Internal Control
Internal Control is one of Ordina’s main priorities. The internal control structure is constantly reviewed and professionalised, with the emphasis being placed on governance structure, processes, systems and specific controls, as well as raising awareness amongst management and staff of the importance of the proper application of such controls:
Strategy development
At Ordina, we scrutinise our strategy and related objectives and ambitions annually and adjust them where necessary on the basis of market developments and an analysis of strengths and weaknesses and opportunities and threats and lastly, a strategic risk assessment. This is the responsibility of the Management Board. Ordina’s strategic course is also discussed extensively with the Supervisory Board on an annual basis.
Translating strategic targets to business plans and long-term ambitions
The strategic targets, including key opportunities and threats, are shared with the boards of the different divisions, both on a group and individual basis. Ordina’s overall strategic targets and the contributions to achieving them by the different divisions, form the foundation for the business plans and long-range plans of the divisions.
In addition to setting the financial budget, each division’s business plan includes several concrete business targets that are translated into a number of key performance indicators (KPIs), which are consistently monitored for progress throughout the year.
Analysis of results and reporting cycle
The financial results of the divisions and their forecasts are analysed monthly using the Ordina Management Information System (Ordina MIS), both at local and at corporate level. The divisional management and business controllers, as well as the Management Board and Group Finance & Control all have direct access to Ordina MIS, which was overhauled at the beginning of 2009.
The divisional management and business controllers submit monthly progress reports in respect of the targets defined in their business plan, the related KPIs, and the respective division’s financial performance to the members of the Management Board and Group Finance & Control.
Based on the reports, monthly progress meetings are held, which serve to discuss any previously agreed actions, relevant commercial developments, the financial performance for the past month and the updated forecasts, staff turnover and recruitment, and any progress made in the execution of important projects.
Transparant internal control structure
We have formalised responsibilities, mandates, segregation of duties, guidelines, procedures and processes within Ordina in a clear and accessible format in the Ordina Success Manual (digital handbook). For each process, we have added a description of relevant risks and the appropriate key controls. The divisional management and business controllers are responsible for the correct application of the processes and systems. In 2008, emphasis was placed on creating awareness of the importance of applying the processes and procedures that have been formalised in the Ordina Success Manual. The financial accounts are kept in SAP, our primary system for accounting and operations. The decision to process financial information at our shared service centres contributes to the consistency and quality of our financial reporting. Most of the Ordina organisation uses this system. As soon as acquisitions are properly embedded in our organisation, their guidelines, procedures, processes and systems are integrated as well. The Dutch internal governance model serves as a guideline for the further development and professionalization of risk management at our Belgian operations.
Project Management
A critical review of opportunities and threats in the course of the commercial process and the mandatory involvement of management at the right level (depending on the size of a prospective contract) are the first steps in the control and management of projects with bottom-line responsibility. To achieve this, we updated our Deal Review System in 2008. This system, which was introduced in 2007, allows for an informed decision to be taken at each stage of the bidding process. Or to determine whether or not to submitt a bid (bid no bid). Key elements of the Deal Review System include the assessment of risks and measures available to mitigate those risks. By accepting a project we inherently assume risk, but our track record, experience, stringent project management and contractual agreements with our clients that limit our liability are all measures to identify and manage these risks.
In order for the Deal Review System to be consistently applied, bid and contract management, and the execution of large Consulting, IT and Application Outsourcing contracts have been centralised. Project progress is monitored centrally by the Project Support Office, which reports monthly on how potential problems are being resolved. The most important findings are then discussed in monthly review meetings.
Control self-assessment and internal and external audits
The final element in our internal governance structure is formed by a written statement by our second-line management of their compliance with the processes and procedures formalised in the Ordina Success Manual during the reporting period. In addition, a broad group of executives are asked to perform periodic control self-assessments. Finally, internal and external audits are conducted.
The Internal Audit Department, which reports directly to the Chief Financial Officer, carries out audits of the correct application of, and compliance with, internal procedures and guidelines. Both financial and operational audits are conducted. The objective is to further professionalise our internal control structure. In addition, these instruments contribute to the continual enhancement of risk awareness within the Ordina Group.
Besides internal audits, independent external auditors conduct external audits of the quality system, accounting system and the financial statements. In addition, independent assurance is given to clients in the areas of Application Outsourcing with respect to the existence and effectiveness of relevant processes and specific controls. The financial statement audit focuses on the correct application and effectiveness of the internal control procedures that are relevant for the preparation of the financial statements. The findings of these audits by the external auditor are reported, both orally and in writing, to the Management Board as well as to the Supervisory Board.
Opinion of the Management Board
As Ordina’s Management Board, we are responsible for the Company’s corporate strategy and the related risk profile, as well as for the design and effectiveness of our internal risk management and control systems. These systems are aimed at providing a reasonable level of certainty, at all times, as to what extent we are achieving our strategic and operational targets, guarantee the reliability of our financial reporting, and act in accordance with the legislation and regulations that apply to our organisation. The design of our internal risk management and control systems with respect to our strategic, operational, compliance-related and financial risks is of the highest priority at Ordina and is continually being fine-tuned and improved, also in light of developments in the environment in which we operate and in our organisation itself. We evaluated the design and the effectiveness of these internal risk management and control systems in the reporting period. The outcome of our evaluation, as well as our risk profile, was positive and was discussed with the Supervisory Board. Nevertheless, we cannot provide absolute assurance that no material misstatements will occur at Ordina.