now part of
Sector, Market and functional management’s quarterly
ICS/SOx (Sarbanes-Oxley) monitoring process, and that