Internal Control and Risk Management

The Board is responsible for the Group’s system of internal control and for reviewing its effectiveness. Such a system is designed to manage rather than eliminate the risk of failure to achieve business objectives and can only provide reasonable, and not absolute, assurance against material misstatement or loss. The concept of reasonable assurance recognises that the cost of control procedures should not exceed the expected benefits.

The Board has an ongoing process for identifying, evaluating and managing the significant risks faced by the Group. This process was in place throughout the year under review and up to the date of approval of the Annual Report and Financial Statements, and is in accordance with the Turnbull Guidance “Internal Control: Revised Guidance for Directors on the Combined Code.”

The key features of Informa’s system of internal control and risk management systems in relation to the financial reporting process include:

• Business Planning - all business units produce and agree an annual business plan against which the performance of the business is regularly monitored.
• Financial analysis - each business unit’s operating profitability and capital expenditure are closely monitored. Management incentives are tied to financial results. These results include explanations of variances between forecast, actual and budgeted performance, and are reviewed in detail by Executive management on a monthly basis. Key financial information is reported to the Board on a monthly basis.
• Group Authority Framework - the framework provides clear guidelines for all business units of the approval limits for capital and operating expenditure, and other key business decisions.
• Risk Assessment – a risk assessment is embedded into the operations of the Group as part of each business unit’s annual plan submitted to Executive management and the Board for approval. Each business unit considers the significant risks to its business and to the achievement of the proposed plan. In doing so, each unit considers risk in terms of probability of occurrence and potential impact on performance, and mitigating actions, control effectiveness and management responsibility are identified to address these risks.

The Board regularly reviews the effectiveness of the Group’s system of internal controls, including financial, operational and compliance controls, risk management and the Group’s high-level internal control arrangements. In performing its review of effectiveness, the Audit Committee considered the following reporting:

• The Risk Committee reports on the effectiveness of risk management, governance and compliance activity within Informa. This Committee comprises the Chief Executive, a cross section of senior officers and managers of the Group and is chaired by the Finance Director. The Risk Committee supports the Board in its consideration of current and forward-looking material business risk exposures.

• The external auditors present their proposed annual audit plan for approval by the Audit Committee and report on any issues identified in the course of their work, including internal control reports on control weaknesses, which were provided to the Audit Committee as well as executive management.

• Internal Audit present their proposed annual audit plan for approval by the Audit Committee and reports on reviews and tests of key business processes and control activities, including following up the implementation of management action plans to address any identified control weaknesses and reporting any overdue actions to the Audit Committee.

In order to ensure the quality of the Internal Audit function and provide assurance that the Internal Audit function complies with the Standards of the Institute of Internal Auditors, during 2010 the Audit Committee appointed RSM Tenon to conduct an independent External Quality Assurance review of the Internal Audit function, which is further described below. The remit, approach and delivery of the Internal Audit function were found to be satisfactory, and the function was found to comply with the International Standards for the Professional Practice of Internal Auditing. The Board confirms that no significant failings or weaknesses have been identified from the reviews performed by Internal Audit.