Developments in Risk Management
and Internal Control in the Netherlands
Arnold Gratama van Andel
Corporate Vice-President Finance and Economics
DSM NV
25 October 2005
Corporate Finance & Economics
0
 Globally active “multi-specialty” chemical company
• More than 200 locations, ca. 25,000 employees
 Leadership positions, in ~75% of the portfolio
 Innovation driven, R&D spend ~ € 300 million
 Financially sound, solid balance sheet
• Net debt < € 1 billion
Key data 2005 (2 x H1)
Sales : ~ € 8 billion
EBITDA: ~ € 1.3 billion
EBIT:
~ € 0.8 billion
Life
Science
Performance Products
DSM
Materials
Nutritional
Other Industrial
Products
Chemicals
Sales 2004
Corporate Finance & Economics
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Regulatory background to Requirements
1997
: Corporate Governance in the Netherlands Report
The forty Recommendations of the Peters
Committee
Dec. 2003: The Dutch Corporate Governance Code
Principles of good corporate governance
And best practice provisions
(Code Tabaksblat)
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Code Tabaksblat
II.
Management Board
II.1
Role and Procedure
Principle
The management board is responsible for complying with all relevant
legislation and regulations, for managing the risks associated with the
company activities and for financing the company. The management
board shall report related developments to and shall discuss the
internal risk management and control systems with the supervisory
board and its audit committee.
Corporate Finance & Economics
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Code Tabaksblat
Best practices provisions
II.1.3
The company shall have an internal risk management and control system
that is suitable for the company. It shall, in any event, employ as
instruments of the internal risk management and control system:
a. Risk analyses of the operational and financial objectives of the
company
b. A code of conduct which should, in any event, be published on the
company’s website;
c. Guides for the layout of the financial reports and the procedures to
be followed in drawing up the reports
d. A system of monitoring and reporting
Corporate Finance & Economics
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Code Tabaksblat
II.1.4
The management board shall declare in the annual report that the
internal risk management and control systems are adequate and
effective and shall provide clear substantiation of this. In the annual
report, the management board shall report on the operation of the
internal risk management and control system during the year under
review. In doing so, it shall describe any significant changes that have
been made and any major improvements that are planned, and shall
confirm that they have been discussed with the audit committee and
the supervisory board.
II.1.5
The management board shall, in the annual report, set out the sensitivity
of the results of the company to external factors and variables.
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Code Tabaksblat
Practical implementation of risk management
and Internal Control requirements
Dutch scope
• Financial, operational and compliance risks and controls
• Design effectiveness and operating effectiveness
• During the year under review
Conclusion: In Europe unique wide-ranging scope
Corporate Finance & Economics
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DSM’s Risk Management
DSM Values
Corporate Requirements
Strategy
BG requirements
BG organization
BG policies
Performance
Risk & Control Assessments (PRA)
CSD
(CRA)
People
RT&D
Business
development
HRM
BSD
(BRA)
QESH
Security
& Regulatory
Project
management
PtP
Manufacturing
PtO
OtC
Demand Supply Chain Management
BIM &
ICT security
Asset
Management
Legal
Affairs
Planet
Finance &
Control
VBBS
Monitoring
& continuous
Corporate Finance
& Economics
7 improvement
Profit
DSM’s Internal Governance Framework
DSM Values
Corporate Requirements
Strategy
CSD
(CRA)
BG requirements
VBBS
BG policies
Performance
Risk & Control Assessments (PRA)
People
RT&D
Business
development
HRM
BSD
(BRA)
BG organization
QESH
Security
& Regulatory
Project
management
PtP
Manufacturing
PtO
OtC
Demand Supply Chain Management
BIM &
ICT security
Asset
Management
Legal
Affairs
Finance &
Control
Monitoring
& continuous
Corporate Finance
& Economics
8 improvement
Planet
Profit
True Blue Alignment Session (January 2005)
Live the DSM Values
Comply with the Corporate Requirements
Manage your risks
Use DSM-practices as much as possible
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True Blue project organization
*) Steering Committee
2 M.B.
4 B.G.
3 Staff
Steering
Committee *)
Project Director
Chairman
Core Team
Work Stream
Corporate
Requirements
Champions
Goods Flow
Squad
Project Director
WS IC-2005
Project Support
Work Stream
Corporate
Alignment
Home Office
Work Stream
Lasting
Compliance
Flying Squad 1 Flying Squad 2 Flying Squad 3 Flying Squad 4 Flying Squad 5 Flying Squad 6
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True Blue IC-2005 Deliverables
• For units selected and processes involved:
• Will draw up a detailed overview of fit and non-fit compared with Corporate
Requirements
• will provide a framework to document the implementation of the Corporate
Requirements (transparent governance)
• will train people in executing a number of routine business processes
according to DSM requirements, designed to reduce risks to a minimum and
improve business performance (risk control)
• will help to detect and report deviations from the requirements (assurance of
compliance)
This requires a joint effort
from both the Unit & True Blue !
Corporate Finance & Economics
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Code Tabaksblat
Assurance implications of developments
Wideness of scope
Impact on Assurance
What is “Reasonable Assurance”
2004 Internal Control Statement DSM (page 8 Annual Report)
Based on the activities reported in the risk management section we
believe, to the best of our knowledge, that we can assert with reasonable
assurance that the internal risk management and control system of Royal
DSM N.V. was effective during the 2004 financial year.
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