Plastic Omnium - 2020 Universal Registration Document

RISK FACTORS AND MANAGEMENT Internal control procedures and risk management PLASTIC OMNIUM UNIVERSAL REGISTRATION DOCUMENT 2020 71 The consistency of the Group’s financial statements is guaranteed by the use of the same accounting standards and a single chart of accounts by all Group entities. The standards and chart of accounts take into account the specific characteristics of the subsidiaries’ various businesses. They are laid down by the Accounting Standards and Principles Department, which is part of the Accounting and Tax Department and is the sole entity with authority to change them. This consistency is then ensured by the coordinated management of the information systems which combine to produce the financial information for each subsidiary of the Group. The reporting and accounts consolidation processes are standardized and unified by the use of a single software program. Also, based on a software package recommended by the Group, the business lines have developed integrated management systems, deployed at almost all of their industrial, Research and Development and administrative sites, thus contributing to the control of information necessary to prepare the financial statements. Consolidated Group financial information is prepared for the following key processes: weekly cash reporting; ● monthly reporting; ● interim consolidated reporting; ● annual budget. ● These four processes apply to all subsidiaries controlled by Compagnie Plastic Omnium SE. FINANCIAL REPORTING AND CONTROL PROCEDURES The accounting function is decentralized in the subsidiaries of Plastic Omnium A first level of control and analysis of the financial statements is carried out at the local level, then at the central level in each business line. Third-tier controls are performed by the Finance Department. Reporting is done on a monthly basis. It is submitted to senior management eight business days after the close of the monthly accounts and is reviewed at the Executive Committee meeting. The reporting package comprises in particular an income statement broken down by function, with an analysis of production costs, overheads, and Research and Development expenditure. It also includes a full cash-flow statement, business forecasts for the subsequent three months and a set of environmental and safety indicators. The information is prepared at Group, business line and subsidiary level. The reporting provides comparisons between the various items – monthly actual, year-to-date actual compared with prior-year actual and current-year budget. It provides an analysis of material differences. The budget process begins in September each year. Prepared by each subsidiary and consolidated at the Group business line level, it is submitted to senior management in November and validated by end-November before being presented to the Board of Directors of Compagnie Plastic Omnium SE. The budget comprises an income statement, cash-flow statement and data concerning capital employed by subsidiary and by business line for the year N+1. “Revised” forecasts are regularly produced to allow remedial measures to be made with a view to ensuring that initial budget targets are met. They also allow senior management to report reliably on changes in the situation. The budget is based on the rolling strategic and financial plan, approved each year by senior management. It includes income statement and balance sheet projections for the four years following the year in progress. It also takes into account the sales, industrial and financial strategies of the Group and its business lines. Compagnie Plastic Omnium SE is responsible for managing the medium-term financing requirements of all the subsidiaries controlled by the Group. Plastic Omnium Finance covers short-term financing needs. Through the latter, the Group centralizes its cash management and has set up a daily cash-pooling and netting system for all Group subsidiaries in all countries where local rules allow this practice. In addition, intragroup receivables and payables are netted monthly. In this way, it manages funding streams and verifies cash positions on a daily basis. In general, subsidiaries cannot negotiate external financing arrangements without the prior authorization of the Group’s Central Treasury. Plastic Omnium Finance is also responsible for controlling all currency and interest rate hedging transactions. Cash reports are sent to senior management on a weekly basis. They include an analysis of the cash position of each business line, and of the Group, together with comparisons with the prior year and the budget for the current year. No material incidents or significant changes occurred in 2020 that could have compromised the effectiveness of the internal control system described above. WORK PLANNED IN 2021 Committed to a process of continuous improvement of its internal control system, Compagnie Plastic Omnium SE will complete certain procedures in order to both strengthen their relevance and facilitate their take-up by operational staff. This approach, in which the Risk Management Department and the Internal Control Department are fully involved, covers our internal control procedures, our accounting and financial procedures, and our risk control procedures. The Internal Audit Department has planned to carry out 22 assignments in 2021. To improve the internal control and risk management system, the Company will continue to apply the procedure for tracking progress on implementing recommendations issued by the Internal Audit Department.