Internal Control, Risk Management and Audit

Internal control, risk management and audit control environment and actions

The Group has a strong entrepreneurial and business oriented corporate culture that supports local decision making. This culture influences the set-up of the Group’s internal control and management. The Group’s management model is strongly based on people management, delegation of responsibility, and recognition of differences in business environments, which all enable quick and flexible decision making. Instead of formal and heavily structured processes, the internal control of the Group is based on a flat and transparent organization where the Group management is in frequent and personal interaction with the Group companies. Number of personnel of the Group management is relatively small, which enables focused and centralized information management and direct and tight relationships with operational and financial management of the business units. Business units are closely monitored through financial indicators and by observing the operative actions.

The Group comprises of the parent company and the manufacturing and distribution subsidiaries. The Group’s internal controls and management are based on this legal structure. Responsibility for the management of these subsidiaries rests with each company’s Board of Directors, which typically comprises of the Group CEO and the Company Counsel, and the subsidiary’s managing director. In addition, the Group subsidiaries have their own management teams, which together with each subsidiary’s managing director have responsibility over the operative decision making.

The Board monitors the business activities of the corporation, ratifies the risk management principles and is responsible for ensuring that accounting, reporting and asset management are appropriately organized.

The CEO, the members of the Board and the managing director of each Group company are responsible for ensuring that the accounting and administration in their respective areas of responsibility are in compliance with the local laws, the Group’s operating principles, and the instructions and rules issued by the Board of Rapala VMC Corporation.