INFORMATION ON MATTERS OF INTERNAL CONTROL AND RISK

Why the flow of information upwards to the board on matters of internal control and risk is so important

In the first instance, the information provided enables the board to monitor the performance of the company on the crucial issues in question. This includes compliance, performance against targets and the effectiveness of existing controls. By being made aware of the key risks and internal control issues at the operational level, the board can work to address them in the most appropriate way.

The board also needs to be aware of the business impact of operational controls and risks to enable us at board level to make informed business decisions at the strategic level. If the board receiving incomplete, defective or partial information then they will not be in full possession of the necessary facts to allocate resources in the most effective and efficient way possible.

The board has the responsibility to provide information about risks and internal controls to external audiences. Best practice reporting means that they have to provide information to shareholders and others, about the systems, controls, targets, levels of compliance and improvement measures and they need quality information to enable us to do this. 

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Quality Characteristics of Information

The information the board receives on risks and internal controls should be high quality information. This means that it enables the full information content to be conveyed to the board in a manner that is clear and has nothing in it that would make any part of it difficult to understand. 

The communications should be reliable, relevant and understandable. They should also be complete. 

Reliable

By reliable I refer to the trustworthiness of the information: the assumption that it is ‘hard’ information, that it is correct, that it is impartial, unbiased and accurate. In the event that you must convey bad news such as some of the issues raised by the loss of the Mary Jane, we expect you to do so with as much truthfulness and clarity as if you were conveying good news.

Relevant

By relevant I mean not only that due reports should be complete and delivered promptly, but also that anything that you feel should be brought to the board’s attention, such as maritime safety issues, emergent risks, issues with ports, etc. should be brought to our attention while there is still time for us to do something about it. 

Understandable

Information conveyed must be understandable. This means that it should contain a minimum of technical terms that may not be understandable to some members of the board. All communication should therefore be as plain as possible within the constraints of reliability and completeness. 

Complete

By complete, I mean that all information that we need to know and which you have access to, should be included. Particularly with relevance to risks, all relevant information must be conveyed regardless of the inconvenience that it may cause to one or more colleagues.