Risk Management and
Internal Controls
Overview
Financial Reporting
Control Environment
Risk Management Program
Delhaize Group Annual Report 2014 55
Center SA, as Borrowers and Guarantors,
the subsidiary guarantors party thereto, the
lenders party thereto, and Bank of America
Merrill Lynch International Limited, BNP Paribas
Fortis SA/NV and J.P. Morgan Limited, as
Bookrunning Mandated Lead Arrangers. The
"Change of Control" clause provides that, in
case any person (or group of persons acting in
concert) gains control over the Company, i.e.
becomes the owner of more than 50 per cent
of the issued share capital of the Company or
is able to exercise a decisive influence on the
designation of a majority of the directors or
managers of the Company or the direction of
management and policies of the Company,
this may lead to a mandatory prepayment and
cancellation under the credit facility.
The Company's Board of Directors has ultimate
responsibility for monitoring the performance
of the Company and its internal controls. It
is assisted by Board committees, described
herein, which monitor various aspects of the
Company's performance and make recom
mendations to the Board for decisions and
approval.
The Board of Directors relies on management
for establishing and maintaining adequate
internal controls. Internal control is broadly
defined as a process implemented by the
Board and management, designed to provide
reasonable assurance regarding achievement
of objectives related to:
effectiveness and efficiency of operations;
reliability of financial reporting; and
compliance with applicable laws and
regulations.
The Audit Finance Committee ultimately
oversees major business and financial risk
management and discusses the process by
which management of the Company assesses
and manages the Company's exposure to
those risks and the steps taken to monitor and
control such exposures.
Management of the Company has estab
lished and operates its internal control and
risk management systems in a manner that
is consistent with guidelines issued by the
Committee of Sponsoring Organizations of the
Treadway Commission ("COSO"). The internal
control system is based upon COSO's Internal
Control - Integrated Framework, and its risk
management system is based on COSO's
Enterprise Risk Management Framework.
The Company's internal controls over financial
reporting are a subset of internal controls and
include those policies and procedures that:
pertain to the maintenance of records that,
in reasonable detail, accurately and fairly
reflect the transactions and dispositions of
the assets of the Company;
provide reasonable assurance that
transactions are recorded as necessary to
permit preparation of financial statements in
accordance with IFRS as adopted by the EU,
and that receipts and expenditures of the
Company are being made only in accord
ance with authorizations of management
and directors of the Company; and
provide reasonable assurance regarding
prevention or timely detection of unauthor
ized acquisition, use or disposition of the
Company's assets that could have a material
effect on the financial statements.
Since the Company has securities registered
with the SEC, the Company must provide (i) a
management report on the effectiveness of
the Company's internal control over finan
cial reporting, and (ii) the Statutory Auditor's
assessment of the effectiveness of internal
control over financial reporting, as described
in Section 404 of the U.S. Sarbanes-Oxley Act
of 2002 and the rules implementing such act.
The Statutory Auditor's related opinion regard
ing the Company's year ended December 31,
2014 will be included in the Company's Annual
Report on Form 20-F for such year, which is
required to be filed with the SEC by April 30,
2015. The Company's 2013 annual report
filed on Form 20-F includes management's
conclusion that the Company's internal control
over financial reporting was effective as of
December 31, 2013.
The Statutory Auditor concluded that the Group
maintained, in all material respects, effective
internal control over financial reporting as of
December 31, 2014.
The Company operates in seven countries
on three continents. The management of the
Company is organized around strong banner
and regional management teams, and the
chief executives or chief operating officers
of each operating banner report to the Chief
Executive Officer of Delhaize Group or to a
member of the Executive Committee.
The Company provides support and coordina
tion functions to all members of the Group and
monitors selected activities group-wide. Our
operating companies have acquired leading
positions in food retailing through a distinct
go-to-market strategy, benefiting from support
functions at the global or regional level,
whichever makes the most sense in terms of
efficiency.
Delhaize Group also has implemented policies
and procedures that determine the govern
ance of the Company to ensure that strategies
and overall business objectives are pursued
under a controlled and well-defined deci
sion-making authority.
The Company's Guide for Ethical Business
Conduct provides a statement of our position
on various ethical and compliance issues that
could impact our business and summarizes a
number of Company policies that must guide
our actions. The Company has also adopted
policies related to specific areas of compliance
and a reporting mechanism, referred to as
IShare, for associates and others to report
compliance concerns.
We also expect our independent store
operators, franchisees, vendors and outside
consultants, such as business, financial, tech
nical or legal advisors, to be guided by these
standards and policies.
A copy of the Guide for Ethical Business Con
duct is available on the Company website at:
www.delhaizegroup.com.
Executive Management is responsible for
establishing a risk management program that
is implemented at all levels of the organization
for identifying, assessing, and mitigating risks
that could, if they occur, impede the organiza
tion's ability to achieve its objectives and create
value for its stakeholders. Business leaders
are responsible for identifying, assessing and
managing risks within their assigned areas
of oversight and responsibility. They are also
responsible for integrating identified risks into
their financial plans.
The Audit Finance Committee reviews man
agement's process for identifying, assessing
and mitigating such risks. The Board of Direc
tors considers risks identified by management
in evaluating the Company's strategy, three-
year business plan and annual budget, and
related funding and allocation of capital, as
well as in assessing the Company's talent and
capabilities to deliver performance.
