authorities and responsibilities have been documented
and communicated in management documents, such as
AAK’s financial policy, raw material purchasing policy,
the manual on financial reporting and the authorization
rules set by the CEO. AAK’s finance functions are
integrated through a joint consolidation system and
joint accounting instructions. The Group’s finance unit
works closely and effectively with the controllers of
subsidiaries in relation to year-end financial statements
and reporting.
As a supplement to the internal control, under a
specific plan, an annual audit of some units in the Group
is carried out on a rotating basis by the Group’s central
Finance Department, in collaboration with an independent
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international accounting firm. AAK has decided
not to set up a separate review function (internal audit),
as the functions mentioned above fulfil this task well. All
of AAK’s subsidiaries report on a monthly basis. These
reports form the basis for the Group’s consolidated
financial reporting. Each legal unit has a controller who
is responsible for the financial management of each
business area, and for ensuring the financial reports are
correct, complete and delivered in time for consolidated
reporting.
Risk assessment and risk management
Through its international presence, the AAK Group is
exposed to a number of different risks. Risk management
within the Group is run in accordance with fixed
policies and procedures, which are reviewed annually
by AAK’s Board. Risks relating to commodities are
managed using the Group’s raw material purchasing
policy. Risks relating to currency, interest and liquidity
are mainly governed by AAK’s finance policy. The
Group’s credit policy directs the management of
credit and contract risks. Effective risk management
unites operational business development with the
requirements of owners and other stakeholders for
improvements in control and long-term value. Risk
management aims to minimize risks, but also to ensure
that opportunities are utilized in the best possible
way. Risk management covers the following areas of
risk: strategic risks relating to the market and sector,
commercial, operational and financial risks, compliance
with external and internal regulatory frameworks
and financial reporting. The main components of risk
assessment and management are identification, evaluation,
management, reporting, follow-up and control.
For further information about AAK’s risk management,
please see Note 3.
Control activities
The risks identified relating to financial reporting are
handled via the company’s control activities. These
control activities aim to prevent, identify and correct
errors and discrepancies. Control activities take the
form of manual controls, such as reconciliation and
stocktaking, automatic controls via the IT systems and
general controls of the underlying IT environment.
Detailed financial analyses of the result and follow-up
against budgets and forecasts supplement the operation
specific controls and provide overall confirmation of
the quality of the reporting.
Information and communication
To ensure the completeness and accuracy of its
financial reporting, the Group has adopted guidelines
for information and communication aimed at ensuring
relevant and significant exchange of information within
business operations, both within each unit and to and
from management and the Board. Policies, handbooks
and working practices relating to the financial process
are communicated between the management and
employees, and are available in electronic format and/
or printed format. The Board receives regular feedback
on internal control from the Audit Committee. To ensure
that external information is correct and complete, AAK
has an information policy adopted by the Board, which
states what is to be communicated, by whom and in
what way.
Follow-up
The effectiveness of the process for risk assessment
and execution of control activities is followed up continuously.
The follow-up covers both formal and informal
procedures, which are used by those responsible at
each level. The procedures include follow-up of results
against budgets and plans, analyses and key figures.
The Board receives monthly reports about the Group’s
financial position and development. The Company’s