Sound Financial Reporting & Management

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Sound Financial Reporting & Management

Risk Oversight and Management of Material Risks

PMP views risk management as a continuous process and a fundamental driver of effective corporate governance and value generation.

PMP's policy is to apply a common framework across all businesses to identify material risks and implement appropriate mitigation processes. To this end, PMP maintains a risk management framework that provides a consistent and systematic view of the risks faced by the company. The risk identification, analysis, treatment and monitoring procedures follow the Standards Australia’s risk management standard.

The Board has responsibility for the design and implementation of an effective system of risk management and internal control. The Audit and Risk Management Committee provides assistance to the Board by reviewing, assessing and making recommendations in relation to the risk management framework, supporting systems and the internal control structure.

Responsibility for designing, implementing and reporting on the system of risk management and internal control has been delegated to management through the Chief Executive Officer.

Management, with the assistance of the Group Risk Manager, reports the company's key risks and the status of the key risk treatment plans to the Audit and Risk Management Committee at least four times each year.

The Audit and Risk Management Committee receives assurance that the system of risk management and internal control are operating effectively through reports presented to the Audit and Risk Management Committee, management representations and Internal Audit.

Risk Management Framework Summary

PMP's Risk Management Framework provides for a consistent approach to identifying, assessing and rating risks across the group. Strategic risks are typically identified during the annual planning cycle. Business units are required to consider emerging risks and review existing risks and the status of risk mitigation plans on a monthly basis.

The key business risks are required to be owned by a member of the Executive Management Team. These risks are specifically reported on at each of the four scheduled Audit and Risk Management Committee meetings. Executive Management Team members may be required to attend these meetings to assist Audit and Risk Management Committee assess the risk and managements planned response to the risks.

The Audit and Risk Management Committee also receives reports on the status of the implementation of the Risk Management Strategy and supporting framework.

Management Representation

Detailed and comprehensive questionnaires are completed by all business units and functional management every six months. These questionnaires include business unit management’s assessment of risk management, financial reporting and the internal control environment operating within each business unit.

The questionnaires are reviewed by the executive management and external audit as part of the half-yearly reporting to the market and to achieve compliance with section 295A of the Corporations Act and Recommendation 7.3 of the ASX Corporate Governance Council’s Corporate Governance Principles and Recommendations.

Based on the questionnaires, the Board receives written assurance from the Chief Executive Officer and the Chief Financial Officer that, to the best of their knowledge and belief, the declaration provided to them is founded on a sound system of risk management and internal control. The assurance provided is not absolute as it is based on judgement, use of sample testing and the inherent limitations in internal control.

Internal Audit

The internal audit assurance function conducts a series of risk-based reviews based on a plan agreed with management and the Audit and Risk Management Committee. The Audit and Risk Management Committee review and endorse the planned internal audit activities at each of the four scheduled committee meetings.

As the Group Risk Manager oversees the risk management framework and internal audit, the Audit and Risk Management Committee require independent assurance as to the adequacy of the company’s framework, and the completeness and accuracy of risk reporting by management. The independent assessments are to be conducted annually and will commence in the 2009/ 2010 financial year.

Inherent Operational Risks

The company believes there are a number of operational risks which are inherent in the industry in which it operates. They include:

strained economic environment due to the global economic crisis;
reliance on continuity of supply from utilities (electricity and gas);
fluctuations in demand volume;
changing operating and market environments; and
reliance on continuity of supply of raw material inputs (e.g. paper and ink).

These risks are provided to assist investors in understanding the nature of risks faced by PMP and the industry in which the company operates. This is not necessarily an exhaustive list.

Audit and Risk Management Committee

The Audit and Risk Management Committee provides assistance to the Board in relation to its corporate governance and oversight responsibilities by reviewing,assessing and making recommendations in relation to:

financial reporting;
internal control structure;
risk management framework and systems;
health, safety and the environment; and
internal and external audit functions

Under its Charter, the Audit and Risk Management Committee consists of between three and five Non-Executive Directors, a majority of whom are required to be independent. The Committee must include members who are financially literate; at least one member shall have relevant qualifications and experience (qualified accountant or other financial professional with experience of financial and accounting matters); and some members shall have and an understanding of the industry in which PMP operates.

Record of Attendence

Committee Member	Number of meetings (attended out of 4)
I L Fraser (Chairman)	4 (out of a possible 4)
Dató Ng Jui Sia	4 (out of a possible 4)
M A Griffin	2 (out of a possible 2)
P George (past Chairman)	1 (out of a possible 2)