Reporting 2006

About Nuon | Sustainability 2006 | Annual Report 2006

• Annual report 2006
  • Review of 2006
  • Risk Factors
  • Report of the Management Board
  • Details of the Management Board
  • Corporate Governance
    • Management Board
    • Supervisory Board
    • Shareholders
    • Departures from the Code
    • Role of the auditors
    • Internal risk management and control systems
  • Report of the Supervisory Board
  • Details of the Supervisory Board
  • Remuneration Report
• Financial statements 2006

Internal risk management and control systems

The Management Board is responsible for the internal risk management and control systems of Nuon. These systems are designed to provide reasonable assurance that the achievement of objectives is monitored, that the financial reporting is reliable and that laws and regulations are complied with.

The internal risk management and control systems are aimed at ensuring that the most important risks are identified and that appropriate measures of control are taken in relation to these risks. The risks recognised by Nuon pertain to strategic, operational, financial and compliance issues.

Important components of the internal risk management and control systems of Nuon are:

• the Corporate Development & Strategy Department which advises the Management Board on the identification and assessment of strategic risks;
• the Corporate Risk Management Committee which, chaired by the Chief Financial Officer and assisted by various corporate departments, monitors the correct and full application of the risk policy determined by the Management Board and based on Nuon’s strategy and corporate objectives; 
• a risk culture survey, which is periodically conducted within the Nuon organisation with the aim to measure the perceptions of the staff in relation to risk management; 
• risk analyses performed at the corporate level and at the level of divisions/business units and the risk reports based on these analyses. The aforementioned units are facilitated by the Corporate Risk Management Department. More in particular, risk analyses take place within Nuon’s trading environment;
• the Transaction Review Committee, which assesses applications for investments, large operational projects and sale and purchase contracts and advises the Management Board on these issues; 
• the business planning & control cycle, within which a long-term business plan is drawn up, discussed and adopted per division/business unit and for the company as a whole. This is followed up by the discussion and adoption of the divisions’/business units’ annual objectives and budgets and of the company as a whole; 
• the periodic reporting on the financial and operational performance of the divisions and business units, partly based on a system of KPIs that is continuously measured, developed and maintained; 
• monthly business reviews by the Management Board with the managements of Nuon divisions/business units that take place partly on the basis of periodic reports; 
• the Nuon Governance Manual, which contains regulations, guidelines and procedures that are relevant to the relationship of Nuon with Nuon group companies, business units and staff; 
• the Nuon Code of Conduct and the Whistleblower Policy. These documents are posted on the website www.nuon.com; 
• the IFRS accounting manual and the reporting manual; 
• the framework of Letters of Representation (LoRs), in which responsible management on a corporate and division level confirms the reliability of the financial reporting by relevant management; 
• the framework of Statements on Business Control which are based on self-assessments in relation to risk management and internal control by the Nuon divisions/business units. These statements are discussed annually by the Management Board with the responsible management; 
• the certifications within various division/business units in such fields as quality (ISO-9000), the environment (ISO-14000) and safety (VCA); 
• the audits of the Internal Audit Department which are performed in conformity with a year plan adopted by the Management Board and the Audit Committee, whose reports and findings are discussed in the Audit Steering Group; 
• the monitoring reports on the control status of Nuon which are reported to the Management Board; 
• the further development of the framework of key controls, which is partly based on the COSO Enterprise Risk Management model. In this connection, particular attention is given to Tax Affairs, Nuon Germany and Nuon Belgium. The key controls focus mainly on the management & control objectives in relation to financial reporting risks.

The system of internal risk management and control systems, including the Business Control Framework, are regularly evaluated and further optimised by Nuon.

The internal risk management and control systems will not provide absolute assurance in relation to the achievement of the corporate objectives, nor will they give any absolute guarantees that material errors, losses, fraud or violations of laws and regulations cannot occur both in processes or financial reports.

With due regard to the above the Management Board is of the opinion that, in the year under review, the internal risk management and control systems of Nuon provided a reasonable degree of assurance that the financial reports do not contain inaccuracies of material significance. In addition, in the context of what is described above, there is no reason to assume that the risk management and control systems will not function properly in relation to the financial reporting risks in the year 2007.

These matters were discussed with the Audit Committee and the Supervisory Board.

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