RBS 2004 Annual Report Download - page 125

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02
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Annual Report and Accounts 2004
Corporate governance
Governance
Relations with shareholders
The company communicates with shareholders through the
annual report and by providing information in advance of the
annual general meeting. Individual shareholders can raise
matters relating to their shareholdings and the business of the
Group at any time throughout the year. Shareholders are given
the opportunity to ask questions at the annual general meeting
or submit written questions in advance. The chairmen of the
Audit, Remuneration and Nominations Committees are
available to answer questions at the annual general meeting.
Communication with the company’s largest institutional
shareholders is undertaken as part of the company’s investor
relations programme. During the year, the directors received
copies of the analysts’ reports and a monthly report from the
Group’s investor relations team which includes an analysis
of share price movements, the Group’s performance against
the sector, and key broker comments. In addition, information
on major investor relations activities and changes to external
ratings are provided. In 2004, the senior independent director
attended the analysts’ presentation at the interim results to
enhance his understanding of the issues and concerns of
the major shareholders and would be available to shareholders
if concerns could not be addressed through the normal
channels. The mechanisms used to ensure that directors
develop an understanding of the views of major shareholders
are considered as part of the annual Board performance
evaluation.
The Chairman, Group Chief Executive, Group Finance Director
and, if appropriate, the senior independent director
communicate shareholder views to the Board as a whole.
The terms of reference of the Audit, Remuneration and
Nominations Committees and the standard terms and conditions
of the appointment of non-executive directors are available on
the Group’s website (www.rbs.com) and copies are available
on request.
Internal control
The Board of directors is responsible for the Group’s system
of internal control that is designed to facilitate effective and
efficient operations and to ensure the quality of internal and
external reporting and compliance with applicable laws and
regulations. In devising internal controls, the Group has regard
to the nature and extent of the risk, the likelihood of it
crystallising and the cost of controls. A system of internal
control is designed to manage, but not eliminate, the risk of
failure to achieve business objectives and can only provide
reasonable, and not absolute, assurance against the risk of
material misstatement, fraud or losses.
The Board has established a process for the identification,
evaluation and management of the significant risks faced by
the Group, which operated throughout the year ended 31
December 2004 and to 23 February 2005, the date the
directors approved the Report and Accounts. This process is
regularly reviewed by the Board and meets the requirements of
the guidance ‘Internal Control: Guidance for Directors on the
Combined Code’ issued by the Institute of Chartered
Accountants in England and Wales in 1999.
The effectiveness of the Group’s internal control system is
reviewed regularly by the Board and the Audit Committee.
Executive management committees or boards of directors in
each of the Group’s businesses receive quarterly reports on
significant risks facing their business and how they are being
controlled. These reports are combined and submitted to the
Board as quarterly risk and control assessments. Additional
details of the Group’s approach to risk management are given
in the ‘Risk management’ section of the ‘Operating and
financial review’ on pages 96 to 112. The Audit Committee also
receives regular reports from Group Risk Management and
Group Internal Audit. In addition, the Group’s independent
auditors present to the Audit Committee reports that include
details of any significant internal control matters which they
have identified. The system of internal controls of the
authorised institutions and other regulated entities in the Group
are also subject to regulatory oversight in the UK and overseas.
Additional details of the Group’s regulatory oversight are given
in the Supervision and Regulation section.
Disclosure controls and procedures
As required by US regulations, the Group Chief Executive and
the Group Finance Director have evaluated the effectiveness of
the company’s disclosure controls and procedures (as defined
in the rules under the US Securities Exchange Act). This
evaluation has been considered and approved by the Board
which has authorised the Group Chief Executive and the Group
Finance Director to certify that as at 31 December 2004, the
company’s disclosure controls and procedures were adequate
and effective and designed to ensure that material information
relating to the company and its consolidated subsidiaries
would be made known to them by others within those entities.
Changes in internal controls
There was no change in the company’s internal control over
financial reporting that occurred during the period covered by
this report that has materially affected, or is reasonably likely to
materially affect, our internal control over financial reporting.