LISI GROUP - 2016 Financial report

144

LISI 2016 FINANCIAL REPORT

1.2

LIMITATION OF THE AUTHORITY

OF THE SENIOR MANAGEMENT

The senior management has the broadest powers to manage the

Company within the limits of those conferred by law and the bylaws

to the Board of Directors.

1.3

MANAGEMENT STRUCTURE

At its meeting of February 17, 2016, the Board of Directors confirmed

its decision of October 21, 2015 to separate the function of Board

Chairman from that of Chief Executive Officer; as of March 1, 2016,

the role of Chairman will be assumed by Gilles Kohler, while that of

CEO will be assumed by Emmanuel Viellard, with the assistance of

Jean-Philippe Kohler as Deputy CEO.

The presence of directors, (majority shareholders or independent

directors), as well as a referent director, has enabled the Board to

consider that the separation of the function of Chairman from that

of Chief Executive Officer was consistent with the protection of the

interests of all shareholders, especially minority shareholders, while

remaining suited to the Company’s business.

To fulfill their executive duties, the CEO and Deputy CEO are backed by:

1) a Management Committee of six people which meets monthly to

review major issues addressed by the Group;

2) an Executive Committee comprising the managers of the divisions

and internal audit, a total of 18 people who meet quarterly to make

a progress update on the main areas for improvement.

1.4

REMUNERATION AND BENEFITS IN KIND

The principles and rules governing corporate officers’ remuneration,

which are submitted and suggested to the Board by the Compensation

Committee each year, are detailed in Chapter 7 of the Annual Report,

which deals with the corporate governance policy. It describes in

particular the information referred to in Article L. 225-100-3 of the

French Commercial Code and tables prescribed by the AFEP-MEDEF

Code.

1.5

INTERNAL AUDIT REPOSITORY

In 2011, the Internal Audit Department developed a new internal

audit repository, which is based on a self-assessment questionnaire

with 130 questions covering all processes in the internal audit

manual: Purchasing, Capital Expenditures, Sales, Inventories, Cash,

and Human Resources.

In 2015, this questionnaire was reviewed in order to improve internal

control standards. Accordingly, an additional process comprising

24 questions was introduced for the control of our IT systems.

Audits have been used since 2012 to validate (or invalidate) the level

of internal audit achieved in each of the business units; they have

continued throughout the whole of 2016 with 11 audit tasks completed.

Given the stiffening of internal control requirements, as described

above, we thus noted that the Group’s overall score (84%) had dropped

2 points compared with the previous year, but is still higher than our

minimum objective of 80%.

We feel that the stiffening of the internal control requirements caused

a loss of about 5 points on the scores previously achieved, while the

impact of the Chapter “Information Systems” would be approximately

3 points.

A more detailed analysis by Business Group shows that all the BGs

had a score higher than 80% apart from LISI AEROSPACE Structural

Components BG which had a score of 78%.

Lastly, an analysis by process shows:

–

That the HR, Treasury and Fixed assets processes had robust scores

(> 80%).

–

That the Inventories, Purchases, Sales and IS must make more

progress (< 80%).

In 2016, the Internal Audit Department mainly concentrated its

efforts on integrating entities joining the Group’s consolidation scope:

LISI MEDICAL Remmele in the USA and Ankit Fasteners in India.

Lastly, in 2016, the Internal Audit Department instituted the CCI –

Internal Audit Committees – with the aim of giving thought to improving

our practices on specifically chosen topics. These CCIs bring the

internal audit referents in the divisions together with the Managers

concerned depending on the topics addressed: HR, IS, Inventories etc.

This work will obviously be continued in 2017.

Risk mapping

The main risks identified in the context of the budget and strategic

planning in the medium term belong to four categories:

■■

Market risks to be anticipated as accurately as possible within all

divisions:

–

possible effects of over-stocking based on the current contracts;

–

strong downward pressure on non-contractual prices;

–

missed opportunities on major new markets;

–

marginalization due to insufficient size in a context of market

player concentration.

■■

Industrial challenges:

–

essential productivity programs to be carried out to sustain

certain industrial processes and maintain competitiveness in

high cost areas, sometimes accompanied by reconversion in the

more attractive segments of the business;

–

launches of new products which are technically very challenging;

Documents specific to the Shareholders General Meeting