RBS 2011 Annual Report Download - page 298

296 RBS Group 2011
Statement of compliance
The company is committed to high standards of corporate governance, business integrity and professionalism in all its activities.
Throughout the year ended 31 December 2011, the company has complied with all of the provisions of the UK Corporate Governance Code issued
by the Financial Reporting Council in May 2010 (the “Code”) except in relation to the provision (D.2.2) that the Group Remuneration Committee
should have delegated responsibility for setting remuneration for the Chairman and executive directors. The company considers that this is a matter
which should rightly be reserved for the Board. No director is involved in decisions regarding his or her own remuneration. Information on how the
company has applied the main principles of the Code can be found in the Corporate governance report on pages 252 to 295. A copy of the Code
can be found at www.frc.org.uk/corporate.
The company has also implemented the recommendations arising from the Walker Review.
The company has also complied in all material respects with the Financial Reporting Council Guidance on Audit Committees issued in December
2010.
Under the US Sarbanes-Oxley Act of 2002, specific standards of corporate governance and business and financial disclosures apply to companies
with securities registered in the US. The company complies with all applicable sections of the US Sarbanes-Oxley Act of 2002.
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 2011 and to 22 February 2012, the date the directors approved the Report and Accounts. This is
confirmed by a semi-annual Control Environment Certification process which requires senior members of the executive and management to assess
the adequacy and effectiveness of their internal control framework and the compliance of their business with Group policies and associated
standards (in accordance with the Group Policy Framework), and they meet the requirements of Sarbanes-Oxley Section 404 and the UK Corporate
Governance Code Section C2. The policies that govern these processes, and reports on internal controls arising from them, are regularly reviewed
by the Board and meet the requirements of the guidance ‘Internal Control: Revised Guidance for Directors on the Combined Code’ issued by the
Financial Reporting Council in October 2005. Enhancements have been made to the Risk Management framework throughout 2011 and further
improvements will be made in 2012.
The effectiveness of the Group’s internal controls are reviewed regularly by the Group Board, the Group Audit Committee and the Board Risk
Committee. Executive management committees or boards of directors in each of the Group’s businesses also receive regular reports on significant
risks facing their business and how they are being controlled. In addition, the Group Board receives monthly risk management reports. Details of the
Group’s approach to risk management are given in the Risk and balance sheet management section, on pages 100 to 249 of the Business review.
The Group Audit Committee has received confirmation that management has taken, or is taking, the necessary action to remedy any failings or
weaknesses identified through the operation of the Group framework of controls.
The Group’s independent auditors present to the Group Audit Committee reports that include details of any significant internal control matters which
theyhave identified. The system of internal controls of the authorised institutions and other regulated entities in the Group is also subject to
regulatory oversight in the UK and overseas. Additional details of the Group’s regulatory oversight are given in the Supervision and Regulatory
developments and reviews sections on pages 443 and 444.
Compliance report