PRINCIPLE 7: RECOGNISE AND MANAGE RISK

Risk identification and management
Consistent with ASX Principle 7, the company is committed to the identification, monitoring and management of risks associated with its business activities and has embedded, in its management and reporting systems, a number of risk management controls.

The risk management controls adopted by the company include:

• guidelines and limits for approval of capital expenditure and investments;
• a group compliance programme supported by approved guidelines and standards covering safety, the environment, legal liability, risk identification, quantification and reporting, and financial controls;
• a comprehensive annual insurance programme including external risk surveys;
• policies and procedures for the management of financial risk and treasury operations, including exposures to foreign currencies and movements in interest rates;
• a formal dynamic planning process of preparing five year strategic plans each year for all businesses in the group;
• annual budgeting and monthly reporting systems for all businesses, which enable the monitoring of progress against performance targets and the evaluation of trends;
• directors’ financial due diligence questionnaires to management;
• appropriate due diligence procedures for acquisitions and divestments; and
• crisis management systems for all key businesses in the group.
  

Management is ultimately responsible to the Board for the group’s system of internal control and risk management. The Audit Committee assists the Board in relation to risk management and, at designated months of the year, receives reports from the divisions on risks associated with legal liability, financial controls, and environment, health and safety.

The internal audit function is independent of the external audit function. The Group Internal Audit Manager, who reports to the Finance Director, monitors the internal control framework of the group and provides reports to the Audit Committee. The Audit Committee approves the internal audit charter and the annual internal audit plan to ensure that planned audit activities are aligned to business risks. The Audit Committee also reviews internal audit reports issued by the Group Internal Audit Manager and monitors progress with recommendations made in those reports to ensure the adequacy of the internal control environment.

Risk management and integrity of financial reporting
In accordance with ASX Principle 7, the Managing Director and Finance Director have provided the Board with a written statement for the year ended 30 June 2007 that:

• the statement given with respect to the integrity of the financial statements (referred to under the heading “Financial reporting” in Principle 4: Safeguard Integrity in Financial Reporting) was founded on a sound system of risk management and internal compliance and control which implements the policies adopted by the Board; and
• the company’s risk management and internal compliance and control system was operating efficiently and effectively in all material respects.
  

This statement was also signed by the General Manager, Group Accounting.