| Internal Control Statement |
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The Board of Directors is ultimately responsible for the Group’s system of internal control and for reviewing its effectiveness in
providing shareholders with a return on their investments that is consistent with a responsible assessment and management of risks.
Because of the limitations that are inherent in any system
of internal control, such systems are designed to manage
rather than eliminate the likelihood of fraud, error or failure
to achieve Tanjong’s business objectives. Accordingly, these
systems can provide only reasonable and not absolute assurance
against material misstatement or loss. The concept of reasonable
assurance also recognises that the cost of controls should not
exceed the expected benefits.
The Malaysian firm of the External Auditors, Messrs.
PricewaterhouseCoopers has reviewed this Statement on Internal
Control as required by paragraph 15.24 of the Listing Requirements
of Bursa Securities. Their review was performed in accordance with
Recommended Practice Guide 5 (“RPG 5”) issued by the Malaysian
Institute of Accountants. Based on their review, the External
Auditors have reported to the Board that nothing has come to their
attention that causes them to believe that this Statement is
inconsistent with their understanding of the process the Board has
adopted in the review of the adequacy and integrity of the internal
control of the Group. RPG 5 does not require the External Auditors to and
they did not consider whether this Statement covers all risks and controls,
or to form an opinion on the effectiveness of the Group’s risk and control
procedures.
There were no significant internal control deficiencies or material
weaknesses resulting in material losses or contingencies requiring
disclosure in the Annual Report.
In addition to the monitoring of internal controls by the Audit
Committee, the Group’s system of internal controls comprises the
following key elements:
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| Control
Environment |
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The Board has approved a Statement of General Business Principles
and Human Resource Policies and Procedures that set the tone of control
consciousness and employee conduct. There is also in place supporting
procedures for the reporting and resolution of actions which contravene
these policies. There is, furthermore, a Limits of Authority manual
that delineates authorisation limits between various levels of Management
and matters that need to be escalated to the respective Boards of the
operating subsidiary groups and the Tanjong Board, to ensure proper
identification of accountabilities and segregation of duties.
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| Control
Procedures |
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Detailed budgets are prepared requiring Management and Board approval.
Operational manuals have been established to guide key business processes
and accounting manuals are in place towards ensuring that the recording
of financial transactions are complete and accurate. Procedures also exist
for mitigating exposures to losses arising from business interruption,
material fraud or error, as well as ensuring compliance with legal and regulatory requirements.
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| Information
and Communication |
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Group business units monitor and explain performance against budgets on a monthly basis. The results are reviewed by the Board on a quarterly basis to enable it to gauge the Group's achievement of its annual targets. Financial reports are submitted prior to each quarterly meeting, analysing trend and budget variances as well as reporting on fluctuations in non-financial metrics. Operational reports are issued every quarter discussing key matters such as strategy implementation, industry analysis, legal and regulatory developments and operational performance. The Board recognises the need for a robust reporting framework given the growth of the Group's international assets notably in the power generation segment, and will work towards further strengthening that element of the internal control system.
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| Monitoring |
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In addition to Management’s monitoring procedures,
which are embedded within the Group’s policies, processes and
activities, independent engagements are carried out by Group Corporate
Assurance and are communicated to the Audit Committee and ultimately
to the Board, to enable a timely evaluation of the adequacy and
integrity of the Group’s system of internal control.
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| Risk
Management |
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There is in place a structured and on-going process to identify, evaluate and manage risks that may significantly impact the Group.
This process entails the establishment of an enterprise-wide framework to embed risk management precepts in the processes and
activities of the Group.
Effectively, this includes identifying principal business risks
in critical areas, assessing the likelihood and impact of material
exposures and determining the corresponding risk mitigation and
treatment measures. A schematic diagram of the process is presented below.
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| The on-going processes are co-ordinated by
Group Corporate Assurance in conjunction with all corporate and
business heads within the Group; reporting periodically to the
Risk Management Committee (“RMC”) which is chaired by
the GCOO. The following activities were undertaken by the RMC: |
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Risk Management Policies and Procedures have been established as part of the Group’s risk management framework. During the
financial year, a review was conducted to update and streamline the risk management framework and process to ensure that they
reflect the Group’s operating environment and are consistent with global best practices and standards. |
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Workshops have been conducted for risk owners and line managers to instill in them risk and control consciousness with a view of
inculcating a risk based culture within the Group. This was followed by the completion and continuous monitoring of Risk Registers
for core business activities. |
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Principal Business Risk Schedules and a Risk Map summarising the risk ratings have been completed and presented by the Chairman
of the RMC to the Audit Committee and ultimately, to the Board. Based on the above reports, it has been concluded that all
identified risk factors have adequate measures to reduce the likelihood of the risks crystallising and to mitigate the loss impact in
the event these risks crystallise. |
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