Ahlstrom-Munksjö Group has a Risk Management Policy, which is reviewed and approved annually by the Board of Directors. The policy sets out the principles for the risk management process, as well as the division of responsibilities and reporting within the group.
The Board of Directors is responsible for risk oversight within the group and the CEO is responsible for assessing and reporting the group’s consolidated risk exposure to the Board of Directors.
Ahlstrom-Munksjö’s risk management process consists of risk identification, risk assessment, risk response and risk control. The risks are primarily identified by the units in accordance with the Group Risk Management Principles and Guidelines. The units are required to update their risk evaluation at least once a year, in connection with the annual budgeting process.
The risk management process is also embedded in the internal controls framework and Ahlstrom-Munksjö’s process level control structure has been created by using a risk-based approach to define individual control points.
Internal control and risk management systems in relation to financial reporting
The Board of Directors and the CEO have overall responsibility for internal controls. The CEO is responsible for ensuring that processes and procedures are available to safeguard the internal controls and quality in financial reporting. The structure and steering documents in the form of policies, guidelines and instructions provide the basis for ensuring the maintenance of quality in the internal controls and financial reporting. The business segments/areas and group functions are responsible for applying these policies and guidelines to achieve efficient and appropriate controls on the basis of their individual circumstances and operational contexts.
The internal control and risk management systems relating to financial reporting are designed to provide reasonable assurance regarding the reliability of financial reporting and to assure compliance with applicable laws and regulations.
The internal control framework has been created using a risk-based approach and it includes elements from the framework introduced by the Committee of Sponsoring Organizations (COSO). There are five principle components: Control Environment, Risk Assessment, Control Activities, Information and Communication, and Monitoring. As most of the financial procedures are carried out at unit level, a large part of the controls is carried out at the unit level.
Detailed financial reports are produced each month, on both a business area and group level. The company’s primary reporting segments are based on the company’s business areas: Decor, Filtration & Performance, Industrial Solutions and Specialties, as well as Other (HQ and group eliminations/adjustments). An important part of the group’s internal control process are the meetings, which are held within each business area, where the CEO, CFO, functional management and the group controller, together with the operational management of the business area, review the month’s outcome in comparison with projections etc. At these meetings, reviews and analysis are carried out on e.g. the market situation, order bookings, earnings trends, cash flow and tied-up capital. In addition, improvement measures are initiated, if any.
Financial reporting is carried out in a harmonized manner in all group companies. Ahlstrom-Munksjö’s accounting principles are based on International Financial Reporting Standards (IFRS). In addition to IFRS, more specific group policies and guidance are provided in Ahlstrom-Munksjö's accounting manual (Corporate Manual). Ahlstrom-Munksjö’s Finance function is responsible for maintaining the company’s accounting policies and reporting systems, and also performs monitoring to ensure that these reporting policies are followed. The Group’s business segments are consolidated at the Group Finance function.
The performance of Ahlstrom-Munksjö is reviewed regularly at different organisational levels. The Group Internal Control function adheres to the Internal Control Charter, approved by the CEO and reviewed by the Audit Committee, which stipulates the mission and scope of work for this function. The Group Internal Control function adheres to the Internal Control Charter, approved by the CEO and reviewed by the Audit Committee, which stipulates the mission and scope of work for this function. The Group Internal Control function visits the company’s businesses to perform operational reviews and to monitor compliance with internal control procedures, policies and guidelines according to an agreed plan.
During 2015, internal control activities have been focused on following up last years’s review of the process flow documents, as well as making an initial review of the units that were not covered last year. The Internal Control function has performed such reviews in ten (10) units during 2015.The new group reporting system (HFM) taken into use in 2013 is now in full use and has improved the efficiency of reporting and the control environment.
During the year, a project has been initiated with the aim to renew the order handling and production planning as well as the financial systems in the mills. The aim over time is to convert all mills to the same platform. The first units to have the new setup will be Billingsfors and Jönköping, and the plan is to start production on the new platform in the second quarter of 2016. The remaining units will be converted during the next 3–5 years.
During the year, the administrative functions of the French mills at La Gère, Rottersac and Stenay have been developed and personnel has been recruited, which has brought more closeness to the business and strengthened control. As a result, the service relating to accounting purchased from Ahlstrom Corporation has been discontinued for all other units than the Italian legal unit.
The Audit Committee and Ahlstrom-Munksjö Finance function annually define one or more audit themes over and above the statutory auditing requirements. The findings are reported by the statutory auditors to the Audit Committee and Ahlstrom-Munksjö management.