ENVIRONMENTAL AND CORPORATE RESPONSIBILITY INFORMATION
COMPOSITION OF THE BOARD OF DIRECTORS on 12/31/
2. Internal auditing and risk management procedures
2.1 Internal auditing objectives
The Company’s internal auditing procedures are intended to:
- ensure that operations and management acts as well as staff conduct fall within the framework defined by General Management,
prevailing laws and regulations and our Company’s internal values and rules,
- verify that the information provided and communications addressed to the Board of Directors and to the GMs are reliable and give a true and fair view of the Company’s activity.
One of the main purposes of the internal auditing system is to anticipate and manage the risks resulting from the Company’s activity and risks of error or fraud, particularly with respect to finance and accounting. However, as with any control system, it cannot provide absolute assurance that these have been totally eliminated.
DASSAULT AVIATION draws on the reference framework of the AMF of July 22, 2010.
2.2 General
internal
auditing
organization and environment
Internal auditing reference documents The Company’s internal auditing is based on the following reference documents:
- the Ethical Charter, which defines our values and code of conduct,
- the Quality Manual, which describes the Company processes,
- the Organization Manual, which describes the tasks and organization of each department, - for financial or accounting activities, the
economic and financial data management procedure defined in the Quality Manual.
Internal auditing bodies
The main internal auditing bodies in DASSAULT AVIATION are as follows:
- Executive Committee
The composition and the role of this Committee are detailed in paragraph 1.6 above. Each Committee member is responsible for the internal auditing of his or her department.
The actions and recommendations decided upon by the Committee are assigned to one or more of its members, and a manager is designated to ensure coordination. At each meeting, the Committee secretary monitors the progress of these actions through to their effective completion.
- Total Quality Management Department
through the Risk Management Department
This Department ensures the smooth running of the risk management process relating to aircraft programs and products. It identifies critical risks
and notifies General Management
(Chairman/CEO and Chief Operating Officer).
through the Quality Management System (QMS):
The QMS is coordinated by the Total Quality Management Department and relies on establishments’ Quality Control Managers and
Quality Representatives of operational
departments.
The system uses a structured document repository, comprising process descriptions and quality procedures and instructions.
The QMS is monitored through a program of internal audits, quality assessments and management reviews.
- Program Departments through Program
Management
Program Management is coordinated by each Program Director, reporting back to Senior Management. It draws on the Program Managers of the functional departments.
- Financial Department via Management Auditing Management auditing, with respect to both “structure” and “programs”, ensures the control of the budgetary process.
It comprises a network of management auditors in all Company departments. Monthly and quarterly budget reviews are produced, particularly for the purpose of reporting to Senior Management.
Control of subsidiaries
The DASSAULT AVIATION strategy is to exercise majority control over its subsidiaries or, by default, significant influence as in the case of THALES. The Company maintains an effective presence on the Boards of Directors and management bodies of its subsidiaries.
Periodic management reports are prepared by each subsidiary for the Parent Company.
Internal auditing
The Internal Auditing Department, which reports back to Senior Management, is assigned with evaluating the risk management and internal auditing processes.
The Internal Audit Director reports to Senior Management on the results of the audits and the recommendations implemented. He also submits for the latter’s approval the internal audit plan prior to its implementation.
The Audit Committee meets with the Internal Audit Director and takes note of the audit plan and of the conclusions of the audits.
External auditing factors
The Company operates in a particular external auditing environment due to its French government contracts and aerospace activity:
- the calculation of our cost price components (hourly rates, procurement and non-production expenses) as well as the cost prices of our activities related to French government contracts are investigated by the French Defense Procurement Agency (DGA),
- the DGA monitors our products and grants us our design organization approval in the military aviation field,
- the Company, in the field of civil aviation, possesses design, production and maintenance certifications. These certifications are subject to permanent monitoring by the airworthiness authorities that have issued them:
Direction Générale de l'Aviation Civile (DGAC),
European Aviation Safety Agency (EASA), Federal Aviation Administration (FAA). In the framework of a proactive approach, the Company is certified EN 9100, ISO 9001 and ISO 14001. Its Quality Management System (QMS) and its Environment Management System (EMS) were subject in March 2014 to a joint monitoring audit by an outside body (Bureau Veritas Certification). This audit confirmed that our QMS and our EMS were compliant with the requirements of the standards.
