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DANONE
REGISTRATION DOCUMENT 2015
Corporate Governance
6.4 Internal control and risk management
293
Transmission of information
Appropriate information must be identified, collected, quantified
and disseminated in a manner and within a timeframe that enables
each person to assume his or her responsibilities.
To this end, Danone relies on:
•
its organization and information system, which facilitate the
communication of information needed for decision-making;
•
the various intranet sites and documentation databases that
enable information to be shared within Danone. This information
includes not only financial information but also non-financial
information that meets the needs of the various operating and
administrative departments. Since 2012, Danone has deployed
its social network (Danone Social Network), which is accessible
to all, to transmit information and develop communication and
experience sharing;
•
the distribution of the DANgo framework by the Internal Control
Department, which oversees, trains and coordinates the network
of internal controllers:
• it organizes working and annual training sessions for the
network of internal controllers, including workshops and
information-sharing seminars. More than 160 people attended
the two sessions organized in 2015;
• it is responsible for the training and integration of new internal
controllers, including those working for newly-acquired
companies;
• it is also responsible for internal control training sessions
open to all managers of the finance functions;
• it communicates regularly at various levels of the organization
(Corporate Committees, meetings at Division level with the
finance directors or operational employees, systematic annual
presentations to the general managers and finance directors
of the regions, and participation in functional Management
Committees).
Continuous monitoring
The internal control system is reviewed periodically so that its
performance and effectiveness may be qualitatively assessed.
The continuous monitoring of control procedures is part of the
ongoing activities of Danone and its subsidiaries.
The quality of the internal control system's steering andmonitoring is
ensured by two Committees, led by the Internal Control Department,
which meet regularly:
•
the DANgo steering and cross-functional coordination Committee,
which consists of operational senior executives appointed as repre-
sentatives of Danone's key functions: Research and Development,
Purchasing, Operations, Marketing, Sales, Finance, Human
Resources, Information Systems, etc.;
•
the Internal Control steering Committee, which consists mainly
of the heads of Danone's Finance function and the Divisions and
meets quarterly.
In addition, the Audit Committee, as well as Danone's General
Management, are informed at least twice a year of the status of the
subsidiaries' self-assessment processes, the results thereof and the
results of the audits conducted by the Internal Audit Department.
The following year's targets are also presented as well as the pri-
orities selected by the Internal Control and Internal Audit functions.
Monitoring of internal control indicators
The Internal Control Department has introduced and monitors
internal control performance indicators (coverage rate, internal
control intensity rate and deficiency rate on control points) to analyze
and communicate the internal control results of the subsidiaries
and of Danone together with a monitoring by geographic region
and by Division.
The targets for these performance indicators are discussed by
the Internal Control Steering Committee and by the DANgo and
cross-functional coordination Steering Committee, and are then
presented to Danone's Audit Committee (see section 6.1
Governance
bodies
), before being sent to the subsidiaries, which helps to harmo-
nize and develop a shared vision of the internal control priorities.
In 2015, Danone's internal control key indicators remained relatively
stable compared to 2014: the deficiency rate slightly decreased
compared to 2014, while the coverage rate and intensity rate of
subsidiaries increased.
Monitoring of internal fraud
Reporting
Danone has an annual internal fraud report that covers 140 entities,
i.e. nearly all of its operating entities. The number of confirmed
fraud cases reported by the subsidiaries fell in 2015 compared to
2014, mainly in certain emerging countries. In 2015, approximately
296 suspected cases were reported during the year; 215 of these
cases were confirmed on average, the majority of which involved
commercial relations with our customers or suppliers. None of
these fraud cases had a significant impact on Danone's consoli-
dated financial statements. In the majority of cases identified, the
employment contracts of those involved were terminated following
investigations of such fraud.
Dialert
Danone has also implemented a whistleblowing system (Dialert),
which enables employees, suppliers and other third parties to
confidentially report suspected fraud or cases of non-compliance
(see also section
Control environment
above).
A meeting to monitor cases of fraud and suspected fraud is held
every two weeks at Danone's headquarters to ensure the effective
monitoring of fraud cases and their appropriate management with
respect to ethics and internal control. To this end, detailed infor-
mation on the nature of the main cases is collected and analyzed
by the Dialert Committee (fraud monitoring), which consists of
representatives of the Human Resources, Compliance and Internal
Audit functions.
In 2015, Danone received approximately 130 alerts, 61 of which
involved suspected fraud. Only a minority of these alerts were
confirmed as cases of fraud.
Internal audit assignments
In 2015, the Internal Audit Department conducted 43 internal audits
at subsidiaries or cross-company functions, based on the plan previ-
ously approved by the Audit Committee. These audits confirmed the
overall level of reliability of the DANgo self-assessment performed
by the subsidiaries.
Following each audit, an action plan is prepared by the management
of the subsidiary to correct weaknesses identified in the audit report.
The implementation of action plans is monitored by the operational
and functional managers, under the supervision of the Internal Audit
Department. In 2015, 27 short follow-up audits on implementation
of action plans were conducted within 12 months of the initial audit,
wherever possible.
Moreover,theTreasuryandFinancing,InformationSystems,Environment,
Legal and Crisis Management departments all arrange for audits
and periodic reviews at the subsidiaries, in addition to the general
internal audits.