Philips 2013 Annual Report Download - page 93

6 Risk management 6.1 - 6.1
Annual Report 2013 93
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
eectiveness 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 eectiveness of internal control over financial
reporting, can be found in section 11.1, 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 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 o on an annual basis by the relevant
employees, to confirm their awareness of and
compliance with, the respective codes.
The GBP self-assessment process is fully embedded in
an automated workflow application (ICS) supporting
Sector, Market and functional management in
monitoring internal controls, as described under the
Philips Business Control Framework. 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 GBP non-compliance
issues, if significant, are reported to the Board of
Management/Executive Committee via the Quarterly
Certification Statement process.
In June 2013, as part of the global GBP communications
campaign, a business integrity survey was rolled out to
all employees to obtain their input on the eectiveness
of our GBP program. The insights that were derived
from this survey were used to further enhance the
eectiveness of the current compliance activities as
well as the compliance road map. The business integrity
survey also provided the kicko for a global GBP
communications campaign, culminating in a global
event called the ‘GBP dialogue week’ held in October
2013, in which managers were invited to hold sessions
with their teams to discuss GBP in relation to their
function or business.