2.3 Risk management procedures
The risk management mechanism, detailed in Chapter 2 of the Directors’ report, is based on risks- mapping that is updated by each of the Company’s major departments for the activities that concern them.
The risks identified in this mapping, whatever their nature, have been assessed according to their seriousness and their frequency of occurrence. The
procedures for treating major risks are also recorded in this mapping.
More particularly, risk management at DASSAULT AVIATION is based on the following approach: - identifying critical risks per program,
- risk analysis (assessment and prioritization), - treatment of risks.
Risks are primarily identified through regular critical risk reviews held in conjunction with program management, operational management and site management.
Risks are monitored at the various stages in a product’s life cycle based on various reviews. The purpose of these reviews is to identify new critical risks and monitor and reduce existing risks. The Risk Management Department notifies Executive Management by transmitting the list of critical risks identified.
The risk management procedures are defined and applied by the various Departments of the Company.
For Supply Chain risks, the DGIA (Direction Générale Industrielle et des Achats - Industrial Operations and Purchasing Department) has put in place a reference system for reducing the risk of shortages on the production line and supplier default.
With regard to information systems, the Group has put in place procedures designed to ensure the security of the IT systems and the integrity of data.
The social risk of maintaining skills levels is subject to joint management between each operational department and the Human Resources department. Concerning financial risks, their management is detailed in the Directors’ report, in paragraph 2.7. Environmental risk management:
- relates to the compliance of sites and products as well as the control of their impacts,
- is performed based on the Group’s
Environmental Management System (cf.
paragraph 2.9 of the Directors’ report).
Lastly, in 2011 the Company created a Risks Committee. Its mission, based on the risks-mapping and any other relevant factors, is to:
- validate the identified risks, their classification and the risk-reduction actions carried out, - ensure that new risks are identified, taken into
account and their financial impacts measured. To this end, the Committee conducts interviews with those in charge of the Company’s processes, responsible for updating risks-mapping.
This Committee also ensures that the risk management mechanism is taken into account in the subsidiaries.
It is presided over by the Executive Vice-President for Total Quality, and reports back to the General Management.
2.4 Internal control procedures for
financial
and
accounting
purposes
Organization of the financial and
accounting function
This function, described in the Quality Manual, is managed by the Financial Department for both the parent company and Group consolidation. This aforesaid function consists in:
- validating and auditing the Company’s
centralized financial and accounting information system, implemented by Information Systems General Management,
- updating the consolidation software
configuration used by the Parent Company, its subsidiaries or subsidiary sub-groups.
General references
The financial statements are prepared in accordance with:
- the accounting standards applicable to French companies:
Regulation ANC 2014-03 endorsed by the Decree of September 8, 2014,
opinion and subsequent recommendations of the Accounting Standards Authority, - the international valuation and presentation
standards for IFRS financial reporting in force as of December 31, 2014, as adopted by the European Union and mandatorily applicable for fiscal years open as from January 1, 2014, for the consolidated accounts,
- the operating and control procedures described
in the “Economic and financial data
management” process, supplemented by the specific procedures for the approval of the Parent Company and Group consolidated half-
yearly and annual financial statements. These procedures and the IT applications used by the finance and accounting department are regularly reviewed by the statutory auditors in connection with their annual certification of the financial statements.
Financial and accounting information process
In 2014, the Financial Department centralized the accounting data and produced the financial statements for the Parent Company and the Group. It distributed a schedule with the tasks and controls to be performed at each period-end to the relevant persons in the Parent Company and subsidiaries. This schedule indicated the start date for the Statutory Auditors’ certification procedures at approximately four weeks prior to the Board meeting at which the financial statements are submitted for approval.
In parallel, the financial reports and statements are reviewed by a review committee independent of the teams participating in the drafting of these documents.
2.5 2014 Actions
The Internal Audit Department (DAI) and the Total Quality Management Department (DGQT) continued to monitor the internal audit procedures for all parties involved by using the risks-mapping updated during the year.
The aforementioned departments conferred in order to decide on the breakdown of the audits. They performed audits in order to verify the proper application of the internal control procedures.